The Australian Energy Market Commission (AEMC) has made a final rule to encourage electricity distribution networks to make efficient decisions in relation to network expenditure, including investment in demand management.

The rule was delivered in line with proposals from the Total Environment Centre and COAG Energy Council.

The rule amends the existing demand management incentive scheme arrangements to provide greater clarity to the Australian Energy Regulator and stakeholders in respect of how a demand management incentive scheme and a demand management innovation allowance should be designed and applied.

This includes the introduction of separate, clearer objectives and principles to guide the Australian Energy Regulator in developing and applying an effective incentive scheme and innovation allowance.

The Australian Energy Regulator is required to develop and publish an incentive scheme and innovation allowance by 1 December 2016. This will enable these mechanisms to be applied from the next round of distribution regulatory determinations, which will start to be prepared in early 2017.

Power of Choice

The AEMC’s Power of Choice Review recommended a market wide reform program designed to facilitate consumer participation in energy markets. This rule change contributes to that reform program and complements a number of building blocks that the AEMC has already put in place including:

  • New cost-reflective network pricing arrangements requiring network companies to structure their prices to better reflect individuals’ consumption choices.
  • Better consumer access to their electricity consumption information.
  • Draft rules to remove the networks’ effective metering monopoly and allowing new competitors to offer metering services to consumers.
  • Reducing the barriers to connect embedded electricity generators to distribution networks.
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