Electricity Network Regulatory Frameworks

Inquiry report

This inquiry report was released on 26 June 2013.

The Commission's report is in two volumes. Volume 1 contains the Overview, the Recommendations and findings and Chapters 1 to 8. Volume 2 contains Chapters 9 to 21, Appendix A and the References. Appendices B to F are only available online below.

See also

Download the report by volumes

Download the report by chapters

  • Preliminaries (PDF - 432 Kb)
    • Cover, Copyright, Letter, Terms of reference, Disclosure of interests, Contents, Acknowledgments and Abbreviations and explanations
  • Overview - including key points (The main messages) (PDF - 1132 Kb)
  • Recommendations and findings (PDF - 241 Kb)
  • Chapter 1 About the inquiry (PDF - 914 Kb)
    • 1.1 What are the perceived problems?
    • 1.2 Overview of the regulatory framework and its institutions
    • 1.3 The Commission's approach to its terms of reference
    • 1.4 A guide to the report
  • Chapter 2 The structure and performance of the National Electricity Market (PDF - 894 Kb)
    • 2.1 The structure of the National Electricity Market
    • 2.2 The scale of the network and its costs
    • 2.3 The nature of demand
    • 2.4 Prices have been rising
    • 2.5 The proximate reasons for higher network charges
    • 2.6 Reliability
    • 2.7 What is at stake?
  • Chapter 3 The rationale for regulation of electricity networks (PDF - 295 Kb)
    • 3.1 The characteristics of electricity networks
    • 3.2 Evidence about the costs of market power
    • 3.3 The case for regulating monopolies
    • 3.4 Are deadweight losses passé? New theories of why monopolies should be regulated
    • 3.5 The alternative policy implications of different theories of monopoly regulation
    • 3.6 In summary
  • Chapter 4 A framework for benchmarking (PDF - 799 Kb)
    • 4.1 Benchmarking managerial efficiency and performance
    • 4.2 Benchmarking techniques
    • 4.3 What should be benchmarked?
    • 4.4 The use of benchmarking for Australian electricity networks
    • 4.5 Criteria for judging benchmarking
    • 4.6 Validity does the measure test what it claims to?
    • 4.7 Other scientific criteria for judging benchmarking
    • 4.8 Testing the credibility of results
    • 4.9 No perfect measure is possible
  • Chapter 5 Incentive regulation and benchmarking (PDF - 574 Kb)
    • 5.1 Incentive regulation
    • 5.2 Incentive regulation and the electricity sector
    • 5.3 Ensuring effective incentives
    • 5.4 The AER's ability to determine expenditure forecasts
  • Chapter 6 Empirical evidence of network efficiency (PDF - 854 Kb)
    • 6.1 Existing evidence and arguments
    • 6.2 The relative impacts of the WACC, capex and opex
    • 6.3 Demand driven augmentation
    • 6.4 What does the RAB tell us?
    • 6.5 Expenditure, allowances and timing
    • 6.6 Public and private ownership
    • 6.7 Conclusions
  • Chapter 7 Ownership (PDF - 376 Kb)
    • 7.1 A framework for considering ownership
    • 7.2 Incentive regulation and state-owned corporations
    • 7.3 Non-commercial imperatives and interference
    • 7.4 The productivity and performance of state-owned network businesses
    • 7.5 The perceived risks of privatisation
    • 7.6 The bottom line on private ownership
    • 7.7 The transition to privatisation
  • Chapter 8 How should the Australian Energy Regulator use benchmarking? (PDF - 750 Kb)
    • 8.1 Should benchmarking be used in a mechanistic role to set revenue allowances?
    • 8.2 Benchmarking the effectiveness of the regulatory regime
    • 8.3 Could more targeted analysis act as a filter?
    • 8.4 Benchmarking could be a trigger for negotiated settlements
    • 8.5 Information and 'moral suasion'
    • 8.6 The long-run application of benchmarking
    • 8.7 The regulator's benchmarking practices
    • 8.8 Conclusion
  • Chapter 9 Peak demand and demand management (PDF - 716 Kb)
    • 9.1 What is peak demand and why is it a problem?
    • 9.2 A roadmap for how this report addresses peak demand management
    • 9.3 Facets of the peak demand problem
    • 9.4 What is demand management and how can it provide a solution?
    • 9.5 Demand management is not widely implemented
    • 9.6 Why is the uptake of demand management so low?
    • 9.7 Gauging the prospective benefits and costs of demand management
  • Chapter 10 Technologies to achieve demand management (PDF - 836 Kb)
    • 10.1 Understanding smart meters
    • 10.2 Rolling out smart meters involves major challenges
    • 10.3 Creating the optimal incentives for deploying demand management technologies
    • 10.4 A hybrid approach that blends a market-based and regulated approach
