Rule Change: Completed

Overview

In its final rule determination the Commission has decided not to make a rule. There will be little impact on stakeholders as a result. The Commission is considering general issues related to capital expenditure incentives in its consideration of the economic regulation of networks rule changes proposed by the Australian Energy Regulator.
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On 13 September 2012, the AEMC published a final rule determination in respect of the MEU&rsquo;s rule change requests on the optimisation of the regulatory asset base and the continued use of fully depreciated assets that are still useful.</p>
<p>
In its final rule determination the Commission has decided not to make a rule in response to the MEU&rsquo;s rule change requests. The AEMC&rsquo;s reasons are set out in the final rule determination.</p>
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<strong>Background&nbsp;</strong></p>
<p>
On 3 November 2011, the AEMC received two rule change requests from the MEU with respect to electricity and gas. In particular, the rule change requests propose to introduce optimisation of the RAB (or capital base). They also seek to disincentivise the replacement of assets which are still in operation and useful.</p>
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Under the National Electricity Rules (NER) and the National Gas Rules (NGR), the RAB (or capital base) is required to be rolled forward from one regulatory control period to the next, without being subject to optimisation at regulatory resets. The MEU is concerned that there is therefore an incentive for network businesses to over invest, with consumers being required to pay for this over-investment. The proposed rule aims to address this by introducing optimisation for these assets.</p>
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The MEU is also concerned that there is no disincentive for network businesses to replace fully or partially depreciated assets, irrespective of whether they are still in operation and useful. The MEU proposes for new provisions in the rules to be included that aims to disincentivise the replacement of assets which are still in operation and useful.</p>
<p>
On 1 December 2011, the AEMC gave notices under the relevant provisions of the National Electricity Law (NEL) and the National Gas Law (NGL) to initiate and commence consultation of the rule change requests. Submissions on the rule change requests closed on 20 January 2012 and are published on this website.</p>
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On 16 February 2012 and then on 10 May 2012, the AEMC gave notices under the relevant provisions of the NEL and the NGL to extend the period of time for the making of the draft rule determination to 21 June 2012. In each case the extension was to ensure that there was adequate time to assess the issues raised in the rule change requests.</p>
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On 21 June 2012, the AEMC published a draft rule determination in respect of the MEU&rsquo;s rule change requests on the optimisation of the regulatory asset base and the continued use of fully depreciated assets.</p>
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The draft rule determination proposed not to make a rule in response to the MEU&rsquo;s rule change requests. The AEMC&#39;s reasons were set out in the draft rule determination.</p>
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Submissions on the draft rule determination closed on 3 August 2012. Five submissions were received in response and they are published on this website.</p>

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