COAG Energy Market Reform - Implementation Plan - Report on Progress - Mid 2013 Key Issues Key Recommendations (as put to and agreed by COAG 7 December 2012) Key Milestones Primary responsibility Delivery dates Progress Notes Strengthening Governance Ensuring a strong and accountable regulator Welcome the Commonwealth proposal to increase funding to the Australian Energy Regulator (AER) to increase its technical expertise and improve its capacity to effectively perform its role and deliver its new functions including under the revised rules for economic regulation of networks. Formalised in 13/14 Budget Commonwealth 1 July 2013 The Commonwealth has provided an additional $23 million of funding over four years to the AER, commencing Relevant to Western Australia (WA) as it relates to the AEMC and the Northern Territory (NT) Endorse strengthening consumer input in network pricing decisions through the establishment of the Consumer Challenge Panel within the AER. Panel established by AER (from 1 July 2013) – see 6.2. 1.1) That the part-time state nominated AER Board member convert to full-time. Formalised in 13/14 Budget Commonwealth 1 July 2013 The part-time state/territory AER member will be converted to a position (effective 1 July 2013). Note that the Commonwealth will introduce budget transparency for the AER, including the actual allocation of program funds over the course of the previous financial year and provide information on projected AER funding and staffing (separately from that of the Australian Competition and Consumer Commission (ACCC)) over the forward Formalised in 13/14 Budget Commonwealth 1 July 2013 The 2013-14 Australian Competition and Consumer Commission (ACCC) Portfolio Budget Statement separately identifies the AER budget. time
estimates period. 1.2) SCER will develop enhanced budget and performance reporting to SCER and the public for the Australian Energy Market Commission (AEMC) and the AER, noting that this will include the AER providing a regular public report on its activities, including its budget and business plan and its performance against key performance indicators (KPIs), as well as its views on emerging regulatory issues that it will be focusing on in its work. Reporting Framework Finalised Commonwealth in consultation with SCER December 2013 SCER has agreed to an enhanced performance and accountability framework for the AEMC and AER. The framework comprises: a Statement of Expectations to be agreed by SCER; a Statement of Intent by each organisation; and reporting against Key Performance Indicators in the AEMC and AER annual reports. Statements of Expectations will be developed by officials for SCER consideration. Welcome the Commonwealth’s proposed independent review of the AER and its operational requirements, in 18 months’ to ensure resourcing is adequate, and the operational arrangements are effective, to meet the Review Commences Commonwealth (Treasurer and Energy Minister) July 2014 The terms of reference for the Review will be developed in due course.
demands of the new regulatory regime drawing on the experience of the transitional period. Strengthening the regulatory outcomes Ensuring that the rules equip the Regulator to reach efficient regulatory outcomes in the long term interests of consumers Welcome the AEMC’s Economic Regulation of Network Service Providers Rule change which will lead to more efficient outcomes in setting revenues and prices for consumers by giving greater scope to the AER to adapt its approaches to the nature of the business it is regulating, clarifying the powers of the regulator to undertake benchmarking and publish information on the relative efficiency of electricity network businesses, and changing how the rate of return on capital (a key driver of network revenues) is set. Rule finalised AEMC Nov 2012 AER consulting on key implementation issues under its Better Practice Regulation program. Call for the rapid implementation of these rules so that consumers see their benefits in upcoming regulatory determination processes (especially any changes to the weighted average cost of capital regime). N/A N/A N/A Completed – AER managing implementation. Note the Productivity Commission’s (PC) finding in its draft report for its inquiry into Electricity Network Regulatory Frameworks that efficiency benchmarking may be an important tool for the regulator as the rigour and accuracy of benchmarking N/A N/A N/A The PC’s final report and Australian Government response released on 26 June 2013.
