New guidelines to enhance energy regulation process clarity

New guidelines announced for the regulation of network businesses will benefit consumers by providing more clarity from the Australian Energy Regulator (AER) about its processes.

Energy Networks Association CEO, John Bradley, said the industry had urged the AER to provide clearer, more predictable guidance on expenditure benchmarking and forecasting.

“While these Guidelines provide better clarity about regulatory processes, the big benefits to consumers are being driven by reforms already initiated by network businesses,” Mr Bradley said.

“In the past two years, network businesses have significantly revised their capital programs and driven efficiency in operational services and back office functions.

“In New South Wales alone, customers are benefiting from $4.3 billion in savings across Networks NSW.

“Contrary to loose claims about ‘network gold-plating’, analysis shows Australian electricity networks significantly reduce their project capital expenditure in falling demand environments,” Mr Bradley said.

Mr Bradley said a third factor in achieving lower network spending had been network businesses convincing governments to remove prescriptive reliability standards which have dictated reliability spending in some States that didn’t provide value to customers.

Mr Bradley said the sector would be concerned to see how new guidelines for benchmarking efficiency are used by the AER, which previously argued it did not have sufficient powers to use benchmarking.

“It’s easy to make spurious comparisons about cost differences between network businesses to support a media headline or a public argument.

“It will be vital that the AER takes a prudent approach to interpreting benchmark data, given the significant differences in cost drivers driven by different network circumstances, including climate, location and customer density for instance.

“Consumers, the network sector and governments will be closely assessing how the AER puts these principles in practice in network regulatory decisions in New South Wales, ACT and Tasmania next year,” Mr Bradley said.

The new guidelines were released as part of the AER’s Better Regulation program which aims to deliver an improved regulatory framework focused on promoting the long term interests of electricity consumers.

More information about the Australian Energy Regulator’s Better Regulation reform program may be found here.