AUSTRALIA Law and Practice Contributed by: Alexander Danne, Roy Groom, Rohit Venkat and Georgia Summerhill, Clayton Utz
5.6 Electricity Distribution System Charges and Terms of Service Distribution charges in the NEM are established through the same regulatory framework as transmis- sion, with the AER setting maximum allowed revenue for each DNSP through five-yearly distribution deter- minations under NER Chapter 6. Revenue Determination and Pricing The AER applies a building block methodology (mir- roring the transmission approach) comprising a return on the RAB, depreciation, efficient operating expendi- ture and a taxation allowance. The approved revenue is then recovered through distribution use of system (DUOS) charges levied on retailers and, ultimately, passed through to end consumers. Network tariff structures are undergoing significant reform, with a shift toward cost-reflective pricing. This includes: • demand-based tariffs that charge consumers based on their peak demand contribution; • time-of-use pricing that differentiates charges by time period; and • two-part tariffs separating fixed (access) charges from variable (usage) charges. These reforms aim to send efficient price signals that encourage consumers to shift consumption away from peak periods and better reflect the true cost of network services.
Regulatory Principles The AER applies regulatory principles including effi- cient cost recovery, a fair rate of return for network investors, non-discriminatory pricing for similar ser- vice classes, and incentive-based mechanisms (such as the Efficiency Benefit Sharing Scheme, Capital Expenditure Sharing Scheme and Service Target Per- formance Incentive Scheme) that reward DNSPs for outperforming regulatory benchmarks. Terms of Service and Consumer Protections Terms of service are governed by standard connection contracts prescribed by the NER for small customers and negotiated connection agreements for large cus- tomers. Consumers may complain about network ser- vices to state energy ombudsman schemes (such as EWON in NSW, EWOV in Victoria, and the Energy and Water Ombudsman Queensland). The AER handles systemic compliance issues and publishes annual performance reports. Appeals against AER distribution determinations fol- low the same pathway as for transmission – ie, judicial review to the Federal Court, with limited merits review having been substantially curtailed.
29
CHAMBERS.COM
Powered by FlippingBook