Changes to the pricing methodologies

In Brief

• The Australian Energy Regulator (AER) is expected to consider the revised pricing methodologies for all Transmission Network Service Providers (TNSPs) for the new regulatory period (2012-2017) by 3 February 2012. The AER is expected to issue revised pricing methodology guidelines by the end of August 2011.
• If approved by the Australian Energy Regulator (AER), the revised pricing methodologies may affect customers’ entitlement to the Avoided Transmission Use of System (Avoided TUOS) charges.
• The AER is expected to invite submissions on the revised pricing methodology in May 2011.

What is Avoided TUOS?

The connection of an Embedded Generator to a distribution network reduces the amount of energy drawn from the transmission network. This in turn reduces the variable transmission use of system charges that the Distribution Network Service Provider (DNSP) has to pay the transmission network owner. In other words, Avoided TUOS payments are paid to Embedded Generators in lieu of transmission fees. These payments compensate Embedded Generators for connecting directly to the distribution network, allowing transmission businesses to avoid capital expenditure costs.

Clause 5.5 (h), (i) and (j) of the National Electricity Rules (NER) cover the operation of the TUOS pass-through provisions.

What is happening to Avoided TUOS?

Some TNSPs have proposed a shift from the current methodology of calculating locational prices with an equal demand-energy component to a demand-based locational pricing. This could have negative effect on the customers’ entitlements to the Avoided TUOS payments.

Why are the changes in pricing methodology happening now?

Chapter 6A of the Rules require TNSPs to prepare a Pricing Methodology for approval of the AER at the time of the TNSPs’ next revenue reset for the 2012-2017 period. The TNSPs’ Pricing Methodology must be consistent with the Guideline as well as the principles in Clause 6A.23 of the Rules. The AER is required to consult on its Guideline prior to publishing it in 2012. The AER’s final decision on the acceptability of revised methodologies will be released by 3 February 2012.

Can customers object to a TNSP’s proposed pricing methodology?

Interested parties may submit written submission on the proposed pricing methodology to the AER during the consultation period. The formal consultation period for proposed pricing methodologies of all TNSPs is scheduled to commence by the start of May 2011. The submission must be made within 30 business days of the invitation (Clause 6A.20(c)).

Written by Andrew Bruton, Partner and Amir Kordvani, Solicitor.

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Important disclaimer: The material contained in this publication is of a general nature only and is based on the law as at 9 June 2011. It is not, nor is intended to be, legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.