Ring-fencing

What is ring-fencing?

Ring-fencing refers to the separation of the regulated and competitive business activities of an electricity network service provider.

The purpose of this mechanism is to prevent regulated businesses from:

• favouring their own competitive activities to the disadvantage of other competitors operating in the market
• using revenue earned from regulated services to cross-subsidise their contestable services.

Electricity distribution

Our ring-fencing framework sets out the specific obligations applicable to network businesses in line with ring-fencing rules including regular reporting of compliance. 

The latest version of our Ring-fencing guideline for Distribution Network Service Providers (DNSPs) was published on 3 November 2021, effective on 3 February 2022. 

Go to the Ring-fencing guideline (Electricity distribution) - effective Feb 2022

All DNSPs need to comply with this version of the guideline, subject to any waivers approved by the AER. 

Compliance reporting

DNSPs are required to submit annual compliance reports by 30 April for the preceding calendar year. 

We've published a best practice manual to assist in ring-fencing compliance reporting.

Compliance reporting best practice manual for DNSPs

Electricity transmission

We published an updated Ring-fencing guideline for Transmission Network Service providers (TNSPs) in March 2023.

Go to the Ring-fencing guideline (electricity transmission) 2023

We also sought stakeholder feedback on concerns raised about the ability of TNSPs to discriminate against competitors in providing contestable connection services due to their monopoly role in providing the non-contestable elements of a connection.

As a result, on 18 July 2023, we submitted a rule change request to the AEMC requesting the inclusion of negotiated transmission services within the scope of the Transmission Ring-fencing framework.

Compliance reporting

TNSPs are required to submit annual compliance reports by 30 April for the preceding calendar year. 

We’ve published a best practice manual to assist in ring-fencing compliance reporting.

Go to the Compliance reporting best practice manual for TNSPs (2023)

Gas

Ring-fencing provisions in the National Gas Law require the separation of pipeline businesses from related businesses, such as those that produce, buy or sell gas.

The provisions ensure that related businesses do not gain a competitive advantage by virtue of their common ownership or operation with pipelines. In these types of situations, the pipelines are considered to have market power. Ring-fencing stops the leveraging of this market power into related markets.

Breaches of ring-fencing obligations

A DNSP must notify the AER in writing within 15 business days of becoming aware of a breach of its obligations under the Ring-fencing guideline, except for a breach of clause 6.2.2 or clause 6.3. We will publish all breach information on this website.

DNSPs can report breaches to the AER by emailing AERringfencingaer [dot] gov [dot] au (AERringfencing[at]aer[dot]gov[dot]au)

To assist, please use the following templates:

Ring-fencing - Breach cover letter template for DNSPs 

Ring-fencing - Breach reporting template 

Publication of registers

DNSPs are required to publish registers on their websites providing staff and office contacts in relation to ring-fencing. These registers are intended to be living documents and must be updated quarterly (by 15 January, 15 April, 15 July and 15 October of each year).

To assist, please use the following template:

AER - Template - Staff and office sharing register - Distribution ring-fencing guideline 

Please send all enquiries relating to ring-fencing to AERringfencingaer [dot] gov [dot] au (AERringfencing[at]aer[dot]gov[dot]au)

Ring-fencing waivers

Ring-fencing aims to provide a level playing field in new and existing markets for contestable services.

Our ring-fencing guideline recognises that strict adherence to the ring-fencing obligations, in some circumstances, might result in outcomes that are not in the best interests of consumers.

Therefore, we have made provision in our guideline for ring-fencing waivers which provide the flexibility of allowing exemptions in certain circumstances, subject to our approval.

We publish all ring-fencing waivers that apply to the ring-fencing frameworks in electricity distribution, electricity transmission, gas distribution and gas transmission.