Footnotes

Chapter 1 - Introduction

[1]        Journals of the Senate, 2013–15, no. 59 (2 October 2014), pp. 1586–87.

[2]        Journals of the Senate, 2013–15, no. 79 (2 March 2015), p. 2203.

[3]        These letters were published as Submission 65 and as a supplementary submission (Submission 65.1).

Chapter 2 - The context of this inquiry

[1]        Energy Networks Association, Submission 31, p. 2. These inquiries and reviews include several reviews undertaken by the Australian Energy Market Commission into specific issues, a Senate Select Committee inquiry and a comprehensive review undertaken by the Productivity Commission (PC) between January 2012 and April 2013. The PC report, Electricity network regulatory frameworks, is referenced throughout this report.

[2]        Network costs are the costs associated with building, maintaining and operating the transmission and distribution networks that transport electricity from the generator to the consumer. Other components of a typical small consumer's electricity bill include wholesale costs (costs associated with generating electricity), costs associated with retail services (such as billing) and costs linked to government green schemes. An indicative breakdown of the composition of residential electricity bills by state in 2014 can be found in Australian Energy Regulator (AER), State of the energy market 2014, p. 131.

[3]        Energy Users Association of Australia (EUAA), Submission 17, p. 5.

[4]        Mr Michael Murray, Policy Manager, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 20.

[5]        EUAA, Submission 17, p. 10; Mr Bruce Mountain, Submission 19, p. 7.

[6]        Dr Gabrielle Kuiper, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 15.

[7]        Mr Mountain added that customer density in Australia's metropolitan areas 'is often comparable to that in other countries with the exception of very dense international capitals such as London, Tokyo or New York. Submission 19, p. 13.

[8]        The NEM is the wholesale electricity market for states and territories in eastern and southern Australia. The NEM is explained in more detail in Chapter 3.

[9]        Mr Bruce Mountain, Submission 19, p. 12–13.

[10]      Mr Terence Effeney, Chief Executive Officer, Energex, Proof Committee Hansard, 16 February 2015, pp. 1–2.

[11]      The gold plating effect, that is the risk that rate-of-return regulation can lead to inefficient levels of investment and high prices, is also known as the Averch–Johnson effect after Harvey Averch and Leland L. Johnson. The Averch–Johnson effect is outlined in H Averch and L Johnson, 'Behavior of the Firm Under Regulatory Constraint', The American Economic Review, vol. 52, no. 5 (December 1962), pp. 1052–69. See also Mr Bruce Mountain, Submission 19, p. 20.

[12]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 61.

[13]      While network companies reject claims of gold-plating, it is noteworthy that these concerns have received a level of acceptance by governments. For example, concerns about gold‑plating led then Prime Minister Julia Gillard to pursue a program of reform through the Council of Australian Governments (COAG). See House of Representatives Hansard, no. 15 of 2012 (11 October 2012), pp. 12093–94.

[14]      Australian Energy Market Operator (AEMO), National electricity forecasting report 2014, June 2014, www.aemo.com.au/Electricity/Planning/Forecasting/National-Electricity-Forecasting-Report (accessed 23 March 2015), p. iii.

[15]      Department of Industry, Submission 34, p. 14.

[16]      EnergyAustralia, Submission 23, pp. 2–3.

[17]      Electrical Trades Union of Australia, Submission 22, p. 2.

[18]      Central Irrigation Trust, Submission 1, p. 4.

[19]      Energy Supply Association of Australia, Submission 25, p. 1.

[20]      Big Picture Tasmania, Submission 4, p. 5. See also Mr Phillip Barresi, Chief Executive Officer, EUAA, Proof Committee Hansard, 18 February 2015, p. 20.

[21]      Mr Gavin McMahon, Chief Executive Officer, Central Irrigation Trust, Proof Committee Hansard, 19 February 2015, p. 10.

[22]      Mr Robert Mackenzie, Director, Canegrowers Isis, Proof Committee Hansard, 16 February 2015, p. 27.

[23]      Big Picture Tasmania, Submission 4, p. 1.

[24]      Mr Bruce Robertson, Submission 16, p. 1.

[25]      New South Wales Irrigators' Council, Submission 5, p. 3.

[26]      Canegrowers Isis, Submission 39, p. 1.

[27]      Mr Terence Effeney, Energex, Proof Committee Hansard, 16 February 2015, p. 2.

[28]      AER, Seasonal peak demand by region, www.aer.gov.au/node/9767 (accessed 16 April 2015).

[29]      These figures are for the entire Queensland NEM region; Energex only operates in south-east Queensland.

[30]      Ms Claire O'Rourke, National Director, Solar Citizens, Proof Committee Hansard, 17 February 2015, p. 61.

[31]      EUAA, Submission 17, pp. 7–8.

