Updating regulation for embedded networks
By Executive General Manager of Transmission and Distribution Networks, Richard Owens
Hundreds of thousands of people are customers in private power networks like high-rise apartment buildings, shopping centres, retirement villages and caravan parks. They are often locked into uncompetitive electricity supply deals. Right now they don’t have the same protections as customers who are connected directly to the grid but the AEMC is working to change that.
In December an embedded network power provider, Flow Systems, went into voluntary administration leaving its 2,000 customers unsure of their future. Because Flow is not registered in the national electricity market (NEM) and its customers are off-market, the Australian Energy Regulator (AER) can’t appoint a retailer of last resort or direct the market operator, the Australian Energy Market Operator (AEMO), to transfer the stranded customers as it typically would for a NEM retailer. The regulator has stepped in to monitor the situation. It’s a timely example of the problems sometimes faced by people in embedded networks – and one of the reasons why the AEMC is updating embedded network regulation.
Community consultation with the AEMC embedded networks team on its draft report (released 31 January) is well underway. Our first stakeholder workshop in Sydney last week with 200 people attending in person or by the webcast.
Next week we will be meeting consumer groups in Brisbane and Cairns before we start national meetings with jurisdictional departments and regulators in all states and territories as well as more workshops with the AER, AEMO and embedded network operators. This latest round of consultation follows a series of workshops and stakeholder meetings we held following commencement of the review in late 2018.
Embedded networks are private electricity networks that are owned and operated by anyone other than the regulated local distribution service provider. These networks are connected to the local distribution network through a parent connection point. Almost all embedded network operators are currently exempted from the usual obligations to be an authorised electricity retailer and registered distribution network service provider.
The changes we have proposed are all about treating electricity customers the same way wherever they live and do business. Everyone should have the same rights and protections no matter who they buy their electricity from. In particular, accelerating high density development is driving the fast growth in these private, embedded networks. This push is encouraged by the ability to access a regime with less competition and consumer protections. This exemption regime was originally designed to cut costs and red-tape for small networks like caravan parks, but following the recent exponential growth in its application to big developments there are now over 4,000 exempt embedded networks and several hundred thousand customers in those embedded networks.
We have identified rising risks for this expanding group of consumers and decided that the regulatory framework for embedded networks needs to change. It’s just not acceptable for some customers to be unable to access competitive prices or important customer protections.
Of course, provided they are appropriately regulated, embedded networks can provide benefits to consumers. But at the moment many embedded network customers are not realising these.
Aspects of the retail law and rules do not operate effectively because they do not recognise embedded network service providers or on-sellers. Current AER powers to monitor compliance and enforce consumer protections in embedded networks are insufficient. In many states and territories, the reliability and safety requirements that apply to electricity distribution networks do not apply to embedded networks, and customers in embedded networks have limited access to concessions, rebates and ombudsmen schemes.
This report recommends law changes so embedded network customers have the same opportunities to benefit from competition in the open market and gain access to appropriate protections. The reforms also seek to clarify and align minimum obligations for embedded network suppliers.
We want embedded network customers to be able to access new products and services within a clear regulatory framework that provides appropriate check and balances.
At this stage the majority of proposed changes would apply to new embedded networks established after the introduction of the new regime. We are also seeking stakeholders’ views on whether the proposed changes should apply to certain types of existing embedded networks.
What would change at a glance
Our proposals would give customers in embedded networks:
- improved consumer protections in areas such as disconnections, billing information, payment options and notification of planned outages
- new protections for the first time including access to customer hardship programs and continuity of supply in the event of retailer failure
- stronger regulation which enhances the ability of the Australian Energy Regulator to enforce compliance with obligations to provide protections
- access to competitively priced market offers by making it easier for customers to choose their retailer and requiring better industry financial and data transfer processes to help more retailers compete in embedded networks
- market-compliant meters that are registered with AEMO so it’s easier for customers to switch retailers and get better information about their usage and bills
- the same rights as grid-connected customers when upgrading their connections eg when installing electric vehicle charging stations within apartment blocks
- improved access to state government services such as concession schemes and emergency financial assistance, access to independent dispute resolution, and new reliability protections (these changes are recommended for implementation by state and territory governments).
How to get involved in this conversation
Submissions on the draft report from the review Updating the regulatory frameworks for embedded networks close on 14 March 2019.
If you want to discuss any aspect of the project please contact
Kate Reid (02) 8296 7800 or kate.reid@aemc.gov.au
Sherine Al Shallah on (02) 8296 7800 or sherine.alshallah@aemc.gov.au