The Australian Energy Market Commission is seeking stakeholder comments on options being considered to address the issues raised in the rule change requests relating to managing the risks faced by distributors and its customers as a result of retailer default.

Distributors face commercial risks associated with the non-payment of network charges resulting from a retailer default. These risks arise as distributors rely on retailers to collect the network charges from their shared customers and to remit those funds to the distributor. The provision of credit support and the collection of costs through the retailer insolvency cost pass-through provisions are two of  a number of mechanisms available to distributors to manage the risks associated with retailer default.

The Commission received two rule change requests from AGL to amend the retailer-distributor credit support requirements, for changes to the National Electricity Rules (NER) and National Gas Rules (NGR), respectively. In addition, the Commission received a rule change request from the Council of Australian Governments Energy Council (COAG Energy Council) to amend the retailer insolvency cost pass-through provisions in the NER and a rule change request from Jemena Gas Networks to amend the retailer insolvency cost pass-through provisions in the NGR.

Due to the common issues raised by these rule change requests, the Commission has consolidated the COAG Energy Council’s rule change request with AGL’s rule change request relating to the NER and the Jemena rule change request with AGL’s rule change request relating to the NGR.

The Commission has published an information notice in relation to the Jemena rule change request to provide stakeholders with an opportunity to provide submissions on the issues raised in relation to the retailer insolvency cost pass-through provisions in the NGR.  Submissions on the information notice are due by 26 November 2015.

While specific changes were proposed in the rule change requests, the Commission has concluded that there is merit in considering a broader range of options that also have the potential to contribute to the achievement of the National Electricity Objective or National Gas Objective. The range of options is set out in the options paper.

Prior to making a draft rule determination in respect of the rule change requests, the Commission is seeking stakeholder views on these options and any other matters raised in this paper. Submissions from stakeholders will assist the Commission in determining the best way to address the issues raised by the rule change request and to ensure any changes to the existing frameworks will lead to more efficient market outcomes in the long term interests of consumers.

Submissions are due by 26 November 2015.

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817