The Australian Energy Market Commission (AEMC or the Commission), in consultation with a wide range of stakeholders, has developed a new regulatory framework for embedded electricity networks.

The Commission has previously found that the current regulatory arrangements for embedded electricity networks are no longer fit for purpose, resulting in some customers not being able to access competitive prices or important consumer protections. There are also insufficient monitoring and enforcement powers, leading to a lack of clarity that embedded network operators are meeting their obligations as suppliers of an essential service. While some embedded networks are providing benefits to energy consumers that they may not receive in a standard supply arrangement, often they do not.

In this report, the Commission presents a package of law and rule changes that will apply to new embedded networks to address these issues. The new framework will elevate new embedded electricity networks into the national regulatory regime under the National Electricity Law (NEL), National Energy Retail Law (NERL), National Electricity Rules (NER) and National Energy Retail Rules (NERR). Proposed drafting amendments for the NER and NERR, and drafting instructions for the NEL and NERL, have been published to accompany this report.

The new regime will improve consumer protections and access to retail market competition for embedded network customers by extending many of the arrangements for grid-supplied customers to embedded networks. The Commission's view is that consumer protections should be driven by the needs of customers and not the business model of suppliers. Careful consideration has been given to whether, and if so how, these arrangements should apply in existing embedded networks.

Ombudsmen, consumer groups, retailers and the Australian Energy Regulator (AER) expressed overall support for the new framework. These stakeholders considered the elevation of embedded networks in the national regime would assist in providing consistent treatment for most small customers, including through greater access to retail competition and the extension of consumer protections.

The proposed framework will not be implemented until the COAG Energy Council has redrafted electricity and energy retail laws based on the AEMC's proposed law change descriptions, and these have been made by the South Australian Parliament. The proposed changes to electricity and energy retail rules will then be able to be made. Following the enactment of this package of law and rule changes, jurisdictions may also need to make amendments to jurisdictional instruments and the Australian Energy Market Operator (AEMO) and the AER will require a transitional period to consult on and update relevant procedures and guidelines.

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