Consumer benefits resulting from the AER’s incentive schemes

Consumer protection Energy pricing Financial incentive mechanisms Regulatory system Australia

Energy Networks Australia (ENA) asked HoustonKemp to provide an independent estimate of the consumer benefits that have arisen (and are expected to continue to accrue in future) from networks responding to the incentive schemes that form part of the Australian Energy Regulator (AER’s) overall regulatory framework.

Key findings:
The assessment quantified the benefits to consumers generated by networks due to the operation of the following three incentive schemes:

  • the Efficiency Benefit Sharing Scheme (EBSS) that encourages networks to lower the cost of operating their network and was developed by the AER in 2007;
  • the Capital Expenditure Sharing Scheme (CESS) that incentivises networks to minimise the cost of their network investments and was developed by the AER in 2013 and first applied in 2015/16; and
  • the reliability component of the Service Target Performance Incentive Scheme (STPIS) for electricity distribution networks that provides incentives to improve service quality and was developed by the AER in 2007.

With the exception of the STPIS, the assessment has considered electricity distribution and transmission networks and gas distribution networks, for the period from 2006 to 2020.

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