Explanatory Statement - Amending the Service Target Performance Incentive Scheme (STPIS) and establishing a Distribution Reliability Measures Guideline (DRMG) - November 2018

On 14 November 2018, the AER released its revised STPIS that applies to electricity distribution networks. The STPIS provides these networks with incentives for maintaining and improving network performance, to the extent that consumers are willing to pay for such improvements. The STPIS is intended to ensure that distributors’ service levels do not reduce as result of efforts to achieve efficiency gains.

In conjunction with the STPIS review, the AER has also developed a new distribution reliability measures guideline (DRMG) which will provide greater consistency and transparency in how distribution reliability measures are defined. This guideline outlines common definitions for distribution reliability measures across the National Electricity Market (NEM).

The AER has adjusted the STPIS formula to better balance the weight given to the frequency and duration of supply interruptions. The modified STPIS will increase the incentive for distributors to reduce the average duration of supply interruptions for all customers, while keeping the number of outages at low levels.

The AER has found that the STPIS has delivered improvements in the reliability of electricity supply, but that distributors have focused on reducing the number of short interruptions to supply, rather than also reducing the number of longer interruptions. As a result, the average length of supply restoration time has increased, meaning that customers, particularly at the end of networks (often in rural or remote areas) may not receive the same supply improvements as customers in urban areas. The changes to the STPIS are designed to achieve better reliability outcomes for all customers, including those in rural areas.

This review of the STPIS follows an Australian Energy Market Commission (AEMC) review of the framework for measuring reliability performance in the NEM. The AEMC proposed a number of changes to the current method for measuring interruptions to supply as well as the development of a new DRMG.