News Archive

AER releases Better Regulation guidelines

Dec 11, 2013

The Australian Energy Regulator (AER) have released their "Better Regulation" guidelines.  These guidelines apply more scrutiny to the way network tariffs are set, which in theory should slow down the rate of network increases we have seen over the last few years.

Some key points:

• Currently, if a distributor overspends from their forecast capex requirement, this new capex is added to the network's asset base from which they can receive returns from.  In the new guidelines, any capex overspend deemed "inefficient" are not added to the network's asset base - removing the incentive to "gold plate" infrastructure.
• Reducing incentives for the network to load spend towards the front of the five year regulatory review period.
• Accounting for network infrastructure that is "shared" - for example a power pole used for telecoms.  This additional revenue, if material, can be taken into consideration by the AER.
• Public benchmarking to guage the efficiency of the networks

These guidelines will start to apply in NSW/ACT from July 2015, and be rolled to all states by 2018.

Only when the review processes commence will the effectiveness of these guidelines be determined.  Namely, pricing determinations will always include subjective elements that can be contested through the legal system.  However we do consider these guidelines a step in the right direction.

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