Welcome to our energy update for the period up to 23 February. 

It will be apparent that this means the update does not capture the important draft report released by the AEMC into reform of network regulation for pipelines – but the report and sales pitch from AEMC is available here and we will have more to say about it in coming weeks.  Rod has also been speaking about gas market issues this week, particularly supply side problems associated with state moratoria – his speech yesterday (delivered by Nicole Ross, Director of the ACCC’s Gas Inquiry Unit) can be found here.

A lot of the developments over the last month have involved network regulation – both gas and electricity – and have implications for those DNSPs and pipelines with upcoming revenue resets.

In this update:

• The National Energy Guarantee development process continues to move forward, with the release of a consultation paper by the Energy Security Board and a round of upcoming public fora.
   
• For those that missed it, the Snowy 2.0 feasibility report prepared by Marsden Jacobs was published.  As well as providing an insight into the business case for the expansion of Snowy – it also provides a very well developed and insightful overview of the state of the NEM.  Well worth a read.
   
• COAG published its Gas Price Trends Review for 2017.  This is one of a number of projects by energy market regulators involving publication of gas market pricing and follows the publication of net back pricing estimates by the ACCC in December as part of its Gas Inquiry 2017-20 Interim Report.
   
• The AER has commenced its major review of the regulatory investment test for electricity networks with the release of an Issues Paper.  This review of the RIT framework will have an important bearing on future resets.
   
• The AER also undertook a number of processes that will provide inputs into reset processes including announcing an upcoming workshop on its opex benchmarking approach (a controversial feature of the last round of resets) and launching a consultation into service classification and asset exemption, which is work following the implementation of the Ringfencing Guidelines late last year.
   
• The AEMC started its annual review of economic regulation for electricity networks – which launched with publication of a report by Frontier on ‘Totex’ frameworks in a number of European jurisdictions.  The totex concept (which creates a blend of opex and capex in order to avoid incentives to over-invest in capex) was pioneered by Ofgem and Ofwat in the UK, but has been taken up elsewhere.  Interestingly, the Frontier report does not consider the US application of totex in New York which was led by Audrey Zibelman (now of AEMO, of course) – and which is another leading proponent.
   
• Early in the period, submissions made in response to the AEMC interim report as part of its Reliability Framework Review were published – a number of which then fed media and press around reliability issues.

Finally, for those interested in how our energy regulatory mess compares with those in other jurisdictions, you may enjoy a short article by NERA that provides a neat summary of the outcomes of the Helm Report in the United Kingdom published in October 2017.  It can be found here.

Much to discuss.

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