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Network Regulation Rule changes: The AEMC’s process

Network Regulation Rule changes: The AEMC’s process. Brisbane Public Forum, 23 November 2011. Paul Smith Senior Director AUSTRALIAN ENERGY MARKET COMMISSION. Network Regulation Rule changes.

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Network Regulation Rule changes: The AEMC’s process

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  1. Network Regulation Rule changes: The AEMC’s process Brisbane Public Forum, 23 November 2011 Paul Smith Senior Director AUSTRALIAN ENERGY MARKET COMMISSION

  2. Network Regulation Rule changes • The AER is proposing changes to three main areas of the electricity rules relating to network regulation: • The approach to setting opex and capex allowances, and the incentives to spend capex efficiently • How the cost of capital is set • The process for a revenue determination • The AER’s proposals with regard to the cost of capital would also apply to the gas rules • The Energy Users Rule Change Committee is proposing changes to the calculation of the debt risk premium for electricity network businesses to more closely reflect companies’ actual debt costs

  3. Consolidating the rule change proposals • We have used our power under the Law to consolidate the proposals relating to the electricity rules from the AER and the Energy Users Rule Change Committee • This means they are treated as a single rule change proposal, and will have the same Draft and Final Determinations • The AER’s proposed changes to the cost of capital provisions for gas network businesses remains a separate rule change proposal • However, given the cost of capital proposals cover the same types of issues, and part of the premise of the AER’s proposal is greater consistency across gas and electricity, we intend to consider the gas proposals on the same timetable as the electricity proposals

  4. The AEMC’s process • We have added additional consultation compared to the standard rule change process given the breadth and complexity of the issues • Current consultation ends on 8 December • A Directions paper will be issued in late February (this is the additional non-statutory consultation) • A Draft determination is due to be made in July (inc draft Rules) • A Final determination is expected to be made in October (inc final Rules) • We will be facilitating other opportunities for stakeholder input during the process through public fora and other meetings

  5. AEMC’s Approach / Outcomes • We are currently in listening mode to understand stakeholders’ views • The process will not necessarily result in changes – we will consider first how the current arrangements are working, and whether there is any need for change • The possible Rule changes arising out of the process are limited – restricted to problems raised by proponents (preferred Rule power)

  6. Stakeholder Input • We would encourage all stakeholders to provide as much information and analysis as possible to support their views • We would particularly welcome quantitative analysis of outcomes under the current rules • In addition to considering stakeholder’s comments the AEMC will be undertaking a range of analysis to inform our assessment of the proposals

  7. The MEU’s rule change proposal • We have received a further rule change proposal from the Major Energy Users about network regulation issues. The proposal covers the electricity and gas rules • The MEU requested that the proposal be considered as part of the process for considering the AER’s rule change proposals • We will be making a decision in the next couple of weeks about whether and when to initiate the MEU’s proposal, and the process that we will follow to consider the proposal

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