The Australian Energy Regulator (AER) has submitted a rule change request to the Australian Energy Market Commission (AEMC) proposing an amendment to the transmission ring-fencing framework under the National Electricity Rules (NER).
The AER’s request proposes an amendment to clause 6A.21.2(a) of the NER to include negotiated transmission services within the scope of the Transmission Ring-fencing Guideline.
The AER has requested this rule change proposal be “fast tracked” under Division 3 of the National Electricity Law following extensive consultation already undertaken with stakeholders on the nature of the problem and the proposal forming the basis of this rule change request.
The proposed amendment would address concerns raised by stakeholders that electricity transmission network service providers (TNSPs) have the ability to discriminate in favour of themselves or an affiliate when providing non-regulated transmission services as a result of their monopoly provision of negotiated transmission services. These concerns have focussed around the role of TNSPs in providing negotiated connection services and the risks of discriminatory conduct that has negative impacts on competitive connection services markets. Including negotiated transmission services within the scope of the Transmission Ring-fencing Guideline would provide the AER with additional regulatory tools to manage the potential harms associated with possible discriminatory behaviour, and would provide greater transparency for connection applicants and third party service providers.
This proposed rule change will be important during the energy transition as the number of connections to the transmission network increases to facilitate the introduction of additional renewable energy required by 2050. Any inefficiencies in the connection framework due to market power will delay, and increase the cost of, the transition.
Background
On 1 March 2023, the AER published its Electricity Transmission Ring-fencing Guideline (Version 4) following a review of the transmission ring-fencing arrangements.
During the review, some stakeholders raised concerns about the ability of TNSPs to discriminate against providers of contestable connection services due to their monopoly role in providing the non-contestable elements of a connection. This conduct could include favouring an affiliate of the TNSP over an unrelated provider of competitive connection services.
The AER was unable to require ring-fencing of these services, as the NER does not allow for ring-fencing of negotiated transmission services, the most common of which is the non-contestable component of connections.
On 12 May 2023, the AER published a consultation paper seeking stakeholder feedback on two options to address gaps in the transmission ring-fencing framework. Option 2 was to submit a rule change request to expand the transmission ring-fencing framework to include negotiated transmission services; 18 submissions were received in response to the consultation paper.