    • 10.5 There must be a role for other parties
    • 10.6 Control of the information hub
    • 10.7 Direct load as an alternative or complementary option
  • Chapter 11 Moving to time-based pricing for the distribution network (PDF - 432 Kb)
    • 11.1 Introduction
    • 11.2 How do distribution businesses currently price?
    • 11.3 Do the National Electricity Rules facilitate time-based and other efficient pricing approaches?
    • 11.4 Designing time-based prices for distribution networks
    • 11.5 A supervising role for SCER is a first step in implementing time-based pricing
    • 11.6 A NEM-wide licensing regime for network providers
    • 11.7 Tightening and augmenting aspects of the Rules
    • 11.8 Guidelines to support methodological development and data collection
    • 11.9 Addressing affordability and equity issues
    • 11.10 The nature of the transition to time-based pricing
    • 11.11 The importance of effective engagement and customer education
  • Chapter 12 Complementary reforms to support demand management (PDF - 618 Kb)
    • 12.1 Choice of revenue control mechanism revenue caps versus weighted average price caps
    • 12.2 The incentives of network businesses to undertake demand management
    • 12.3 Retailers' incentives and price regulation
    • 12.4 The AEMC's proposed 'demand response mechanism' in the Power of Choice review
  • Chapter 13 Distributed generation (PDF - 356 Kb)
    • 13.1 What is distributed generation?
    • 13.2 Scale of distributed generation in Australia
    • 13.3 Potential benefits of distributed generation
    • 13.4 Effects of distributed generation on network costs
    • 13.5 Obstacles to efficient network investment
    • 13.6 Benchmarking to achieve efficient levels of network use of distributed generation
  • Chapter 14 Building a reliability framework in order to benchmark (PDF - 349 Kb)
    • 14.1 What issues does reliability raise?
    • 14.2 Reliability under incentive regulation
    • 14.3 The costs of reliability for network businesses
    • 14.4 What level of reliability is efficient?
    • 14.5 Measuring the value of reliability
    • 14.6 Concluding comments
  • Chapter 15 Distribution reliability (PDF - 544 Kb)
    • 15.1 Introduction
    • 15.2 Reliability performance of distribution businesses in the National Electricity Market
    • 15.3 Reliability settings for distribution networks in the National Electricity Market
    • 15.4 An efficient and effective distribution reliability framework a bolstered STPIS
  • Chapter 16 Transmission reliability and planning (PDF - 818 Kb)
    • 16.1 Introduction
    • 16.2 The special characteristics of transmission networks
    • 16.3 The broader planning context and economic regulation
    • 16.4 An efficient transmission framework?
    • 16.5 The way forward
    • 16.6 Delivering reliability in the shorter term
    • 16.7 Changes to transmission reliability
    • 16.8 Contestability in new connections and other separable transmission investments
  • Chapter 17 The Regulatory Investment Test for Transmission (PDF - 329 Kb)
    • 17.1 The current framework
    • 17.2 Issues with the current RIT-T
    • 17.3 The future role of the RIT-T
    • 17.4 Other potential improvements
  • Chapter 18 The role of interconnectors (PDF - 614 Kb)
    • 18.1 Background and perceived problems
    • 18.2 Some conceptual considerations
    • 18.3 Evidence of the efficiency of interconnection
  • Chapter 19 Efficient use of interconnectors (PDF - 927 Kb)
    • 19.1 The spot market
    • 19.2 Disorderly bidding
    • 19.3 Potential solutions
    • 19.4 More fundamental reforms
    • 19.5 The hedging market
  • Chapter 20 Merchant interconnectors (PDF - 356 Kb)
    • 20.1 The role of merchant interconnectors in the National Electricity Market
    • 20.2 Regulatory biases
    • 20.3 Beneficiary pays
  • Chapter 21 Governance (PDF - 1471 Kb)
    • 21.1 Governance and performance of the Australian Energy Regulator
    • 21.2 Reform of Australian Energy Regulator governance
    • 21.3 What about AEMO, the AEMC and other NEM bodies?
    • 21.4 Consumer engagement and representation
    • 21.5 Processes for amending electricity network regulation
    • 21.6 Merits review processes
  • Appendix A Conduct of the inquiry (PDF - 378 Kb)
  • References (PDF - 269 Kb)

Please note: Appendices B to F are only available online and are not in the printed copy.

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Printed copies

Printed copies of the full report can be purchased from Canprint Communications.

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