Submissions to the AEMC’s draft report on the regulatory frameworks for stand-alone power systems are now available on the AEMC’s website.
This report sets out the Commission’s emerging thinking and draft recommendations to enable distribution businesses to provide stand-alone power systems to their existing customers where it is economically efficient, for example in remote locations, while maintaining appropriate consumer protections and service standards.
The Commission received 27 submissions from a range of stakeholders, including distribution businesses, consumer representatives, electricity retailers and renewable energy advocates, as well as AEMO and the AER.
Overall, stakeholders were broadly supportive of the approach taken by the Commission to develop a national framework for the provision of stand-alone power system supply by distribution businesses as an efficient alternative to investment in traditional poles and wires.
Stakeholders focused their submissions on four key areas:
Facilitating efficient decision making
The provision of information by distribution businesses is critical to achieving efficient planning and investment outcomes. To supplement the existing distribution network planning and expansion arrangements, the Commission proposed two new measures to increase transparency around distribution businesses planning and investment decisions in respect of stand-alone power systems.
First, for projects which are not subject to the regulatory investment test for distribution (RIT-D), the Commission is proposing the development of a set of minimum SAPS project evaluation requirements which will support the competitive testing of potential SAPS solutions by distribution businesses.
Stakeholders were generally all supportive of this recommendation, although the majority of distribution businesses cautioned that any additional requirements should be fit-for-purpose and not unduly onerous relative to the size and scale of potential SAPS investments.
In addition, the Commission recommended an obligation on distribution businesses to undertake a comprehensive program of information provision and engagement with all parties, including customers, who may be affected by a stand-alone power system solution. Stakeholders were again generally supportive of this recommendation, with the majority of distribution businesses recognising that comprehensive engagement with affected parties, in particular prospective SAPS customers, would be critical to the successful role out of efficient stand-alone power system solutions by distribution businesses.
Arrangements for the ongoing supply of electricity to off-grid customers
The Commission recommended that the national electricity law and rules be amended to remove existing barriers to distribution businesses providing stand-alone power systems as a regulated service. The AER would then have discretion to classify (and therefore economically regulate) the activities and services associated with stand-alone power systems using current frameworks.
All of the stakeholders who commented on this recommendation expressed support for this proposal.
Stakeholders also generally agreed that the current framework for distribution service classification was fit-for-purpose and suitable in the context of stand-alone power systems. However, a number of parties, including distribution businesses, considered there would be benefit in the NER including additional guidance on how the services associated with stand-alone power systems would need to be classified by the AER.
To facilitate further discussion and illustrate how the ongoing supply of electricity to customers could work, the draft report presented two illustrative options for SAPS service delivery. The SAPS service delivery arrangements govern the relationship between the distribution service provided by the distribution business and all the other activities required to provide an electricity service to end consumers.
On this matter, stakeholders were divided. Stakeholder views on the best model were generally driven by a desire to either implement arrangements which would ensure customers transitioned to stand-alone system supply were able to retain access to competitive market outcomes (including choice of retailer and retail offer), or to implement arrangements which would enable SAPS-specific demand and supply conditions to be directly reflected in the prices paid by SAPS customers.
Helpfully, several stakeholders proposed variations of, and possible alternatives to, the two illustrative models of SAPS service delivery, for further consideration by the Commission.
Preserving consumer protections
In the draft report, the Commission set out its view that customers should not be disadvantaged as a result of being transitioned to a stand-alone power system. If the model of SAPS service delivery does not enable customers to access retail competition, the Commission noted that new retail price protections would be required to make sure the price paid by SAPS customers is as close as possible to what the customer would have been able to access under retail competition.
The Commission also considered that SAPS customers should continue to receive other existing national energy specific consumer protections (to the extent these remain relevant) as well as reliability protections equivalent to grid-connected customers. On the basis that network reliability standards are a jurisdictional responsibility, the Commission noted that jurisdictions may need to review legislative instruments for reliability standards and guaranteed service level schemes, and make any changes required to cater for stand-alone power systems provided by distribution businesses.
Stakeholders were all generally supportive of the Commission’s proposed approach to the application of equivalent consumer protections for customers transitioned to stand-alone power system supply, including in respect of price, reliability and other general protections. However, in order to minimise risks to consumers, several stakeholders were firmly of the view that price protections should only be provided through retaining access to the competitive retail market for SAPS customers, rather than through regulated retail prices. A number of stakeholders also suggested that SAPS-specific consumer protections would likely require further consideration once a SAPS service delivery model had been chosen.
Jurisdictional participation in the national framework
The draft report outlined a potential process whereby there would be a coordinated program to implement changes to national frameworks, and to jurisdictional instruments in those jurisdictions wishing to proceed with the national framework for stand-alone power system provision by distribution businesses. The national rules would apply uniformly, but would include a restriction on distribution businesses using SAPs solutions in each jurisdiction until such time as the Minister in the relevant jurisdiction has given notice that the national arrangements for SAPS are applicable there.
Stakeholders were all generally supportive of the proposed jurisdictional opt-in provisions as a reasonable means of providing jurisdictions with sufficient time to amend relevant jurisdictional instruments to support the successful implementation of the national framework.
Media: Bronwyn Rosser, Communications Specialist, (02) 8296 7847; 0423 280 341
Background
A stand-alone power system is an electricity supply arrangement that is not physically connected to the national grid. The term encompasses both microgrids, which supply electricity to multiple customers, and individual power systems, which relate only to single customers.
In general, stand-alone power systems are currently not captured under the national electricity frameworks. They are instead subject to jurisdictional legislative frameworks that vary in their comprehensiveness.
Under the terms of reference for the review provided by the COAG Energy Council, the Commission will consider two priority areas:
- Priority 1 will mainly focus on the development of a national framework for customers that move from grid-connected supply to stand alone power systems provided by existing distribution network service providers
- Priority 2 will consider a national framework for the provision of standalone power systems by parties other than distribution network service providers.
Given the breadth of issues across the review as a whole, a separate consultation process will be undertaken for the further issues associated with priority 2, beginning in early 2019.
Under the terms of reference for the review, the Commission is required to provide the COAG Energy Council with a final report for priority 1 by 31 May 2019. A final report for priority 2 is then due by 31 October 2019.
We are concurrently working on updates to the regulatory framework for embedded networks, with a final report due in May 2019. The two workstreams will consider a number of related issues, particularly with regards to consumer protections.
These reviews are part of the AEMC’s consumer action plan to give consumers more choices about energy products and services; more control over energy bills; and stronger protections.