[32]      EUAA, Submission 17, pp. 7–8.

[33]      Bundaberg Regional Irrigators Group, Submission 40, p. 1.

[34]      Mr Warren Males, Head, Economics, Canegrowers; and Chairman, Sugarcane Gene Technology Group, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, p. 26.

[35]      Mr Tom Chesson, Key Member, Agriculture Industries Electricity Taskforce, Proof Committee Hansard, 19 February 2015, p. 12.

[36]      Mr Robert Mackenzie, Director, Canegrowers Isis, Proof Committee Hansard, 16 February 2015, p. 27.

Chapter 3 - Overview of the regulatory framework and revenue determination process

[1]        Australian Energy Regulator (AER), State of the energy market 2014, p. 22.

[2]        WA and the NT are not included in the NEM primarily because of their geographical distance from the other states.

[3]        Productivity Commission (PC), Electricity networks regulatory frameworks, vo1. 1, April 2013, p. 85.

[4]        AER, State of the energy market 2014, p. 68.

[5]        PC, Electricity networks regulatory frameworks, vol. 1, p. 96.

[6]        AER, Submission 36, p. 2.

[7]        AER, Submission 36, p. 2.

[8]        AER, Submission 36, p. 2; Australian Energy Market Commission (AEMC), Submission 41, p. 4.

[9]        The NEL is a schedule to the National Electricity (South Australia) Act 1996 (SA). South Australia is the lead legislator for the NEL; other jurisdictions enact application legislation that gives effect to the South Australian legislation.

[10]      AER, State of the energy market 2014, p. 43.

[11]      National Electricity (South Australia) Act 1996 (SA), s. 7.

[12]      The current Rules are available at: www.aemc.gov.au/energy-rules/national-electricity-rules/‌current-rules

[13]      AEMC, Submission 41, pp. 1, 9.

[14]      PC, Electricity networks regulatory frameworks, vol. 1, p. 70.

[15]      Australian Energy Market Operator, Annual Report 2014, p. 11.

[16]      Outside of the NEM, the Economic Regulation Authority regulates the networks in WA and the Utilities Commission regulates electricity networks in the NT.

[17]      PC, Electricity networks regulatory frameworks, vol. 1, p. 70; AEMC, Submission 41, p. 7.

[18]      AER, Submission 36, p. 2.

[19]      AER, Submission 36, p. 2.

[20]      AEMC, Submission 41, pp. 4, 5.

[21]      AER, Submission 36, pp. 3–4.

[22]      AEMC, Submission 41, pp. 5–6.

[23]      AEMC, Submission 41, pp. 5–6.

[24]      AER, Submission 36, pp. 4–5.

[25]      AER, Submission 36, p. 3.

[26]      PC, Electricity networks regulatory frameworks, vol. 1, p. 194.

[27]      AER, Submission 36, p. 3.

[28]      EnergyAustralia, Submission 23, p. 4

[29]      The return on equity is the return shareholders will require for them to continue to invest. The return on debt is the interest rate the business pays when it borrows money to invest. See AEMC, Submission 41, p. 12.

[30]      PC, Electricity network regulatory frameworks, vol. 1, p. 195.

[31]      AER, Better regulation: Expenditure statement rate of return guideline, December 2013, www.aer.gov.au/sites/default/files/AER%20Explanatory%20statement%20-%20rate%20of%20‌return%20guideline%20-%20December%202013.pdf (accessed 27 February 2015), p. 9.

[32]      AER, Better regulation: Rate of return guideline, p. 9.

[33]      PC, Electricity network regulatory frameworks, vol. 1, p. 195.

[34]      AEMC, Submission 41, p. 12.

[35]      AEMC, Submission 41, p. 13.

[36]      AEMC, Submission 41, p. 15.

[37]      AEMC, Submission 41, p. 13.

[38]      AEMC, Submission 41, p. 15.

[39]      AER, Better regulation: Expenditure forecast assessment guideline for electricity distribution, November 2013, www.aer.gov.au/sites/default/files/Expenditure%20Forecast%20Assessment‌%20Guideline%20-%20Distribution%20-%20FINAL.pdf (accessed 24 February 2015),
pp. 6–7. See also National Electricity Rules, rules 6.5.6(c) and 6.5.7(c).

[40]      These tests are referred to as RIT-D for distribution projects and RIT-T for transmission projects.

[41]      AEMC, Submission 41, p. 14.

[42]      AER, Submission 36, p. 7.

[43]      AEMC, Submission 41, pp. 4–5.

[44]      AER, Submission 36, pp. 7, 9; AEMC, Submission 41, pp 1–2.

[45]      AER, Submission 36, pp. 9, 12.

Chapter 4 - Regulatory building blocks

[1]        Big Picture Tasmania, