The Rule proposal seeks to facilitate the increased use of demand management by placing requirements and incentives on supply side participants to investigate and the undertake demand side solutions as preferred, primary options.

Background

On 22 November 2007 the Commission published a notice under section 95 of the National Electricity Law (NEL) advising of its intention to commence the Rule change process and initial consultation on this Rule proposal.

The TEC Rule Change Proposal particularly covered demand management issues relating to the processes of planning and development of networks, the economic regulation of network businesses and elements of the wholesale market.  The Rule Change Proposal involved nine issues:

• Including specifications in the Regulatory Test for demand management options to be considered prior to network options;
• Requiring TNSPs to publish robust data on upcoming network constraints that are relevant and useful to demand management service providers;
• Requiring the AER to design and implement a demand-side incentive scheme for TNSPs;
• Including requirements to recover expenditure on demand side activities in relation to components of the transmission determination and the post-tax revenue model;
• Ensuring that demand management activities are appropriately integrated into revenue determinations for TNSPs;
• Ensuring that there is an ability for NSPs to recover investment in small scale demand side activities;
• Including a mechanism within the wholesale market pool that allows a price to be set for demand side response services.

On 8 October 2008 the Commission received supplementary information from the Total Environment Centre Inc. relating to its Demand Management Rule proposal.

Section 107 Notices

On 13 March 2008 the Commission published a notice under section 107 of the NEL to extend the publication of the draft Rule determination until 26 September 2008.

The Commission considered it necessary to extend the timeframe because of the complex and difficult nature of the issues raised as a result of stakeholder submissions. It was deemed that detailed analysis was required to sufficiently address the issues and merits of the Rule proposal. The Commission also agreed to align the timetable for the Rule proposal with that of the AEMC Review of Demand Side Participation in the NEM because of the common nature of issues being addressed.

On 28 August 2008 the Commission published a notice under section 107 of the NEL to extend the publication of the draft Rule determination until 19 December 2008. The Commission considered it necessary to extend the publication of the draft Rule determination in order to sufficiently analyse and address complex issues necessary to finalise the draft Rule determination.

The Commission made this decision based on the detailed analysis being undertaken as a result of the stakeholder submissions received from the first stakeholder phase. The decision was also taken based on the recently announced Review of Energy Markets in light of Climate Change Policies as directed by the Ministerial Council on Energy. The proposed Rule change and the Review have elements that are appropriate to consider jointly given that the introduction of the Carbon Pollution Reduction Scheme is expected to impact on the potential costs of demand-side solutions as compared to supply-side responses.

On 18 December 2008 the Commission published a notice under section 107 of the NEL to extend the time for publishing the draft Rule determination for the TEC Demand Management Rule proposal until 29 January 2009. The Draft Report for Stage 2 of the Review of DSP in the NEM was also expected to be published at this time.

The Commission made the decision to extend the time for publishing the draft Rule determination due to a material change in circumstances. The Commission had previously aligned the timetables for the Demand Management Rule proposal, the Review of DSP in the NEM, and the Review of Energy Markets in light of Climate Change Policies. The Commission decided to publish the draft Rule determination and the Draft Report for Stage 2 of the Review of DSP in the NEM at the same time. However, the consideration of issues within the Review of DSP in the NEM and the Review of Energy Markets in light of Climate Change Policies had raised complex issues requiring detailed analysis, warranting further consideration before publishing the Draft Report for Stage 2 of the Review of DSP in the NEM.

Section 108A Report

On 28 January 2009, the Commission published a report under s108A as it had not made a final Rule determination and final Rule within 12 months of publishing the section 95 notice. This was specifically due to the large and complex nature of the issues and other processes relevant to this Rule Change Proposal that has required detailed consideration and analysis.

Draft Rule determination and draft Rule

On 29 January 2009, the Commission gave notice under section 99 of the NEL advising of the making of a draft Rule determination on the Rule Change Proposal regarding Demand Management.

In making this draft Rule determination, the Commission took into account all relevant matters relevant to the Rule Change Proposal. Having considered the issues, the Commission determined to make a draft Rule that accepts, with modifications, some of the TEC's proposed changes, where they were considered that these amendments would contribute to the achievement of the National Electricity Objective (NEO). These relate to specific information about network constraints; the recovery of expenditure incurred by TNSPs on demand-side activities; and integration of demand management activities in the TNSPs' revenue determination processes.

Submissions closed on 13 March 2009.  Five submissions were received.   The Commission did not receive a request to hold a pre-determination hearing in regards to the draft Rule determination and draft Rule.

Final Rule determination and Rule

On 23 April 2009, the Commission gave notice under sections 102 and 103 of the NEL making the National Electricity Amendment (Demand Management) Rule 2009 No. 11 and the corresponding Rule determination. The Rule is a more preferable Rule. The Rule determination sets out the reasons why the Rule satisfies the Rule making test.

The Rule change amends four aspects of the Rules relating to:

• The provision of specific information about forecast constraints by TNSPs in their Annual Planning Reports (APRs);
• The treatment of non-network expenditure incurred by TNSPs (e.g. demand management activities) by the Australian Energy Regulator (AER) in future revenue determinations;
• The obligations on the AER when assessing revenue proposals, to take account of whether the TNSPs have demonstrated, and made provision for, appropriate efficient non-network alternatives; and
• The related obligation on TNSPs to provide information on the appropriate non-network alternatives considered by the TNSP in their Revenue Proposals. 

The Rule commences operation on 1 July 2009.