Economic regulation of network service providers and price revenue regulation of gas services

 Position paper and final rules released

The AEMC today published its final position on new rules to regulate electricity network prices.

The final rules and implementation arrangements will be published on 29 November 2012 and will take effect from that day.

In short, they give the regulator new tools to set maximum prices which network businesses can charge.

They introduce new incentives to improve business efficiency – by requiring the regulator to benchmark network companies against each other and publish reports about their performance.

The new rules improve the strength and capacity of the regulator to determine network price increases so consumers don’t pay more than necessary for reliable supplies of electricity and gas.

They also allow the Australian Energy Regulator (AER) to review past efficiency of network spending when determining revenues and prices for network businesses.

AEMC Chairman, John Pierce, said the new rules were focused on improving the AER’s capacity by giving it a new toolkit to determine efficient costs for each regulated business – and enabling it to decide what costs are efficient.”

“These new rules will have an immediate impact on the AER’s ability to set efficient costs.,” Mr Pierce said.

“These costs are one of the factors that affect price outcomes, along with management and shareholder oversight of network businesses, and elements of the external environment such as overall electricity demand.”

In addition to these draft rule changes, the AEMC is working across the electricity and gas supply chains to identify other areas where changes can be made to improve the efficiency of the total system. This work includes looking at ways for consumers to have more control over the way they use electricity and the prices they pay through our Power of Choice review. The Transmission Frameworks Review is looking at ways to reduce long-term price pressures. The Reliability Standards Review is looking at the merits of moving to a national framework for setting distribution reliability standards. Advice on all of these areas is being provided to governments.


15 November 2012

For information contact:

AEMC Chairman, John Pierce (02) 8296 7800

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817