New rules aim to limit energy price rises

The Australian Energy Market Commission has published its final position on new rules to regulate electricity network prices which will take effect at the end of November.

Among other changes the new rules give the regulator the ability to set maximum prices which network businesses can charge and the tools to introduce new incentives to improve business efficiency.  These rules are designed to make sure consumers don’t pay more than necessary for reliable supplies of electricity and gas.

AEMC Chairman, John Pierce, said the new rules were focused on improving the Australian Energy Regulator’s capacity by giving it a new toolkit to determine efficient costs for each regulated business – and enabling it to decide what costs are efficient.

In addition to these draft rule changes, the AEMC is working across the electricity and gas supply chains to identify other areas where changes can be made to improve the efficiency of the total system.

However, the new rules have been criticized by ratings agency Standard and Poors and Energy Networks Association CEO Malcolm Roberts.  The critics cite a reduction of cash flow predictability and underlying drivers for networks such as peak demand and replacing ageing assets as being problems the regulator wont take into account.

Despite the criticisms the rules have moved ahead and a federal-state meeting of the Standing Council on Energy and Resources and of the Council of Australian governments next month is expected to see the states push for more resources for the AER and its separation from the ACCC.  This would give the AER the “resources, expertise, and independence” to enforce the rules according to Victorian Energy Minister Michael O’brien.

Though the rules go into effect almost immediately, the expected savings for consumers on power prices wont be seen until July 2014 according to Energy Minister Martin Ferguson.