On 24 March 2011, the Commission gave notice under sections 102 and 103 of the National Electricity Law to make the Distribution Network Service Provider (DNSP) Recovery of Transmission-related Charges final Rule determination and Rule as Made.

The Rule as Made is a more preferable Rule that specifies the types of costs permitted to be recovered through the annual pricing proposal process under clause 6.18.7 of the National Electricity Rules (NER).  The Rule commences operation on 24 March 2011.

In brief, the Rule as Made provides the following arrangements:

• it specifically sets out the charges that can be passed through the annual pricing proposal process, including:
  • prescribed exit services charges;
  • prescribed common transmission services charges;
  • prescribed TUOS charges;
  • avoided customer TUOS payments;
  • payments between DNSPs for use of the distribution system which are charges for prescribed exit services, prescribed common transmission services and prescribed TUOS services; and
  • charges for standard control services from other DNSPs it incurs as a Distribution Customer;
• it provides specific transitional provisions for Ergon Energy and ENERGEX's non-regulated charges for only the current regulatory control period, which were permitted to be passed through the annual pricing proposal process in accordance with their current distribution determinations;
• it allows Victorian DNSPs to recover negotiated transmission service charges levied by the Australian Energy Market Operator (AEMO) for augmenting the relevant declared shared network to facilitate a network to network connection service for only the current regulatory control period;
• it provides a special provision for the Bairnsdale network support agreement payments;
• it replaces the existing true-up provisions under clauses 6.18.7 and 6.18.7A (for feed-in tariff schemes) with high level principles; and
• it requires DNSPs and TNSPs to identify components of charges in bills of DNSPs so that DNSPs can determine the charges that can be recovered and account for these in their annual pricing proposals.

The arrangements will apply to each DNSP in respect of its next regulatory year.  Specific transitional provisions have been made for Victorian DNSPs, as they were unable to recover their permitted costs this year because the Rule as Made commenced operation after their annual pricing proposals were approved.

Background

On 24 June 2010, the Commission received a Rule change request from United Energy Distribution (the Proponent) which was submitted on behalf of all Victorian DNSPs. The Rule change request sought to clarify the pricing provisions under Chapter 6 of the National Electricity Rules (NER). Currently the pricing provisions include the ability for DNSPs to pass through ‘transmission use of system (TUOS) charges'. The Proponent proposed that this should be clarified to refer to all charges related to ‘transmission services' as well as including inter-DNSP payments and avoided TUOS payments.

The Proponent considered that the proposed Rule reflects the existing practice in Victoria and other jurisdictions. It also considered that the proposed Rule would remove uncertainty about how these charges should be recovered.

On 2 September 2010, the Commission gave notice under section 95 of the NEL to commence consultation on the Rule change request.  A Consultation Paper prepared by the staff of the AEMC was published to provide guidance to stakeholders in commenting on the Rule change request.  Submissions closed on 1 October 2010.

On 2 December 2010, the Commission gave notice under section 99 of the NEL of the making of the "DNSP Recovery of Transmission-related Charges" draft Rule and draft Rule determination.

The draft Rule, which is a more preferable Rule, specified the types of charges that can be recovered by DNSPs through the annual pricing proposal process under clause 6.18.7 of the NER.  The Commission proposed that the arrangements would commence for each DNSP in its next regulatory year.  Specific transitional provisions were made for Victorian DNSPs as their distribution determination was made as this Rule change process was in progress.  Submissions closed on 21 January 2011.

On 3 March 2011, the Commission gave notice under section 107 of the NEL to extend the period of time for the making of the final Rule determination to 24 March 2011. 

The Commission considered that there were issues of sufficient complexity and difficulty that warranted an extension in the time period and further engagement with stakeholders was required. In particular, these issues included:

• new drafting for the proposed true-up provisions under clause 6.18.7 of the NER; and
• a new request from a DNSP for the inclusion of a charge associated to a non-regulated connection point.