On 19 September 2013 the AEMC made a final determination in relation to a rule change request from the Standing Council on Energy and Resources on the expenditure objectives in chapters 6 and 6A of the National Electricity Rules.

The rule as made is likely to provide greater clarity both to NSPs in preparing their regulatory proposals and the AER in assessing these proposals as it gives primacy to jurisdictional standards for reliability, security and quality of supply in the objectives, where these standards exist.

The AEMC considers that similar clarification in relation to safety is not required, and that the objectives should continue to refer to a requirement to maintain current levels of safety. This is because current levels of safety may have been appropriately influenced by safety standards in voluntary industry codes or Australian standards that sit on top of regulated standards.

Similarly, the Commission determined that the current form of the objectives should also be preserved where there are no regulatory obligations or requirements in place. The Commission considers that the issue of how the existing objectives work together does not arise where there are no regulated standards so it does not propose to amend the objectives for this scenario.

The rule will commence in effect on 26 September 2013.

Background

On 8 October 2012, the Standing Council on Energy and Resources (SCER) submitted a rule change request in relation to the opex and capex objectives in chapters 6 and 6A of the National Electricity Rules (NER).

SCER considered that an interpretation of the NER could potentially allow network service providers (NSPs) to include in their regulatory proposals expenditure they consider necessary to maintain the level of reliability they achieved in the previous regulatory control period. This level of reliability could be above that required by the jurisdictional reliability standards.

The rule change request sought to fix this issue by clarifying the expenditure objectives in the NER such that NSPs are only able to include sufficient expenditure for reliability in their regulatory proposals to comply with jurisdictional standards.

This issue was previously raised by the AEMC as part of the New South Wales reliability review and by the AER in the context of the network regulation rule changes.

The SCER also requested that the AEMC examine whether there is a similar need for clarification around expenditure relating to quality and security of supply and the safety of the network.

Consultation process

On 7 February 2013, the AEMC initiated the rule change process in conjunction with publication of a consultation paper to facilitate stakeholder feedback on the rule change request. Submissions on the first round of consultation closed on 7 March 2013.

On 16 May 2013, the AEMC extended the period of time for publication of the draft determination on the Network Service Provider Expenditure Objectives rule change request to 4 July 2013. The extension of time was to allow for further policy analysis to address the issues raised in the rule change request and submissions.

On 27 June 2013 the AEMC published its draft determination and draft rule in relation to this rule change request. Submissions on the second round of consultation closed on 8 August 2013.