December 5, 2024
Many within the Embedded Network industry will be aware that the Australian Energy Regulator (AER) has recently examined the regulatory Framework for Embedded Networks. However, prior to that in October 2022, the AER conducted a specific review of its Electricity Network Service Provider – Registration Exemption Guideline. This led to the release of a draft Network Exemptions Guideline(Version 7) for public consultation. While the AER is currently taking a holistic view to the review of the entire exempt framework, for the release of revised draft guidelines in 2025, it provides a timely opportunity to look back at the direction of this guideline in the initial draft and review for consideration of potential changes to come.
Below, we will delve into some of the notable changes made in that Draft Version 7, and place that into context with the commentary that has been provided throughout the existing review. Why is this important? Primarily, this information is relevant to industry stakeholders to garner an understanding of the direction, interpretation and approach. The AER has provided a signpost for future regulation, practice and enforcement.
From the initial Notice of Draft Instrument, we drew out six key pieces of commentary in detail from our article in December 2022, which you can find HERE, and we will revisit briefly below.
Coming out of a release of the revised Retail Guideline prior to this review, the AER continued to make efforts to streamline and condense the guideline, taking a far more direct approach to the document’s regulatory content and less informative commentary that places the regulations in context.
To avoid confusion when examining network exemptions, the AER proposed a primary registrant that may be nominated to perform and be responsible for the conditions of the applicable network exemption.
Notably, for many now looking to take advantage of the expanded SRA capabilities, the AER provided a position on the exemption framework that would apply and is expected to apply for Embedded Networks implementing these solutions.
The requirement to appoint an ENM was reinforced, with a proposed maximum timeline in business days for appointment when a trigger event occurs.
Cleaning up the wording within the document was a shift to explicit informed consent from express written consent, along with increased burdens for EENSP’s in what must be provided to customers and those looking to complete retrofit works.
Mirroring the protections of the Retail Exempt Selling Guideline,to apply these to customers on network agreements with the EENSP once moving to energy only retail as an on-market customer.
Just over 12 months from the release of the Draft Network Guideline, the AER released their Issues Paper in review of the regulatory Framework for Embedded Networks. This review included a stakeholder information session and individual stakeholder meetings, which we explored in detail through our article at the time, which you can read HERE.
The issues paper was driven by an increase in state-based inquiries into embedded networks, and some of the common harms facing Embedded Network customers, with the benefit of being removed from political influence and explicitly aligned to the framework of the National Electricity Objective (NEO) within the National Electricity Law (NEL).
The AER proposed a range of regulatory responses in their framework review, primarily targeted at reducing potential harm to the largest growing group of electrical embedded network customers: Residential customers.
Improving visibility of embedded networks in the activity class will also increase the conditions of exemption and ensure transparency for these networks and customers.
Require additional information burden on benefits, records and policies prior to being able to submit an application for exemption.
Assessment of all NR2 applications prior to any approval being provided, meaning exemption applications would need to be made well in advance, as approval would not be automatic.
No further NR2 exemptions would be granted for embedded networks in this category.
Following the lead of the AEMC’s 2019recommendations, including requirements for compulsory reporting.
These protections will be implemented by the AER and will be considered within this review and the documents released as part of the drafts issued in 2025.
The AER has provided clear signposting that their review of the exempt framework will increase the regulatory burden for exempt sellers and suppliers engaged with Residential customers through the ND2 and NR2 activity classes.
Exempt Providers who are looking to gear their products, services and capabilities to be ready for the future compliance requirements of this framework can examine the proposed market adjustments and take proactive steps now to adapt to the anticipated increase in regulatory requirements.. Fortunately, much of the documentation around these reviews has been given excellent attention by the AER and provided opportunity examine the position, interpretations and approach that has been taken in formulating their position.
Operators and providers can then prepare to ensure this information acts as a lever for their ability to adapt and improve, further highlighting the strength and agility of the modern embedded network provider. Today, these providers are central to delivering renewable and energy efficient networks that benefits the end users and owners while delivering a service that almost exactly mirrors that of a market retailer. This makes the review of these proposed regulatory changes even more valuable to modern providers who are looking to show their customers and clients that the historic view of these networks is antiquated, and that their operation and management provides fantastic competition to distributors, while also delivering tailored energy solutions to buildings and networks.
For those looking to gain further insight from the significant body of work that has been undertaken by the AER, and ensure you are prepared and understand what may lay ahead, you can reach out to our team for a conversation about how we can support you and your team to remain compliant and improve your competitive advantage.
- AER’s Review of Exemption Framework
- AER’s Stakeholder Information Session
- ENM Solutions Response to Framework Review
- AER’s Draft Network Exemption Guideline V7
