The final rule establishes a national framework for electricity distribution network planning and expansion, including new demand side obligations on distribution businesses, within the National Electricity Rules. This will support these businesses and other market participants in making efficient investment decisions which will in turn facilitate the efficient development of distribution networks in the long term interests of consumers.

On 11 October 2012, the AEMC published a final rule determination and final rule for the distribution network planning and expansion framework rule change request.

The final rule is largely reflective of, and consistent with, the rule proposed by the Ministerial Council on Energy (MCE). However, the final rule incorporates several policy modifications and a number of drafting amendments to improve and clarify the application and operation of the new national framework.

The final rule consists of an annual planning and reporting process, and a distribution project assessment process. The key components of the final rule are as follows:

• a distribution annual planning review;
• a distribution annual planning report;
• demand side engagement obligations on distribution businesses;
• joint planning arrangements;
• the regulatory investment test for distribution (RIT-D); and
• a dispute resolution process for the RIT-D.

The final rule also makes several consequential amendments to the existing  RIT-T rules as well as changes to the structure of Chapter 5 of the National Electricity Rules (NER).

A detailed description of the final rule is provided in the Commission’s final rule determination.

Section 108A of the NEL

On 11 October 2012, the AEMC also published a short report setting out the reasons why the distribution network planning and expansion framework 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 final rule determination has not been made within 12 months of the publication of the notice under s. 95 of the NEL as a result of:

• 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.

Background

On 30 March 2011, the MCE submitted a rule change request to the AEMC in relation to the introduction of a national framework for electricity distribution network planning and expansion.

The rule change request stems from the AEMC’s Review of National Framework for Electricity Distribution Network Planning and Expansion (the Review). The final report for the Review, published in September 2009, set out the AEMC's recommendations and supporting reasoning in respect of the establishment of a national framework. A proposed rule to implement the new arrangements was also published, for consideration by the MCE.

The AEMC’s recommended design for the national framework consisted of three key components:

•           an annual planning and reporting process;

•           a demand side engagement strategy; and

•           a regulatory investment test for distribution.

The AEMC considered that it was through the interaction of these three elements that the intended purpose and objectives of the national framework would best be achieved.

In September 2010, the MCE provided its response to the AEMC’s final report. Overall, the MCE expressed support for the AEMC’s findings and recommendations. Accordingly, on 30 March 2011 the MCE requested that the AEMC progress the rule change request having regard to the contents of its response.

Initiation and first round of consultation

On 30 September 2011, the AEMC published a notice under s. 95 of the NEL of the commencement of consultation on the rule change request. This was accompanied by a consultation paper.

Submissions on the consultation paper closed on 24 November 2011. In total, 16 submissions and three supplementary submissions were received.

On 30 September 2011, the AEMC also gave notice under s. 107 of the NEL that it had extended the period of time for making the draft rule determination until 22 March 2012. On 9 February 2012, a further notice was published extending the time period to 26 April 2012. On both occasions, the Commission considered that the rule change request raised issues of sufficient complexity and difficulty such that additional time was necessary.

On 5 April 2012, the AEMC published a third notice extending the time period to 14 June 2012. Following further consultation with stakeholders, a number of supplementary submissions to the consultation paper were received. In their supplementary submissions, stakeholders proposed a number of alternative solutions to address several of the key issues identified. To ensure these submissions were given due consideration, the Commission extended the period of time for making the draft rule determination until mid-June.

Second round of consultation

On 14 June 2012, the AEMC published a draft rule determination and draft rule for the distribution network planning and expansion framework rule change request.

The Commission's draft determination was to make a more preferable rule. The draft rule was largely reflective of, and consistent with, the rule proposed by the MCE. However, the draft rule incorporated several policy modifications and a number of amendments to improve and clarify the application and operation of the new national framework for electricity distribution network planning and expansion.

A detailed description of the draft rule is provided in the Commission’s draft rule determination.

Submissions on the draft rule determination and draft rule closed on 9 August 2012. In total, nine submissions were received.

On 13 September 2012, the AEMC published a notice under s. 107 of the NEL to extend the publication date of the final rule determination to 11 October 2012. To ensure that the issues raised by stakeholders in their submissions could be given detailed consideration, the Commission extended the period of time for making the final rule determination by an additional three weeks.