Introduction As the AER, we regulate network businesses and apply the national electricity and gas laws and rules. In regulating network businesses we aim to promote efficient investment and operation of services in the long term interests of consumers. In 2012 the AEMC introduced important changes to the National Electricity Rules (NER). The AEMC rule changes were in response to a proposal we submitted to address weaknesses in the regulatory framework that limited our ability to reject high expenditure forecasts. The rule changes set out a new framework which allows for a balanced assessment between the need for efficient investment by energy networks to provide reliable energy supply, with the need to minimise costs to consumers. An important aspect of the rule changes was an increased emphasis on consumer engagement to address the lack of focus on consumer participation in the energy industry. The new rules require network service providers to indicate the extent of their consumer engagement in their regulatory proposals and require us, when making revenue determinations, to take into account the extent of the network service providers’ consumer engagement. We initiated the Better regulation program to draw together these reforms and feed them into our regulatory processes. The Better regulation program involved: Extensive consultation on seven new guidelines that outline our approach to assessing network businesses' expenditure proposals and determining electricity network revenues. Establishing a Consumer Reference for our guideline development work, to help consumers engage across the broad spectrum of issues considered. Establishing a Consumer Challenge (appointed 1 July 2013) to advise us on whether network business' proposals are justified in the services to be delivered to customers. Improving our internal technical expertise, systems, and engagement with stakeholders. The CRG was established to be a dedicated forum for consumer groups to have input into the Better regulation guideline development. We established the CRG to reflect our commitment to strengthen consumer engagement in energy markets and regulatory processes. The CRG was intended to provide valuable information to consumer groups and incorporate consumer input into guideline work. This paper provides information on how the CRG was established, operated and assesses the CRG as a program for consumer engagement. The assessment is informed by: a written survey conducted with AER Directors involved in the CRG feedback from staff involved in the CRG analysis of minutes from CRG meetings written and oral submissions received from CRG members written survey conducted with CRG members and follow up feedback sessions conducted via to discuss answers to the survey.
work as regulator. This in turn should enable members to participate in further energy sector engagement, including our future engagement activities. Furthermore, we have emphasised our role as an independent economic regulator, rather than consumer advocate, to assist CRG members in understanding why we do not always adopt positions most advantageous to consumers. Leading meetings An important insight gained from AER Directors is that there was a natural progression in who drove CRG meetings: Initially meetings were driven by the CRG secretariat. When AER Directors became familiar with the CRG process they began driving when the meetings would occur. When CRG members had a strong understanding of each workstream and understood the process they began to drive the meetings themselves. Following this model for future consumer engagement work would be effective as it allows a third party (such as the secretariat) to facilitate the process to get it underway and then step back and allow those directly involved to lead meetings when the parties understand the direction to be taken. Proposed consumer engagement model: In the feedback, AER Directors that sometimes CRG meetings felt more about process over substance. More interaction between the secretariat and Directors at the initial stage may have alleviated this concern and relieved the time commitment needed of CRG members and preparation needed of Directors. Consumer collaboration An interesting point raised in the member feedback was that consumer consultation processes would benefit from consumer groups working together to tackle different aspects of consultation. The CRG member feedback highlights that the CRG was successful in creating a forum for members to collaborate with one another, informally exchange views and have access to different consumer perspectives. This creates a foundation. The next step is for consumers to build groups to work together and relieve pressure in tackling substantial amounts of material in future engagement programs. Finding common ground among consumers will allow more efficient allocation of scarce resources. It will make consumers more effective in contributing to regulatory processes.
Attachment A – CRG Members Table 3 Members of the Consumer Reference Group CRG Member CRG member representative Location Nominated Workstream(s) Dr Si Wei Goo Canberra Expenditure Incentives, NSP Customer Engagement Ro Evans Chris Dodds Sydney NSP Customer Engagement, Power of Choice Tennant Reed Melbourne of Choice, Expenditure Forecast, Shared Assets Damian Sullivan Melbourne Power of Choice Jonathan Pavetto Brisbane Expenditure Forecast, Rate of Return, Expenditure Incentives, NSP Customer Engagement Katrina Lee Sydney Power of Choice Janine Rayner Melbourne Expenditure Forecast, Rate of Return, Deanna Foong, Martin Jones, Loren Days Melbourne NSP Customer Engagement, Confidentiality, Power of Choice Robert Mallet Peter Strong Hobart General contribution Belinda Crivelli, Matt Helme Melbourne NSP Customer Engagement, Power of Choice Mountain Melbourne All workstreams Helen Scott Sydney of Choice Sue Fraser Melbourne NSP customer engagement Major Energy Users Inc. Headberry Melbourne All workstreams John Hin, Alexandra Geddes Sydney NSP customer engagement Carolyn Hodge Sydney NSP customer engagement Carly Allen Brisbane NSP customer engagement, Power of Choice Nardi Sydney Expenditure Forecast, NSP Customer Engagement Heather I’Anson Adelaide Power of Choice, Shared Assets, Expenditure Incentives,
Attachment B – CRG sub-groups and training Description of CRG work-streams Expenditure forecast assessment — assessing expenditure proposals from businesses. Rate of return — determining the allowed rate of return businesses earn on their investments. Expenditure incentive — creating the right incentives to encourage efficient spending by businesses. Shared assets — sharing the revenue networks earn from shared assets with consumers. Confidentiality — managing confidential information for an effective regulatory determination process. Consumer engagement — a guide to the consumer engagement that the AER expects NSPs to undertake. of Choice — determining that network companies are innovating and exploring demand management solutions. CRG Training On 4 April 2013 we provided CRG members with an introductory training session on network regulation. This training was conducted to provide all members a basic understanding of the key issues which impact network regulation and our decision-making process during electricity determinations. Staff wanted their work to be accessible to CRG members recognising that the issues addressed under the guidelines are complex. The training session covered the following topics: Overview of the AER and our role Capital and operating expenditure and the interaction with prices Introduction to incentives in monopoly regulation Rate of return