Rules to support choice and control in a digitalised energy sector
The price of energy is one of the most important inputs to the Australian economy. It is important to develop a competitive market for energy services so consumers have more choices in managing their energy bills. It is also important to provide appropriate protections for consumers, especially those most vulnerable, as the system transforms.
We are very focused on least-cost solutions, bearing in mind that the more costs you put into the system, the greater the burden on consumers.
Over the past three years the AEMC has made a range of changes over time to protect customers, support customer choice and control, and lay the foundations so customers can benefit from the digitalisation of energy supply.
Helping energy shoppers be more engaged and better informed
Reducing customer switching times - giving flexibility to AEMO and industry to update their processes so customers can be transferred from one retailer to another retailer in two days – regardless of the type of meter they may have.
Limiting conditional discounts on energy offers - making retailers limit the level of conditional discounts for gas and electricity retail contracts to the "reasonable cost savings" that the retailer expects to make if a customers satisfies the conditions of the discount
Introducing maximum timeframes for meter installations – making retailers provide customers with new smart meters within a set timeframe. Customers typically need a new ‘smart’ meter when they install solar panels or when their old meter needs replacing.
Strengthening protections for customers in hardship – new obligations on retailers to implement effective hardship policies to help customers who are having difficulty paying their bills.
Estimated meter reads – making retailers accept meter reads provided by customers who think their estimated electricity or gas bill is wrong.
Advance notice of price changes – requiring energy retailers to tell customers about any price increases before they happen, and provide information on how to shop around for a better deal.
Advance warnings to shop around before energy discounts finish - energy retailers must notify their electricity and gas customers when benefits in their contract, such as a discount, are about to end or change.
Stopping electricity discounting that can leave consumers worse off – energy retailers are prohibited from offering energy deals deliberately designed to confuse customers with high base rates to make so-called discounts appear bigger than they actually are.
Strengthening protections for customers requiring life support equipment – builds on current rules to strengthen protections for customers that have a person requiring life support equipment residing at their premises.
Retail competition review – our annual retail competition reviews identify ways to improve consumer outcomes in retail energy markets. In our 2019 review we saw bill reductions and that simpler, cheaper deals are on offer for energy consumers as things starter to change. In addition to this we have also seen one in three customers taking their business away from the big three retailers, decreasing their market share.
Review of regulatory arrangements for embedded networks – In June 2019 we published a comprehensive package of law and rule changes to give embedded network customers access to the same rights, protections and prices as customers who are directly connected to the grid. This follows our 2017 review of the protections for the expanding number of electricity customers who live and work in embedded networks like green commercial precincts and apartment blocks, shopping centres and caravan parks.
Review of regulatory arrangements for stand-alone power systems - In May 2019 we recommended a range of regulatory changes to enable distribution network businesses to supply their customers with stand-alone power systems where it is cheaper than maintaining a connection to the grid. The reforms would provide consumers with the same protections, reliability standards and access to competitive retail offers via their retailer of choice as those connected to the grid. In October 2019 we published a final report that sets out a framework to protect consumers in microgrids and those supplied by stand-alone power systems by local councils, community groups, developers or other third parties. The changes would make it easier, safer and more reliable for consumers who choose to go off-grid.
Retail competition review - The AEMC's annual report on retail competition analyses whether energy shoppers are getting what they want from the market. Our 2019 report was published in June 2019. Work on our 2020 retail competition review is underway.
Residential electricity price trends - The AEMC reports annually on price trends, looking at what is driving changes in household electricity bills. Understanding these drivers can help identify appropriate policies that enable the ongoing supply of reliable, secure energy at the best price for consumers. The 2019 Price Trends report was published in December.
Also see our consumer protection action plan.
Integrating new technology into the power system
We understand the community as a whole is very committed to exploring new technologies and renewable options. Our intention is not to hold this back, but to ensure consumers have the choices they want without putting costs burdens on households and the economy that could be easily avoided with better planning. The AEMC is undertaking a technology-focused work program to identify:
- barriers to deployment of new technologies by new or existing market players
- whether the consumer protection framework remains fit for purpose
- incentives or disincentives for business model evolution and whether changes to distribution system operation and market design are needed.
Projects that underpin the integration of new technology in the power system include:
- Changing the financial settlement period for the wholesale electricity spot market from 30 minutes to five minutes. Price signals that align with physical operations lead to more efficient bidding and operational decisions and will underpin investment in capacity the power system needs. This will include fast response technologies, such as batteries, gas peaker plants and demand response. Over time, more efficient investment will flow through to lower wholesale costs, which should lead to lower electricity prices than in a market with 30 minute settlement.
