The AEMC today made a final rule to make the Australian Energy Regulator (AER) responsible for calculating how much electricity customers would be prepared to pay to keep the lights on.
Knowing the value customers place on having reliable electricity supports efficient investments in generation and network infrastructure. This new role for the AER goes to the heart of the need to balance delivery of secure and reliable power supplies while making sure consumers don’t pay more than necessary.
The value of customer reliability has only been estimated a limited number of times in the NEM, with no single body formally responsible. This has led to variations in both the methodology and the resulting estimates.
The new rule published today requires the AER to establish values of customer reliability estimates every five years based on consumer surveys, and update these annually. The AER will develop a methodology to calculate values of customer reliability, and produce the first estimates under that methodology by 31 December 2019.
Value of customer reliability measures play an important role in deciding and delivering a range of standards, settings and other policy parameters in the NEM. For example, these estimates are used by the Reliability Panel to decide whether the reliability standard and settings are appropriate and by the AER and network service when planning and regulating network infrastructure.
Making the AER the single body responsible for calculating values of customer reliability will remove unnecessary duplication and improve our ongoing understanding of the value customers place on reliable electricity supply and the price they are willing to pay for it.
A new overarching process, including a clear objective, timeframes and process for developing and reviewing the values of customer reliability methodology, will improve transparency, accountability and certainty. It will also decrease the administrative burden, particularly for stakeholders contributing to the development of values of customer reliability estimates (e.g. consumer groups).
The rule commences on 13 July 2018 and is part of the AEMC’s security and reliability action plan to provide new tools and processes to manage the changing power system.
Media: Prudence Anderson, Communications Director, 0404 821 935.
Developing values of customer reliability
Understanding how customers value reliability is an important consideration when planning new electricity infrastructure. A reliable supply of electricity is important to everyone: electricity interruptions can be costly, but it can also be disproportionately expensive to try to avoid them completely.
The key is to strike a balance between delivering secure and reliable electricity supplies, and maintaining reasonable costs for electricity customers.
A value of customer reliability (VCR) measure, represented in dollars per kilowatt-hour, indicates the value different types of customers place on having reliable electricity supplies under different conditions. VCR surveys can therefore help guide electricity planning and decisions on investments by energy businesses, governments and regulatory authorities.