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different from previous projects funded under the DMIA. This duplication meant that potentially redundant projects were receiving funding, limiting the effectiveness of the R&D under the DMIA. strikes the right balance. This is not overly prescriptive, but directs distributors to use the allowance in ways that will build market/industry understanding of demand management. Have the potential, if proved viable, to reduce long term network costs in that it be designed to: build demand management capability and capacity explore potentially efficient demand management options The Allowance Objective requires that projects funded under the Mechanism have the potential to reduce long-term network costs for consumers. In the context of innovation, we felt it best to define reducing costs in the context of that project's overall ability to contribute to developing the demand management and industry knowledge, rather than a strict adherence to project benefits. This allows distributors to the allowance experimentally, while still directing them to implement potentially efficient solutions. Exploring this potential is vital to building market/industry understanding and commercialising solutions. Some stakeholders suggested that projects be required to demonstrate customer benefits. However, distributors and other stakeholders considered that doing so would dramatically narrow the range of projects they would be able to undertake, undermining the goal to promote innovation in the demand management sector. It is our view that while projects under the Scheme, must directly deliver net benefits, this is not a reasonable expectation for R&D, which has uncertain results by nature. Not contain costs that are: recoverable any other jurisdictional incentive scheme, recoverable under any state or Australian Government scheme, or included in forecast capital expenditure or operating expenditure approved in the distribution determination. The Mechanism is intended to provide funding for innovative solutions that would not otherwise be available. This aims to fund innovation, rather than allowing distributors to recover extra for simply undertaking actions that are otherwise prudent and should be included in their revenue allowances. This clause aims to prevent of R&D revenue, thereby increasing the Mechanism's value to electricity consumers. As this is a requirement of the NER, we did not consult on this issue. dipping'
Option for indicative up-front approval Clause 2.2.2 of the draft Mechanism sets out that a distributor may seek indicative approval of planned expenditure under the Mechanism ―referred to as 'indicative approval'. During our consultation process, some distributors saw value in implementing a simple Mechanism that would enable them to have certainty when committing projects. We consider that extending our usage of the up-front approval process will assist distributors in adapting to the new compliance procedure. This will build on the understanding we have built with distributors over the life of the current DMIA. Indicative approval is available under the current DMIA. It was not sought for any projects. We also did not deny any projects under the current DMIA. Given the strengthening of the eligibility criteria and the reporting requirements, we consider that distributors may seek indicative approval under the new Mechanism. To receive indicative approval, a distributor must provide us details of the proposed projects before the end of the first month in the relevant regulatory year. We will then assess the projects and provide an in-principle indication of whether this proposed expenditure is likely to satisfy the project criteria. This involves an in-principle examination of whether proposed expenditure the Mechanism is likely to satisfy the Mechanism's criteria when we undertake our ex-post assessment of the allowance spent. This provides greater certainty of what costs distributors are likely to recover under the Mechanism. This is not an ex-ante assessment process. The Mechanism's official approval process remains an ex-post assessment of the projects' adherence to the project and compliance procedures. This is neither an alternative nor a substitute to the actual ex post assessment that we will subsequently conduct for that particular regulatory year. However, if the distributor's proposed expenditure is approved in principle, and its actual expenditure does not differ in substance and/or form from that envisaged at the beginning of the regulatory year, we would expect to approve that expenditure as part of our ex-post assessment.