methodologies improve over time. 2.1) Identify barriers and if necessary ensure the AER has sufficient and clear powers to collect and publish data by amending the National Electricity Law (NEL)/National Gas Law (NGL), so as to improve transparency, accountability and benchmarking in the economic regulation of network businesses, in consultation with industry. Advice on barriers AER and AEMC February 2013 Advice received Finalise policy position on basis of advice SCO April 2013 Finalise legislative amendments (if needed) SCER June 2013 Parliament to introduce legislation (if needed SA 1 July 2013 2.2) Ensure the AER has appropriate and adequate enforcement powers, including civil penalty arrangements, through a review of enforcement regimes – to be completed by end 2013. Finalise discussion paper, engage reviewer or consultant SCER February 2013 Discussion paper and terms of reference finalised and published. Allens and NERA Economic Consulting engaged to undertake review. Review finalised SCER December 2013 Review commenced May 2013 –
consultant’s final report due by 30 September 2013. Appropriate appeals mechanism Ensuring that the appeal framework supports outcomes consistent with the long term interests of consumers with respect to price, quality, safety, reliability and security of supply and the system Welcome the Final Report from the Expert Panel Review of the Limited Merits Review Regime, including its assessment of the shortcomings of the regime to date in delivering the original policy intent and the Panel’s proposals for improvement. N/A N/A N/A Completed - included in SCER’s – “Putting Consumers First” document. Relevant to WA (as it relates to gas pipeline access) and the NT Note that the Expert Panel has called for clearer articulation of the policy intent of merits review through clarifications in the Law and setting out functions and responsibilities of the review body and the AER; changes to establishing grounds for appeal (a “materially preferable decision” criteria); clearer links to consumer objectives; a more investigative (less adversarial) approach to appeals; and the establishment of a new review body, the Australian Energy Appeals Authority (AEAA), which would be independent of but hosted by the AEMC, and funded by industry fees. N/A N/A N/A Completed as above. Relevant to WA (as it relates to gas pipeline access) and the NT 3.1) Prepare and release a Regulatory Impact Statement (RIS) by December 2012, which would seek to assess the costs and benefits of the Expert Panel’s Publish consultation RIS SCO December 2012 Completed – Consultation RIS was published on 14 December 2012. Relevant to WA (as it relates to gas pipeline access) and the NT
to encourage the market-driven (business-led) competitive roll-out of smart meters and other advanced metering. Demand side participation Ensure that consumers are supported by energy supply businesses to make consumption decisions that control bills and provide long term benefits to the market 5.1) SCER to implement a comprehensive demand side participation (DSP) package, which includes supply-side changes to facilitate DSP, based on the recommendations of the AEMC’s Power of Choice review, including: 5.1.1) The phasing in of efficient and cost-reflective retail energy prices through the application of time varying network tariffs, including suitable protections for vulnerable customers, with such network tariffs to be available no later than July 2014; 5.1.2) Appropriate consumer engagement and education, and protections for vulnerable consumers, during a pricing structure transition; 5.1.3) a new mechanism for demand side resources to participate in the wholesale National Electricity Market (NEM), to be in place by July 2014; 5.1.4) arrangements that will allow Report to COAG on implementation to date and forward plan SCER June 2013 5.1) SCER has agreed in principle to a package of reforms to facilitate DSP, based on the recommendations of the AEMC’s Power of Choice review and AEMC advice on electric and natural gas vehicles. SCER has agreed this package should be implemented through a combination of legislative change, rule-change proposals, and work by AEMO. 5.2) SCER adopted key reforms from the Power of Choice review at its December 2012 meeting, and Limited relevance to WA and the NT although some of the principles may be relevant (less in WA with capacity market) NT to consider implementation of reform initiatives where net benefit can be demonstrated The AEMC's final, detailed recommendations on 5.1.3, and subsequent advice from the Australian Energy Market Operator, set out a series of steps that need to be
and location of the function for the allocation of consumer grants (given 6.1 and 6.2). Ensuring consistent national frameworks Consumers benefit from efficiencies of consistent national frameworks and rigorous national approaches to regulation 7.1) That SCER recommend to COAG that it reiterate its commitment to having all jurisdictions in the NEM commence the National Energy Customer Framework (NECF) as soon as practicable and no later than 1 January 2014, subject to the resolution of issues specific to those jurisdictions yet to implement, with SCER to report to COAG by June 2013 and in early 2014 on progress in resolving outstanding issues and implementing the NECF. VIC and QLD to have their legislative instruments passed in their parliaments NSW, VIC and QLD application Acts to meet SCER Energy Market Reform Working Group (EMRWG) and SCER approval processes NSW, VIC, QLD and SA As soon as practicable but no later than 1 January 2014 The NECF has been successfully implemented by the ACT, TAS, SA and NSW.VIC and QLD planning for 2014 and mid 2014 respectively. SA applied the NECF on 1 February 2013. Subject to resolution of state specific issues SCER to report to COAG June 2013 As per above. Deregulation of retail prices To ensure efficient and competitive retail energy markets for the benefit of consumers and the energy sector alike 8.1) SCER to recommend to COAG that it reiterate its commitment to retail price deregulation where effective competition exists. Completed - occurred through SCER and COAG meetings in late 2012. Advice from jurisdictions on transition to price deregulation (8.2, 8.3, 8.5, 8.6) Relevant to WA and the NT for high level commitments (AEMC competition reviews are NEM 8.2) Jurisdictions to work towards effective competition where it does not exist to allow greater opportunities for innovation in and choice of retail offers, and that jurisdictions will provide advice to SCER on the current state of competition and policy settings to fulfil Delivery of transition plans on price deregulation by jurisdictions ( 8.2, 8.3, 8.5, 8.6) All jurisdictions – except VIC which deregulated prices in January 2009 By end 2013 Being progressed by individual jurisdictions. SA no longer required to report given price deregulation from February 2013.