- Electricity network economic regulatory frameworks review which supports the continual evolution of the energy sector. The 2019 review set out a blueprint for integrating distributed energy resources and making distribution networks fit for the future.
- Distribution market model which sets out a vision for our future electricity grid where new energy service providers emerge with more high-tech choices for consumers and more consumers buy and sell energy in a dynamic way in response to price signals. To achieve this, some essential changes to energy markets are already underway but our report outlines a range of ‘enablers’ to help.
- Integration of storage which focused on how storage will impact the supply chain and whether there are barriers and regulatory issues associated with the uptake of energy storage. We have since removed the identified barriers to entry and are addressing any regulatory issues through rule change processes as they are identified.
The AEMC is also participating in reference groups for pilot renewable energy projects which include:
- Distributed Energy Integration Program (DEIP), an initiative of the Australian Renewable Energy Agency (ARENA) that brings together energy peak bodies, market authorities, industry associations and consumer associations to maximise the value of customers' distributed energy resources for all energy users. DEIP will work to coordinate the rollout of initiatives aimed at growing the penetration of DER through improved cost and time efficiencies, informing energy consumers and supporting development of innovative business models.
- Decentralised energy exchange (deX) project, funded by ARENA and led by GreenSync. The deX provides a marketplace for households and businesses with rooftop solar and batteries to trade with each other and also with network operators. This will allow households and businesses generating renewable energy to access incentives and reduce their demand on the grid during peak events.
- Virtual power plant project in South Australia, which is being built by AGL in partnership with ARENA and US-based energy storage company, Sunverge. The project is aiming to build the world’s largest virtual power plant of its kind, made up of 1,000 connected batteries installed in homes and businesses and providing 5 MW of peaking capacity. Customers participating in the project are able to purchase a heavily discounted energy storage system. When working together at scale, the batteries could help stabilise the grid by discharging during peak times.
- Energy Storage for Commercial Renewable Integration (ESCRI) project. ElectraNet has installed a large-scale battery at Dalrymple in South Australia. This demonstration project, part-funded by ARENA, is looking at how energy storage can strengthen the grid and improve reliability in the local area. The battery system has been designed to provide back up energy in the event of a loss of supply to the area; system security services such as fast frequency response and contingency frequency control ancillary services (FCAS); and surplus energy to the wholesale market (ie. energy trading). AGL intends to operate the battery to provide FCAS and energy trading as these are competitive market services.
Laying the foundations: Power of Choice reforms
The AEMC has been working for several years on a series of reforms to make it easier for customers to engage in the energy market, as set out in the AEMC's Power of Choice review. These reforms include:
From 2017, as a result of the AEMC's new distribution pricing rules, the prices paid by households and businesses will better reflect the different ways they use electricity and the costs of providing it to them. The new rules are designed to give consumers the option of reducing their peak demand to save money, or continuing to use electricity at those times when the value they place on that use outweighs the costs.
Competition in metering
The AEMC’s 2015 Competition in metering reforms removed the networks’ effective metering monopoly – giving consumers more opportunities to access a wider range of electricity services.
The information and services available through advanced metering can make it quicker for consumers to switch retailers, allow them to decide how often they want to be billed, and provide them with better information about how they can change their electricity use to save money. Consumers can also benefit from more accurate meter reads.
These reforms also underpin innovation in energy retail markets so consumers can choose from a broader range of technologies, products and services to meet their specific energy needs.
The new arrangements took effect on 1 December 2017.
Rules to change processes that support Competition in metering include:
Review of electricity customer switching
In 2017 we made a rule to improve the accuracy of the customer transfer process by placing new obligations on electricity and gas retailers to resolve transfers that happen without customer consent.
Improving demand side participation information provided to AEMO
In 2015 the AEMC made a rule to enable AEMO to obtain better information on demand side participation information from electricity market participants to inform its forecasts.
Customer access to information about their energy consumption
In 2014 the AEMC made a rule change to make it easier for customers to access their electricity consumption data from their retailer or distributor in an understandable format and in a timely manner. The new rule is designed to improve consumers’ awareness of their patterns of electricity use and enable customers to make more informed choices about electricity products and services.
Promoting consumer choices in the grid of the future
More people are connecting all sorts of equipment to their distribution networks. These are called distributed energy resources including batteries, rooftop solar, electric vehicles, and price-responsive appliances.