Recommendations made in the first interim report
On 20 April 2015, the committee presented an interim report
that included 18 recommendations. These recommendations are reproduced
4.75 The committee recommends that the Council of
Australian Governments (COAG) Energy Council commission an independent expert
review of options for excluding future imprudent capital expenditure and
surplus network assets from a network service provider's regulatory asset base
(RAB). This review should consider the provisions of the Western Australian
Electricity Networks Access Code and its decision-making criteria.
4.76 The review should have the freedom to suggest any
necessary changes to intergovernmental agreements, the National Electricity Law
or the National Electricity Rules.
4.77 The committee recommends that, following the
outcomes of the current round of network pricing decisions, the COAG Energy
Council commission an independent expert review of the efficacy of recent
changes to the National Electricity Rules and the benchmarking process in
promoting the long-term interests of consumers. This assessment should focus on
the appropriateness of current methodologies for calculating the weighted
average cost of capital (WACC) and the manner in which the estimated cost of
corporate income tax is calculated.
4.78 The committee recommends that the National
Electricity Rules be amended to provide that the Australian Energy Regulator
may set a regulatory control period that is less than five regulatory years.
5.44 The committee recommends that state governments
seeking to privatise their electricity network assets examine whether those
assets are overvalued and if the regulatory asset base should be written down
prior to privatisation.
6.67 The committee recommends that the National
Electricity Rules be amended to cap the costs associated with the preparation
of a regulatory proposal that a network service provider may recover from its
6.68 The committee recommends that the COAG Energy
Council request the Australian Energy Market Commission to review the consumer
engagement activities of network service providers. As part of this review,
proposals for enhancing the effectiveness of consumer engagement efforts should
be invited from consumer advocacy groups. Particular focus should be given to
the effectiveness of consumer engagement in ensuring that network planning
outcomes respond to the long-term interests of consumers.
6.69 The committee
recommends that the Australian Energy Market Commission and the Australian
Energy Regulator jointly develop and publish consolidated guidance on the
regulatory determination process to better inform members of the public,
consumer groups and other energy user stakeholders.
7.55 The committee recommends that the Australian Energy
Market Commission is provided with the ability to initiate a rule change
process without being required to receive a rule change request from an
7.56 The committee recommends that the Australian
Government pursue, through the COAG process, amendments to the National
Electricity Law to require that the Australian Energy Market Commission must
commence public consultation on a rule change request within a prescribed
period of time if the rule change request has been lodged by the COAG Energy
7.57 The committee recommends that the Australian
Government pursue, through the COAG process, an agreement that any
Commonwealth, state and territory energy policy schemes and measures that may
have implications for the National Electricity Market or network efficiency
must be referred to the Australian Energy Market Commission for formal advice
regarding the likely effects on the long-term interests of consumers.
7.59 In light of the recommendation made by the
Competition Policy Review (Harper Review) regarding a single national access
and pricing regulator, the committee recommends that the Australian, state and
territory governments consider:
the potential efficiencies and
other advantages of a single national access and pricing regulator; and
whether such a proposal would be
in the long-term interests of consumers of electricity, given the need for a
regulator with sufficient expertise to challenge, when required, well-resourced
electricity network service providers.
7.63 The committee recommends that the Australian
Government commission an external review of the capability of the Australian
Energy Regulator (AER). The review should consider:
the adequacy of the AER's
the effects of the 2014–15
budget cuts; and
whether the AER has the skills
and powers needed to perform its functions effectively.
7.64 The committee recommends that the Australian Energy
Regulator should facilitate public consultation on the statement of intent it
develops in response to the COAG Energy Council's statement of expectations.
7.65 The committee recommends that the board of the
Australian Energy Regulator should be reformed so that:
the number of board members is
increased from three to five;
the requirement for a
Commonwealth member and two state and territory members is abolished with
future appointments based solely on merit;
all appointments to the board
are to made by the Commonwealth;
at least one board member is
required to have knowledge of, or experience in, consumer affairs in energy
at least one board member has
expertise in decentralized energy systems and demand management.
8.73 The committee recommends that the Australian, state
and territory governments increase and prioritise efforts to ensure that networks
are prepared to efficiently respond to changes in the energy market, in light
the increased uptake of
small-scale solar generation;
emerging energy storage
the anticipation of customers
the anticipation of further disruptive
the certainty of value
destruction as a result of current business models.
8.74 The committee recommends that, as cost-reflective
network pricing is introduced, the COAG Energy Council ensure appropriate steps
are taken so network companies' tariff and non-tariff based demand management
programs are strengthened to assist consumers to transition to cost-reflective
8.75 The committee recommends that the Australian Energy
Regulator expedite its implementation of the current demand management
incentive scheme rule change in all open network revenue determinations.
8.76 The committee recommends that the COAG Energy
Council remove any barriers to networks implementing cost-reflective network
prices to ensure efficient use of demand management and embedded generation is
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