Chairman of the Australian Energy Market Commission, John Tamblyn, today released new Draft Rules for the regulation of transmission system revenue. The Commission has called for submissions on the Draft Rules by 11 September 2006.
Australia's transmission network operators own assets worth $9 billion and invest more than $0.5 billion annually on the infrastructure that delivers power from generators to electricity consumers across the country.
The high voltage transmission grid connects and covers Queensland, New South Wales, Australian Capital Territory, Victoria, South Australia, and Tasmania in the National Electricity Market.
The transmission regulation regime plays a critical role in facilitating the continuing investment in the network required to deliver reliable secure and affordable power supplies to Australian workplaces and households into the future.
"The Commission's Draft Rules have been designed to facilitate more efficient network investment and operation in order to promote competition and efficiency in the electricity wholesale and retail markets while maintaining the reliability of power supply." Dr Tamblyn said.
"The Commission's approach is consistent with submissions from a majority of network operators and users which identified a need for greater clarity and certainty in the Rules so as to provide a more certain environment for long-term infrastructure investment."
The development of the Rules has been guided by the key themes that emerged during consultation with stakeholders and has been designed to address the following priorities:
- Aligning the investment and operation decisions of transmission operators with the needs of network users and electricity consumers through incentives for:
- Improved reliability at times of most value to the market;
- Contestable service delivery and adoption of non-network solutions; and
- Commercial negotiation of prices and service quality where feasible.
- Providing greater certainty in regulatory methods and processes to create a more predictable investment environment by:
- Codifying in Rules the form of regulation, the methods for determining regulated revenue and the form of incentive mechanisms; and
- Specifying in Rules a propose-respond process and a fixed time line for regulatory decision-making.
"We believe that the Draft Rules released today represent a balanced regulatory package. We have sought to strike the right balance between incentives for efficient investment, managing the market power of network owners and requirements for transparency and accountability on the part of the regulator," Dr Tamblyn said.
The Rules provide for:
- The recovery of the efficient costs of supplying transmission services;
- Effective incentives for cost efficiency and reliable service performance;
- Management of the potential to exercise market power; and
- Greater clarity, transparency and predictability in the regulatory framework.
In response to stakeholder submissions, the Commission has placed particular emphasis on achieving an appropriate balance in relation to:
- Minimising the inefficiencies that can arise both from the exercise of market power and from regulatory errors and delays
- The strength of, and interaction between, the incentive mechanisms embodied in the revenue regulation model; and
- The degree of codification of methods and processes relative to the areas of discretion and judgement available to the regulator.
This rule-based approach to energy regulation is consistent with the separation of rule making and rule administration which is a central feature of the new energy market institutional and governance arrangements which saw the establishment of the AEMC and the AER in 2005.
In formal terms, the AEMC is today releasing a section 99 Notice under the National Electricity Law advising of a Draft Rule determination and calling for submissions on the Draft Rule.
For information contact
AEMC Chairman, John Tamblyn (02) 8296 7800
AEMC Public Affairs, Prue Anderson (02) 8296 7800 or 0404 821 935