Energy Regulation Rules Must Be Strengthened Further

Energy Regulation Rules Must Be Strengthened Further

Victoria Minister for Energy and Resources Michael O’Brien

Changes To Energy Regulation Rules Do Not Go Far Enough

Victor P Taffa

Energy and Resources Minister Michael O’Brien has today welcomed the Australian Energy Market Commissions (AEMC) proposed changes to rules governing the regulation of electricity and gas networks however, stronger reform is still required.

Mr. O’Brien said the Victorian Coalition Government had been advocating for changes to the regulatory regime to deliver the best results for consumers facing rising energy prices.

“There is a clear need for stronger rules to secure reliable energy supplies without imposing unfair costs on consumers.” Mr. O’Brien said.

While the new rules give the regulator new powers and more discretion, the Australian Energy Regulator (AER) is still constrained by being a small part of the Australian Competition and Consumer Commission (ACCC).

“The best rules in the world will amount to nothing if the regulator does not have the resources, expertise and independence to enforce them.”

“If the Commonwealth Government insists on keeping the AER starved of appropriate funds and shackled within the Australian Competition and Consumer Commission, the benefits of these reforms to network rules will be undermined.” Mr. O’Brien said.

Victoria’s energy is supplied through five electricity distributors, three gas distributors, and gas and electricity transmission companies. The businesses are privately owned but are regulated by the AER.

The AEMC sets the rules for how the AER regulates these businesses. The AEMC’s rule changes announced today will:

  • Establish a new procedure to allow the regulator to better estimate a reasonable return on capital;
  • Include new tools for the regulator to ensure that networks invest in new infrastructure efficiently;
  • Give more power to the regulator to investigate how efficient the businesses are with consumers’ money;
  • Allow more time for the regulator to assess the proposals of businesses for their five-year pricing proposals.

Victorians will benefit from these rules when the next round of five year pricing determinations commence, starting with Victoria’s electricity transmission system in April 2014.

The new rules will take effect from 29 November 2012.