On 22 December 2011, the AEMC gave notice under sections 102 and 103 of the National Electricity Law of the making of the "Efficiency Benefit Sharing Scheme and Demand Management Expenditure by Transmission Businesses" final rule and final rule determination.

The Commission's final rule requires the Australian Energy Regulator (AER), in designing and implementing the Efficiency Benefit Sharing Scheme (EBSS), to consider the possible effects of the scheme on a Transmission Network Service Provider's (TNSP) incentive for the implementation of non-network alternatives.

Rule change request

The MCE proposed a rule change request to amend the EBSS framework to require the AER to consider the scheme's effect on TNSPs' incentive to undertake non-network alternative expenditure. The Commission has made the rule proposed by the MCE without amendments. The rule commences on 22 December 2011.

Background

Non-network alternative expenditure such as demand management and other forms of demand side participation (DSP) related activities that can be undertaken as an efficient substitute for expensive network investment solutions are generally in the form of on-going operating expenditure.

The National Electricity Rules (NER) require the AER to establish and apply an EBSS to TNSPs' operating expenditure. The EBSS is an incentive mechanism through which businesses can earn additional revenue or be penalised depending on whether the business beats or exceeds targets for its operating expenditure approved by the AER in each year of the regulatory control period.

The EBSS framework currently does not require the AER to exclude any non-network alternative operating expenditure from the scheme.

Rule change process

On 4 November, the Ministerial Council on Energy (MCE) submitted a rule change request. The MCE's rule change request sought three separate rule changes related to Stage 2 DSP Review. As the subject matter of each proposed rule is not inter-dependent, the proposed rule changes were disaggregated into three separate projects to allow the AEMC to more efficiently assess each rule on its merits within the rule change process.

The other proposed rules were consulted on separately under AEMC project reference codes "ERC0128 - Inclusion of Embedded Generation Research into Demand Management Incentive Scheme" and "ERC0129 - Network Support Payments and Avoided TUoS for Embedded Generators".

On 23 June 2011, the Commission published a notice under section 95 of the National Electricity Law advising of its intention to commence the rule making process and the first round of consultation in respect of the rule change request. Submissions closed on 21 July 2011.

On 29 September 2011 the Commission gave notice under section 99 of the NEL of the making of a draft rule determination, including a draft rule, in relation to the rule change request. Submission on the draft determination closed on 10 November 2011. The Commission received six submissions.