Energy and gas network businesses will need to demonstrate they have considered the needs and interests of their consumers when putting up spending proposals under new measures published by the Australian Energy Regulator. Charges for these networks make up about one half of household energy bills and in the eastern and southern states these charges are approved by the AER.
“Our new consumer engagement guideline will help ensure that the needs and interests of consumers are considered in the process of planning future spending on energy networks,” AER Chairman Mr Andrew Reeves said.
The consumer engagement guideline the AER has issued promotes better communication between energy networks businesses and their consumers, from households through to large and small businesses. This will help networks align their expenditure proposals with genuine consumer priorities.
“Improving the engagement between energy networks and their consumers is a vital part of promoting accountability for spending decisions so that consumers are paying no more than necessary for services they value,” Mr Reeves said.
The guideline is part of the AER’s Better Regulation program developed over the past 12 months. This followed changes to the energy network regulation rules in late 2012. The AER can now explicitly consider the consultation between network businesses and their consumers as part of coming to a decision on the overall expenditure allowances.
“Our work over the past 12 months has found that some businesses have been active in this, but others have yet to start effective communication. It is important that consumers are made aware of how their needs and interests were considered in the decision making process,” Mr Reeves said.
The guideline sets out a four pronged strategy for networks’ consumer consultation. This involves network businesses improving their engagement with the different consumer segments and using this to identify their needs and interests. Energy networks should then clearly explain how the results of the engagement have been used. Evaluation and review will then identify areas for future focus and improvement, and encourage transparency and accountability.
The AER has also published a stakeholder engagement framework. This commits the AER to the same principles as those being applied to electricity and gas network businesses, that its engagement and communication should be timely and clear, accessible and inclusive, transparent and measurable.
“The AER’s engagement with stakeholders also needs to be of a high standard. Our framework recognises that different levels of engagement are appropriate, depending on the issue, and clearly establishes what stakeholders can expect when they engage with the AER,” Mr Reeves said.
The framework covers our public engagement activities with all stakeholders, including residential and business consumers, energy businesses, and others across our network, retail market and wholesale market functions.
Further information
The AER regulates energy markets and networks. We are established as an independent entity under the Competition and Consumer Act 2010. Our functions are set out in national energy market legislation and rules, which include the National Electricity Law, the National Gas Law and the National Energy Retail Law. Our energy network regulation and wholesale market functions cover all states and territories except Western Australia (in the Northern Territory we regulate only gas transmission). Our retail energy market functions cover the ACT, Tasmania (electricity only), South Australia and New South Wales.
The Better Regulation program forms an integrated package of changes to the way the AER approaches network regulation under the new regulatory framework. Up to 50 per cent of a consumer’s energy bill can be attributed to the cost of delivering electricity through the transmission and distribution networks. The Better Regulation Program includes:
- Consultation on six draft guidelines. The Consumer Engagement Guideline is the first final guideline to be published under the program. The remainder will be published by the end of 2013.
- An ongoing Consumer Challenge Panel (CCP) appointed on 1 July 2013. The CCP will advise the AER on consumer interests in revenue determination processes.
- The final Regulatory Investment Test for Distribution (RIT-D), published in August 2013. The RIT-D establishes consistent, clear and efficient planning processes for distribution network investments in the national electricity market.
- Improvements to our internal technical expertise and systems, and our engagement and communication with all our stakeholders.
All our guidelines are accompanied by consumer focussed factsheets which provide background on the role of each guideline and outline our key positions. In addition, the document Better Regulation: reform package update has an overview of the program, the consultation, and the structure of the package. Our Better Regulation program web page has more information.
The AER developed its Stakeholder Engagement Framework under a separate process. It published a consultation paper in July 2013 and held a forum to seek feedback and develop the final Framework. The AER will track and report on progress in meeting these principles. The Framework webpage has more information.