AEMC review of distribution reliability outcomes and standards – national workstream

The AEMC today called for public submissions on its draft report proposing the introduction of a national framework for state and territory governments to set efficient reliability targets for distribution networks. Jurisdictional governments retain responsibility for setting reliability standards under the AEMC’s framework.

Submissions on the draft report will close on 25 January.

In 2011 energy ministers asked us to design a consistent approach for governments which takes into account both the cost of distribution infrastructure required to deliver reliability standards and consumer attitudes on the value of reliable electricity supplies. Each state and territory currently uses a different approach to set reliability standards.

The proposed framework contains a sequence of stages for regulators to adopt which starts with consumer consultation and the selection of reliability outcomes.

AEMC Chairman John Pierce said this consideration of customer and community preferences regarding reliability was critically important when deciding what targets would be in line with community needs and expectations.

“In overall terms the AEMC proposal marries a focus on consumer interests with publicly available performance reporting,” Mr Pierce said.

“The Australian Energy Regulator (AER) would be required to produce an annual report that compares reliability performance across the nation with published targets.

“These public reports would improve community understanding of the economic relationship between reliability performance and network expenditure.

“Determining reliability levels remain a jurisdictional responsibility under the current proposal but jurisdictional governments would be able to transfer their responsibility for the setting of output reliability targets to the AER.

“The framework has the potential to improve the AER’s ability to benchmark performance and to determine the most efficient levels of expenditure to achieve reliability outcomes.

“It also has the potential to ensure flexible investment decision making by distribution businesses by replacing prescriptive input planning with an outputs-based approach.

“It includes financial incentives (rewards and penalties) to strengthen corporate accountability and encourage distribution businesses to perform to the level of output reliability targets,” he said.