Insights

15/11/17

Australian Energy Regulatory Market Update | Period up to 10 November 2017

It has been a few weeks since our last update and so this is one is also a little longer.  As usual, the pace of policy reform has been frenetic and energy prices haven’t moved from the front page.

Of particular note:

  • The biggest event (which we flagged in our last update because it came down the day we published) was the report by the Energy Security Board to the COAG Energy Council recommending a National Energy Guarantee.  Energy politics is very much the art of the possible – and some form of NEG might just navigate the delicate Australian politics of carbon (and coal).
  • By now, everyone will also have read, or at least heard about, the ACCC’s preliminary report into retail electricity prices.  This is the latest contribution to a crowded field of reviews into the market over the last couple of years (of which the AEMC 2017 retail energy competition remains the best, in the author’s opinion – published in July).  While the complexity of the problem was acknowledged in the recent ACCC report, unfortunately the conclusions simplistically target old scapegoats like “gold plated” networks and vertically integrated “gentailers” as the drivers of price increases. In terms of solutions, it is to be hoped that the ACCC does not follow the UK experience, where similar market review work has led to ill-conceived calls to re-regulate consumer tariffs – a move which would have drastic negative impacts for new UK entrants and smaller retailers.
  • Continued work was done by AEMC around technical requirements for new generation and other measures to improve system security and reliability, which had also been picked up by Finkel.  Recent deliverables during the update period include:
    • an issues paper for its review into frequency control measures;
    • a draft determination not to introduce an ancillary service for inertia; and
    • a draft determination to give AEMO increased powers to signal increased supply or load shedding.
  • The Australian Competition Tribunal confirmed the AER’s decisions in Victorian network resets (rejecting the various applications made by DNSPs for review).
  • AEMO both published its Annual Report for 2016-17 as well as announcing its new Chair, Mr Drew Clarke.  The Annual Report again highlights what a busy year the operator has had.
  • The AER has indicated that it will hold off on enforcing obligations for embedded network managers (due to take effect from 1 December 2017) to give networks more time to get organised.  The AER are putting in place a grace period until 31 March 2018 where they will focus on education, provided that network operators are taking active steps to appoint an embedded network manager (ENM).
  • There are some important consumer law amendments to the AER’s Exempt Retail Selling Guideline, which will be relevant to the many exempt retail selling arrangements.
  • The final amended form of ring fencing guidelines have been published for distribution networks and the AER also released its issues paper in relation to the new rate of return guidelines for networks.
  • And finally, for those energy market tragics who missed it, a couple of other helpful tips:
    • ARENA has released a terrific podcast in relation to energy market innovation, called ‘Rewired: the Energy Innovators’.  The first episode features Dr Jemma Green from PowerLedger.  It is highly accesible for those new to the industry, and well produced.  You can download it here.
    • The Energy Security Board also ran a good webinar on the NEG for those who are still getting their heads around it.  You can contact the ESB about it on its website.

 

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