Service Classification, Asset Exemption, Revenue Proposals and RIT Applications: AER seeks feedback

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In today’s update, we provide a whirlwind summary of three issues (Service Classification, Asset Exemption, Revenue Proposals and RIT Applications) that the Australian Energy Regulator (AER) has recently sought stakeholder feedback on. To read the issues papers, questions and proposals in full, go to the AER pages linked to in the article.

Photo by Alex Jones on Unsplash

 

By Dr Drew Donnelly, Compliance Quarter. 

1. Issues paper: Service classification and asset exemption guidelines

AER has released an issues paper initiating consultation on new guidelines for service classification and for asset exemption for electricity distribution network service providers (DNSPs). Service classification is when the AER determines how or whether a service offered by a DNSP will be regulated. For example, currently service classified as ‘standard control service’, that is distribution services central to electricity supply, are regulated with a price cap.

AER asks a range of high-level questions relating to this guideline including:
• Is the current incremental approach to regulation appropriate? and
• Should service classification decisions make it clear that a service has not been classified because it does not count as a distribution service.

In the same issues paper, AER considers ‘asset exemption’ guidelines for DNSPs. As a result of a National Electricity Rule change last year (the ‘contestability rule change’). DNSPs are now, generally, prohibited from investing in assets located on the customer’s side of a connection point to the network (‘behind the meter’) and earning a return on them.

AER is seeking input on Guidelines for asset exemptions: the exceptional case where a DNSP would be able to invest in such an asset. AER asks a range of questions including:
• What criteria should AER use to determine whether a DNSP should be permitted to add an asset to its regulatory asset base?, and
• What are some examples of restricted assets that should be granted exemptions, and why?

Interested parties are invited to make submissions to the AER on this issues paper by close of business, 16 March 2018. Submissions may be sent to classificationguideline2018@aer.gov.au.

2. Revenue Proposals

AER has received revenue proposals from Evoenergy (formerly ActewAGL), Power and Water Corporation (PWC), and TasNetworks distribution and transmission. These organisations operate in the Australian Capital Territory, Northern Territory and Tasmania, respectively.
These proposals set out the revenue each business proposes to collect from electricity consumers through network charges from 1 June 2019 to 30 July 2024.
Under the National Electricity Rules, AER is required to make a determination on those revenue proposals as well as a decision on distribution service criteria (NDSC) (the criteria to apply in negotiating terms and conditions of access for negotiated services).

AER invites submissions on the regulatory proposals and NDSC by close of business on 16 May 2018.

3. Review of the application guidelines for the regulatory investment tests

AER is reviewing the application guidelines for ‘regulatory investment tests’ (‘RITs’) for electricity transmission and distribution network providers (network businesses).

The RITs are cost–benefit analysis frameworks that network business must perform and consult on before making major investments in their networks to address an identified need. The goal of RITs is to support network businesses in making the best investment decisions in the interests of the National Electricity Market (NEM) as a whole. Questions asked in the Issues Paper include:
• Do you agree that RITs promote the long-term interests of consumers by promoting competitive neutrality and investment efficiency? Are there any other factors AER should consider? And
• How do you think AER should amend the RIT application guidelines to better facilitate consumer engagement throughout the RIT application process?

To read more see https://www.aer.gov.au/system/files/AER%20-%20Issues%20Paper%20-%20Review%20of%20the%20RIT%20application%20guidelines%20-%2020%20February%202018_0.pdf

The Australian Energy Regulator (AER) invites stakeholders to review the paper and provide written submissions. Submissions must be sent by close of business on 6 April 2018 and can be sent to RIT@aer.gov.au.

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