March 28, 2025
The Embedded Network regulatory framework has been the subject of in-depth review following the Australian Energy Regulator’s (AER) Issues Paper and Review of the Regulatory Framework in 2023. Following this review, the AER published the Draft Decision, applicable to the Network and Retail Guidelines (Version 7) on Monday, March 17th 2025.
The Draft Decision includes a range of proposed changes to the framework, some minor and some representing significant step changes that stakeholders within the industry should be aware of in consideration of their position and future planning. Below, we explore the background to these decisions and touch on some of the key proposed changes that are likely to affect stakeholders operating within the AER’s regulatory framework.
The AER’s exemptions framework was originally designed to regulate a relatively homogenous and simple energy retail market, where the supply and sale of energy in embedded networks were regarded as an incidental aspect of the relationship between a landlord or body corporate and the occupants of an embedded network site. However, over time, the number and variety of embedded networks within the NEM have steadily increased. The result is a larger proportion of energy consumers within embedded networks that may be exposed to risks from regulatory gaps and require further action to ensure their protection.
This growing proportion of customers requires greater attention, ensuring there are consistent safeguards, uninterrupted energy supply and retailer responsibilities, regardless of how consumers are receiving their energy. These risks and regulatory gaps had been highlighted in several jurisdictional reviews leading into and throughout the AER’s review period, resulting in the release of the Issues paper and the holistic review of the Embedded Network Regulatory Framework.
Given the concerns raised in previous jurisdictional inquiries, the AER provided direction in their Issues Paper, that their focus would be to deliver regulatory improvements on:
Sale of bulk hot/chilled water within embedded networks was excluded from the scope currently falls under the general provisions of the Australian Consumer Law. It does not fall within the National Electricity Customer Framework (NECF) because it is not a sale of electricity or gas for premises.
While governments must implement comprehensive reforms to energy laws to address some of the issues or gaps reported, the AER is prioritising a practical regulatory framework that supports all energy consumers to receive equitable and robust protection. They are aiming to improve the existing frameworks rather than restrict embedded network development to mitigate identified systemic risks like consumer vulnerability and limited competition.
Unlike previous reviews of the Embedded Network guidelines that have been conducted in isolation,this review and Issues paper encapsulated both the Network Guideline and the Retail Exempt Selling Guideline. Through their consultation, the AER has consequently made a Draft Decision affecting both frameworks. Below, we have highlighted some of the proposed changes under each guideline that will be likely to attract significant attention.
Closure of deemed network exemption classes: The AER has proposed closing the ND1 and ND2 activity classes for future residential and small business embedded networks, requiring all new networks in these activity classes to register. Existing deemed exempt sellers will retain their deemed status and will not be required to register unless their customer numbers increase.
Increased reporting and notification requirements: Amendments to the core conditions will now require existing and new exemption holders to report on customer numbers, with contact details updated within 20 business days of an effective change.
Protections for Energy Only Customers under Network Charges: New protections have been tabled for ‘energy only’ embedded network customers (serviced by authorised retailers)experiencing payment difficulties – the embedded network service provider will be required to offer a payment plan and follow disconnection processes for the supply component of the bill.
Family Violence Policy
Most exempt sellers will be required to develop, implement, maintain and comply with a family violence policy.
Existing exempt sellers will have a transitional period of 6 months from the date the new condition comes into effect to ensure necessary arrangements are made for compliance under this new condition. This transitional period differs from the obligation imposed on new exempt sellers to implement their family violence policies within 3 months from the date of exemption registration or approval.
Pricing Visibility
A new pricing condition has been proposed,requiring exempt sellers to publish their residential and small business customer tariffs on their website (or displayed in a communal area if they do not have a website), including the percentage off the local area retailer’s standing offer. This condition would apply to existing deemed, and registered exempt sellers – both existing and future- who on-sell to any residential and small business customers.
Closing D1 (small business)and D2 (residential) class
Currently, exempt sellers operating under deemed exemption classes require minimal regulatory oversight. The AER sought to limit the regulatory burden on the sellers, and their administrative costs.However, given the growth in embedded networks over recent years, they have proposed the closure of the D1 and D2 class to increase the visibility of those sites.
Registrable retail exemption classes R1 and R2will be amended to capture new small business and residential embedded networks(regardless of size), and the information will be published on AER's public exemptions register.
Re-open registrable exemption class R6
Throughout the consultation process, the AER has become aware of beneficial and existing scenarios relating to sale of meter energy at adjacent premises and are proposing to reopen this registrable exemption class R6. This pertains to the sale of metered energy to small commercial/retail customers at a site or premises adjacent to a site that the seller owns, occupies or controls.
There are a range of additional updates and changes proposed by the AER beyond these,including updated definitions and further efforts to improve the information retained and streamlined within these guidelines. Stakeholders are encouraged to engage, with submissions closing on the 28th of April. The timeline of this process is outlined below:
Over time, the AER’s regulatory framework has supported drastic improvements within Embedded Networks for customers, owners and operators alike. The experience of ENM solutions has been that this regulation and market forces have provided sufficient shift to improve the outcomes for all stakeholders, and with further review and feedback, the AER has an important role to continue that guidance and industry regulation. ENM Solutions has consistently supported the AER's national framework and its application inline with existing laws and rules, particularly pertaining to the protection of customers and enablement of Exempt Embedded Network Service Providers to continually innovate and improve.
While we have touched on some of the key proposed changes above, there are perhaps just as many interesting and noteworthy outcomes that did not proceed from consideration in the review. These omissions are explored and provide excellent context to the direction and approach of the AER in assessing its options and delivering practical and informed outcomes for energy consumers and the market. While the Draft Decision is only that and is subject to submission and consultation, it provides detailed information and sign posts for stakeholders to consider and understand.
Our team are recognised experts in Embedded Networks with a particular focus on the detail and context that comes along with the regulation and interpreting these for our stakeholders. Should you have any specific concerns regarding the content of the issues paper, information we have included above, would like to discuss the review of the network and retail guidelines, or would like us to represent your views and concerns in further submissions - please don't hesitate to reach out to our team for an informed discussion.