only) SA deregulated energy retail prices on 1 February 2013. this commitment by end 2013, including, where appropriate, clear transition plans to price deregulation. SCER will provide advice on this to COAG by the end of 2013. SCER to report to COAG By end 2013 SCER will report to COAG with transition plans from jurisdictions. 8.3) Jurisdictions that have previously been advised by the AEMC that effective competition exists, and/or to deregulate prices, will re-evaluate this advice and report back to SCER on the potential to act on this advice by the end of 2013. Report by relevant jurisdictions SA, ACT By end 2013 Only ACT required (Given SA deregulated prices) – will do through transition plans above. 8.4) SCER to develop any necessary enhancements to the AEMC competition review approach, incorporating where provided advice from the AEMC as previously requested and taking into account any advice from the AEMC's review of competition in NSW, and including proposals to COAG for Australian Energy Market Agreement (AEMA) amendments, by 2013 with any new approach to be applied annually thereafter. Options to be provided to COAG by June 2013 Delivery of new approach to AEMC retail competition reviews through SCER (including supporting framework – AEMA amendments) and subsequent adoption by the AEMC All jurisdictions (through SCER) to develop new approach and AEMC to adopt By end 2013 Over the first half of 2013 SCER developed and approved a revised approach to the AEMC’s competition reviews. This includes Terms of Reference and amendments to the AEMA to guide the AEMC. SCER presented the amended AEMA to COAG for its approval on 9 May 2013. Subject to approval by COAG, SCER intends to request the AEMC SCER’s development of and agreement on new approach to AEMC competition reviews COAG AEMA amendments required Relevant to WA and the NT only in relation to potential adoption of AEMC review process by WA or the NT
apply the new approach with a first report in 2014. 8.5) Task the AEMC to develop a consistent methodology for the determination of regulated retail prices, including incorporating time varying (‘time of use’) network tariffs and with particular regard to a methodology for determining the wholesale energy cost component. Jurisdictions will consider whether to apply this methodology once it is available for consideration. Delivery of the AEMC’s advice on consistent retail price setting methodology All jurisdictions (through SCER) to task AEMC and the AEMC to report Individual jurisdictions to consider adoption of AEMC advice By end 2013 SCER issued Terms of Reference for the AEMC to develop this methodology on 9 May 2013. The AEMC is progressing this review with its final advice due to SCER by 30 September 2013. AEMC’s resourcing capacity to develop new approach to competition reviews and deliver advice on consistent retail price setting methodology (8.4 & 8.5) 8.6) Given the opportunity to transfer retail price controls to the AER under s14.12(b) of the AEMA, jurisdictions will explicitly consider whether to transfer responsibility for applying the methodology developed in 8.5 to the AER. Jurisdictions will report on their decisions under recommendations 8.5 and 8.6 by the end of 2013 as part of their reports in 8.2. Jurisdictional reports on consideration of application of AEMC approach All jurisdictions – except VIC which deregulated prices in January 2009. By end of 2013 Being progressed through the transition plans to be developed by jurisdictions. Advice from jurisdictions on transition to price deregulation (8.2, 8.3) and completion of AEMC advice (8.5) No longer relevant to SA due to deregulation of energy retail prices on 1 February 2013. Relevant to WA
