On 17 April 2014, the Commission published the final rule and associated final rule determination for the connecting embedded generators rule change request.

The final rule amends Chapter 5 of the NER and applies to registered embedded generators (that is, generators with a capacity greater than 5MW). In addition, smaller generators located in Victoria and Queensland may, in some circumstances, be able to use the new Chapter 5 connection process.

The final rule provides a clearer, more transparent connection process with defined timeframes, and requires distributors to publish information to assist embedded generators. The new process aims to reduce the barriers to the connection of embedded generators to distribution networks.

Background

On 18 April 2012, ClimateWorks Australia, Seed Advisory and the Property Council of Australia (the proponents) submitted a rule change request to the AEMC in relation to the process for connecting embedded generators to the distribution network under Chapter 5 of the National Electricity Rules (NER).

The proponents considered that the process under Chapter 5 is insufficiently prescriptive and results in uncertainty for connection applicants. This could lead to significant delays in projects and therefore costs to connection applicants. In addition, the proponents noted that a lack of a technical standard under the rules for embedded generators means that technical requirements can vary greatly between distributors. Further, the proponents considered that the current provisions under the NER for determining connection costs and charges are not sufficiently clear and transparent.

To address these concerns, the proponents suggested a number of amendments to the NER to: clarify timeframes and terms and conditions for connection; require the introduction of a technical standard for embedded generators; and clarify that embedded generators should not be required to contribute to shared network augmentation costs.

Some detailed aspects of the rule change request relating to information provided by distributors overlaps with issues considered under the distribution network planning and expansion framework rule change.

The rule change request included a proposed rule (although it did not include a proposed technical standard). In addition, as drafted, the proposed rule was not restricted to embedded generators and distributors. Instead, it would impact on all connection applicants and network service providers.

On 14 June 2012, the AEMC initiated the rule change process in conjunction with publication of a consultation paper to facilitate stakeholder feedback on the main issues identified by the proponents. Submissions on the first round of consultation closed on 9 August 2012. A total of 43 submissions were received.

On 18 October 2012, the AEMC extended the period of time under s. 107 of the NEL in which it must make the draft rule determination. As a result of this extension the draft rule determination was to be published by 27 June 2013.

The main reason for this extension of time was the high level of engagement by a broad range of stakeholders during the first round of consultation. Consequently, a number of complex issues relating to clarification of the connection process; the technical standards applicable to connections; and the allocation of costs required consideration

In addition, a workshop was held in Sydney on 13 March 2013 to obtain stakeholder feedback on a draft connection process before including it in the draft rule.

On 27 June 2013, the AEMC published its draft rule determination and draft rule on the connecting embedded generators rule change request. Submissions on the draft rule determination closed on 8 August 2013. Twenty one submissions were received.

On 30 January 2014, the Commission published for consultation a draft final rule and position paper. The position paper outlined the policy positions that were the basis for the draft final rule and reflected within it.

The draft final rule for consultation included changes from the draft rule that was published on 27 June 2013. These changes were made following the Commission’s consideration of the issues and concerns raised by stakeholders in submissions and consequent consultation. Submissions on the position paper closed on 20 February 2014. Twenty two submissions were received.

Section 108A report

On 26 July 2013, the AEMC published a short report setting out the reasons why the connecting embedded generators rule change request was not finalised within 12 months of formal commencement of the rule change process. The Commission is required to publish such a report under s. 108A of the National Electricity Law (NEL).

The report noted that the final rule determination was not been made within 12 months of the publication of the notice under s. 95 of the NEL because:

• the detailed and complex nature of the rule change request; and
• the nature and volume of issues raised by stakeholders during the first and second rounds of consultation on the rule change request.

Further detail on the reasons is provided within the s. 108A report.

Extension of time for making final rule determination

On 19 September 2013 and 19 December 2013, the AEMC extended the period of time under s. 107 of the NEL for the making of the final rule determination. As a result of these extensions, the final rule determination is to be published by 17 April 2014.

The main reason for the first extension of time was the number and complexity of the issues in the 21 submissions received on the draft rule determination. The main issues identified by stakeholders were:

• The interaction between the process existing in Chapter 5A of the NER and our proposed new process in Chapter 5.
• The size of generator that should be captured by the new process. Stakeholders raised concerns that large generators that connect to distribution networks should not be required to use a process designed for small generators.
• The workability of the proposed ‘register of compliant equipment’.
• The expert appraisal process. Concerns have been raised over the desirability of the proposed ‘independent engineer’ circuit breaker. It has been suggested that the current dispute resolution process in the rules is adequate. This will also require consideration of the dispute resolution process in Chapter 5A.

In addition, the submissions provided suggestions, comments and proposed changes to most areas of the AEMC’s draft rule, including:

• The timing for each element of the two-stage process.
• The role of, and definition of, the ‘agreed project’ concept.
• Civil penalty provisions.
• The automatic right to export.
• The costs of shared network augmentation and the ‘last in, worst dressed’ provisions as they currently exist in the Rules.
• Regulatory oversight of the proposed enquiry fee.

These issues required more time for the AEMC to analyse and evaluate potential policy solutions.

The main reason for the second extension of time was to provide stakeholders with an opportunity to identify any implementation issues arising from the drafting of the draft final rule published for consultation. The draft final rule reflects changes to the draft rule arising from consideration of stakeholder feedback and submissions.

Stakeholder workshops

The AEMC held two workshops with interested stakeholders on the process for connecting embedded generators under Chapter 5 of the NER.

The first workshop was held on 17 October 2013 and focussed on the timeframes and information requirements outlined in the draft rule where stakeholder submissions had identified specific concerns.

The second workshop was held on 1 November 2013 and further refined the information requirements for the proposed connection process. It also discussed the dispute resolution process and the register of technical equipment outlined in the draft rule.

Materials from these workshops have been published on the AEMC’s website.