Consultation on draft exempt embedded network guidelines (part two): what is a ‘dedicated connection asset’?

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Last week we looked at some of the proposals contained in the draft electricity network service provider registration exemption guideline (draft guideline) (see https://compliancequarter.com.au/consultation-draft-exempt-embedded-network-guidelines-part-one-embedded-network-managers-take-note/). Today we continue that discussion, looking at the changes in that draft guideline that relate to the National Electricity Amendment (Transmission Connection and Planning Arrangements) Final Rule Determination (the rule change).

In today’s article, we address the new concept of a ‘dedicated connection asset’ and the exemptions that have been proposed for any business that owns or controls those assets.

embedded network guideline
Photo by Oliver Wendel on Unsplash
By Dr Drew Donnelly, Compliance Quarter.

What is a dedicated connection asset?

When we think about an embedded network, we often think of private wiring systems connecting a group of customers to the local electricity network at a single point. These are the sorts of embedded networks we find in apartment complexes, retirement homes, caravan parks and shopping malls. But the regulatory definition is broader than that. Chapter 10 of the National Electricity Rules defines an embedded network as a:

A distribution system, connected at a parent connection point to either a distribution system or transmission system that forms part of the national grid, and which is owned, controlled or operated by a person who is not a Network Service Provider.

This broad definition means, for example, that power lines owned by a generator which connect a generator to a transmission network through a substation are an ‘embedded network’. Likewise, for power lines connecting large energy users (‘loads’) directly to the transmission network, through a substation.

This raises the question as to whether these assets should be dealt with in the same way as traditional embedded networks, through the network exemption regime. Through the rule change and the subsequent draft embedded network guideline, it has been proposed that new exemption classes for ‘dedicated connection assets’ (DCAs) be created to address this issue. These are defined as:

the collection of components that are used to connect a connecting party to the shared transmission network and which, once commissioned, can be isolated from electricity flows on the transmission network.

Draft Embedded Network Guideline

Although a DCA facilitates a connection to the transmission network, it was considered unnecessary to require DCA service providers to register as a Transmission Network Service Provider. Instead, it was left to Australian Energy Regulator (AER) to deal with DCAs in its network exemption regime. It is for this reason that two new categories of exemption have been proposed in the draft guideline.

Under the draft embedded network guideline, there are two new classes of exemption depending on whether the business operates a ‘large’ DCA or a ‘small’ DCA. A large DCA includes a component that is longer than 30km, and a small LDCA is one where no component is that long.

Any business that supplies energy to a small DCA is eligible for a deemed exemption (exemption class ND08). That is, an exemption that applies automatically to certain classes of people or businesses. A business that supplies energy to a large DCA is eligible for a registrable exemption (exemption class NR06). That is, an exemption that must be registered with the AER.

As part of their exemption, both small and large DCAs are subject to a range of exemption conditions (just as is the case with traditional embedded networks). Important new conditions for an NRO6 exemption (large DCA) is the obligation to create an access policy, and the obligation to comply with commercial arbitration obligations in the event of an access dispute.

To read the draft guideline go to https://www.aer.gov.au/networks-pipelines/guidelines-schemes-models-reviews/review-of-network-service-provider-registration-exemption-guideline-2017-18.

Any feedback is due by 15 January 2018.

For more of our recent articles and analysis within the Australian energy sector click here.

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