and the NT 8.7) Task the AEMC to enhance its annual pricing reports from 2013 with better information on actual prices paid by consumers (covering both standing and market offers). AEMC reporting on electricity prices more closely represents actual household prices SCER to task AEMC and the AEMC to adopt By end of 2013 Completed – SCER issued revised Terms of Reference (ToR) to the AEMC on 19 December 2012. Discussions ongoing between AEMC and jurisdictions over data requirements and clarification of matters contained in ToR. AEMC’s resourcing capacity Relevant to WA and the NT Micro-generation Ensuring that payment for electricity exported to the grid from embedded micro-generation more accurately reflects the true value of that electricity, regardless of the form of micro-generation technology deployed 9.1) That the National Principles for Feed-in Tariff Schemes be amended to provide for all forms of micro generation technologies to be offered a fair and reasonable tariff and to close premium schemes to new participants by 2014. 9.2) SCER to recommend that COAG adopt these new principles. None required beyond December COAG Jurisdictions December 2012 – decision by COAG 2014 - Premium schemes to close to new participants Completed – SCER recommended, and COAG agreed, that COAG adopt the revised principles as part of its package of recommendations on a new energy reform agenda. Each jurisdiction is to consider the new principles during the course of any reviews of feed-in COAG agreement to publish the amended principles is pending (principles were agreed, but not published, in December 2012, and are not part of AEMA) Relevant to WA and the NT
10.2) Amend the AEMA to make explicit the opportunity for jurisdictions to transfer responsibility of applying the framework developed in 10.1 to the AER. Jurisdictions will report on their decisions under recommendations 10.1 and 10.2 to the SCER by the end of 2013. States and territories to agree in principle to adopt the new best practice framework Draft amendments SCO April 2013 Detailed analysis suggested the need for amendments to the AEMA or Law is not required at this time. AEMC is currently developing methodology. Finalise amendments SCER May 2013 Jurisdictions to report back on whether/when they will transfer the setting function to AER SCER December 2013 Transmission framework Ensuring that the transmission framework is supporting the competitive market by optimising efficient network and generation Welcome the work done to date by the AEMC in undertaking the Transmission Frameworks Review and note the potential improvements identified in access, connections, and planning processes. [Due March 2013, but may receive earlier] N/A N/A N/A Note that the PC, in the draft report for its inquiry into Electricity Network Regulatory Frameworks, also identified the high level of interdependence N/A N/A N/A The PC’s final report and Australian Government response released on making
Ensuring that the benefits associated with reducing demand can be shared between network businesses and consumers on the merits of the AER considering the difference between actual and forecast demand in the prior determination period when undertaking the current determination. This could include analysis of which party bears the risk when forecasts are not realised and the difference of impact depending on whether the control mechanism sets prices or revenue. The AEMC advice should include a draft rule change if considered necessary. review 2012 tasked AEMC with review on 18 January 2013. AEMC Final Report AEMC March 2013 Completed – SCER provided Final Report on 26 April 2013. Policy response agreed SCER May 2013 Completed – published in SCER Bulletin 31 May 2013. Advice from AEMO and AER about any necessary amendments to the Rules June 2013 (to be in place by next round of regulatory determinations, with AEMC considering for one year) Not required. Subject to transitional arrangements from the AEMC’s rule change 12.2) Request AEMO to provide independent demand forecasts to the AER in a manner which will enhance the AER's ability to analyse demand forecasts submitted by network businesses. AEMO (in consultation with the AEMC/AER) to also provide its assessment of the information requirements necessary to undertake the task and whether it considers it has adequate access to this information. Tasking SCER December 2012 Completed – 18 January 2013. Advice from AEMO and AER about any necessary amendments to the Rules AEMO and AER March 2013 Completed – April 2013. Submit rule change proposal (if required) SCER May 2013 (to be in place by next round of regulatory In progress – SCER agreed on 31 May 2013 to the need for rule change and Subject to transitional arrangements from the AEMC’s rule