On 3 April 2018 the Australian Energy Market Commission made a new rule to allow early application of the demand management incentive scheme (DMIS). This scheme encourages distribution network service providers to use alternatives to building more expensive poles and wires in the system. Alternatives can include demand response and distributed generation (including rooftop solar and batteries) where these can address system constraints at the least cost to consumers.

The final rule allows distribution network service providers (DNSPs) to apply to the Australian Energy Regulator for application of the DMIS from 10 April 2018 onwards. As a result, the application of the scheme no longer has to be delayed until the commencement of the DNSPs' next regulatory control periods. 

The DMIS is designed to promote efficient investment in network services by providing incentives for network businesses to use alternatives to poles and wires where these can address system constraints at the least cost to consumers. For example, the DMIS may incentivise a network business to source a demand management solution, like factories turning off during peak periods.

The final rule means customers can start to benefit earlier from the DMIS. It is likely to benefit consumers by reducing total network costs which will be passed through to consumers through lower network prices. These benefits will outweigh the minor administrative costs associated with earlier application. The Commission therefore considers that the Rule will, or is likely to, contribute to the achievement of the national electricity objective.

Background

On 14 December 2017 the AER published the DMIS and at the same time submitted a rule change request to the Commission seeking to allow early application of the DMIS. The proposed rule change sought to amend chapter 11 of the Rules to allow a DNSP to apply to the AER for application of the DMIS during its current regulatory control period.

Under the Rules the DMIS was due to start at the beginning of the next regulatory control period. The next regulatory control period for some jurisdictions was two to three years away and waiting for the next regulatory control period would result in customers having to forgo the opportunity to benefit promptly from the DMIS.

Consultation

On 20 February 2018 the Commission published a consultation paper. Submissions to the consultation paper were due 20 March 2018. The Commission received six submissions in total. 

The rule change process

The Commission assessed the rule change request to be non-controversial and carried out the rule change under the expedited rule change process, subject to any written requests not to do so. The closing date for receipt of written requests was 6 March 2018. No requests to expedition of this rule change process were received.