The AEMC has published a final rule determination, including a final rule, in response to a proposal from the International Copper Association Australia (formerly the Copper Development Centre) regarding distribution losses. This rule is a more preferable rule which is different from the rule proposed by the proponent. This rule will provide clarity and transparency to market participants, regulatory bodies and consumers about how distribution losses are taken into account by distribution network service providers (DNSPs).

It appears to be industry practice among most DNSPs that the cost of distribution losses is already considered, as one of the many relevant inputs to planning and investment decisions, which inform the preparation of expenditure forecasts. Furthermore, the regulatory framework provides for the Australian Energy Regulator to assess whether a DNSP has considered the cost of distribution losses in preparing expenditure forecasts.

However, without some changes to the National Electricity Rules, there may be some uncertainty to other market participants, regulatory bodies and consumers around how DNSPs take into account the cost of distribution losses when making planning and investment decisions.

This rule requires DNSPs to provide an explanation of how they take the cost of distribution losses into account as part of the reporting requirements under the new Distribution Annual Planning Report.

Background

On 22 December 2011, the proponent submitted a rule change request which sought to ensure that DNSPs consider the cost of distribution losses when making investment decisions. The rule change request included a proposed rule and a paper of supporting analysis on the calculation of the long run cost of electrical energy losses.

On 12 April 2012, the AEMC published a notice under section 95 of the National Electricity Law to commence a first round of public consultation on the rule change request. This was accompanied by a staff consultation paper. Submissions to this first round of consultation closed on 31 May 2012. The AEMC received nine submissions.

On 9 August 2012, the AEMC published a draft rule determination, which included a draft rule, in response to this proposal. Submission to this second round of consultation closed on 20 September 2012. The AEMC received five submissions.