Reforms to the Australian Energy Regulator framework

The Australian Energy Regulator (AER) has recently announced some new changes to its rules framework and to its processes, in order to make the energy market work better for its consumers.

With the growing amount of Australians unable to afford their electricity bills, a market focusing on greater consumer engagement and participation sounds like a promising one. It's important that big industry players don't forget the everyday Australians out there who are struggling to keep up with the rising cost in living.

In a speech to the Energy Users Association of Australia on May 23, chairman of the AER Andrew Reeves went into more depth about some of these issues and how they will be tackled.

There have been a number of reviews and reforms to the electricity industry in the last 12 months, covering network prices, reliability standards, underlying drivers of costs and the long term interests of consumers.

Mr Reeves described the rising costs of electricity poles and wires that transport energy to customers are the main reason for high electricity prices and bills for users nationwide. Ageing equipment and peak demand are two such examples of costly network upgrades that have been needed.

Under  some of the AER's new frameworks designed to create better deals for consumers, it will be required to develop a guideline setting out how it will approach the assessment of the rate of return and network business.

As well as this, the AER will have to publish expenditure assessment guidelines, and will introduce new regulatory tools so that the AER can provide incentives to promote more efficient investment. 

"As a package, we consider the new regulatory framework now allows the AER to make a more balanced assessment of the level of efficient investment required for a reliable and safe energy supply," said Mr Reeves.

"A key area of focus for recent energy market reforms has been on increased consumer participation and engagement. This is a new focus - for the first time, there is a regulatory requirement for network businesses to consult with their consumers in the development of their regulatory proposal and the AER is now required to take into account this consultation when considering the proposal."

How these reforms will eventually affect consumers in the short and long term remains to be seen, so watch this space.

Posted by Charlie Moore