On 22 February 2024, the Australian Energy Market Commission (AEMC) published a draft determination and draft rule for the Expanding the transmission ring-fencing framework rule change.

These would enable the Australian Energy Regulator (AER) to specify obligations to require transmission network service providers (TNSPs) to ring-fence their provision of negotiated transmission services from non-regulated transmission services under its Transmission Ring-Fencing Guidelines (the Guidelines).

The draft rule seeks to address a gap in existing regulatory arrangements that prevents the AER from addressing the risk of discriminatory conduct associated with the provision of non-contestable connection services (a category of negotiated transmission services) and contestable connection services (a category of non-regulated transmission services).

We have made a more preferable draft rule

We have made a more preferable draft rule to that proposed in the rule change request submitted by the AER in July 2023. Our more preferable draft rule clarifies that the AER has flexibility when deciding whether to:

• specify any obligations in relation to negotiated transmission services, and
• exclude specific categories of negotiated transmission services from ring-fencing obligations.  

Our draft rule seeks to support effective competition in the market for contestable connections

In line with the AER’s rule change request, we consider there is a risk that a primary TNSP relies on their monopoly position over the provision of non-contestable connection services to discriminate in favour of themselves (or an affiliate) in the contestable connections market.

The risk of discrimination, and the lack of appropriate powers for the AER to address this risk, may hinder effective competition in the market for contestable connection services by discouraging potential competitors from participating in the market.

The draft rule would extend the scope of the AER’s Transmission Ring-Fencing Guidelines to enable the AER to specify obligations to require TNSPs to ring-fence their provision of negotiated transmission services (and prescribed transmission services) from other services.

Next steps

An online forum will be held at 11:00am on 18 March 2024 to present the draft rule determination and to provide an opportunity for stakeholders to ask questions and provide their views.

Please register for the forum here.

Stakeholders may provide feedback in response to the draft determination and draft rule. Submissions on our more preferable draft rule are due on 4 April 2024.

Background

On 18 July 2023, we received a rule change request from the AER to amend the National Electricity Rules (NER) to expand the transmission ring-fencing framework to include negotiated transmission services.

The AEMC has progressed this rule change under a fast-track rule making process. as the AER has already consulted on the nature and content of its proposal. This occurred in May 2023.  The AEMC is satisfied that the consultation already undertaken by the AER was adequate, having regard to the nature and content of that request and the kind of consultation conducted.

The fast-track rule making process allows the AEMC to proceed directly to publishing a draft determination and draft rule which is accompanied by further stakeholder consultation.

Rule change request

A copy of the rule change request is available below.

The AER’s May 2023 Consultation Paper and stakeholder submissions made in response to the Consultation Paper are available here.