Final Report on Updating the Regulatory Framework for Embedded Networks

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The Australian Energy Market Commission (AEMC) has just released its final report on the embedded networks update. This is a quick update on the core proposals, changes since the draft report and the new implementation timeline.

To learn more, sign up for our free webinar on the changes on Friday 28th June at 3pm.

By Dr Drew Donnelly, Compliance Quarter

Key changes for new embedded networks

  • Most exempt embedded network operators will need to be registered as a new class of network service provider, an ‘Embedded Network Service Provider’. Note, however: Class exemptions will still exist for a small group of ‘Exempt Network Operators’, including operators of some temporary accommodation. These exemptions will require registration. Exemptions for individuals will still be available in special circumstances.
  • Most on-sellers will require authorisation as a new class of ‘off-market retailer’. The obligations for these retailers will be similar to the obligations for regular ‘market retailers’.
    Improved consumer access to retail market competition.
  • A metering coordinator will be required to be appointed for connection points in the embedded network to enable customers to switch retailers more easily. All customers will have Network Metering Identifiers (NMIs) and be visible in the Australian Energy Market Operator’s market systems by other retailers. This is intended to enable better access to competitive retail offers.

Changes since Draft Report

There have been some changes and additions since the draft report released on 31 January 2019 , including:

  • Transition arrangements for legacy networks;
  • Additional analysis of gas embedded networks;
  • Introduction of a new connection framework for registered participants, including performance standards;
  • Reintroduction of individual exemptions;
  • Dropping the requirement for registration of off-market retailers with the Australian Energy Market Operator (AEMO).

Implementation Timeline

These AEMC proposals require approval by the Council of Australian Governments (COAG) and must go through the South Australian law and rule change processes. In addition, a range of new Australian Energy Regulator (AER) amendments to existing guidelines, and jurisdictional regulatory changes are required.
There is no fixed date for the above processes to be complete, but AEMC estimates that these changes could occur by mid-2020. Once passed, new embedded networks would be subject to the changes 12 months later (i.e. on projected timelines, in mid-2021). This date is known as the ‘effective date’.

Legacy Networks

The changes proposed and the implementation timeline set out above apply to new embedded networks. For legacy embedded networks, the following is proposed:

  • Those currently operating under deemed or individual exemptions will not be required to comply with the new changes;
  • Existing embedded networks, operating under a registrable exemption, established prior to 1 December 2017, will be subject to a ‘partial transition’. Retailer authorisation will be required, within two years of the ‘effective date’, but registration as an ENSP will not.
  • Embedded networks, operating under a registrable exemption, established on or after 1 December 2017 up to 31 December 2019 will be subject to a ‘full transition’ and will need to fully comply with the new requirements within 2 years of the effective date of the new framework;
  • Embedded Networks established between 1 January 2020 and the effective date, will need to fully comply with the new requirements within 9 months of the effective date.

For more information on the Final Report see https://www.aemc.gov.au/market-reviews-advice/updating-regulatory-frameworks-embedded-networks.

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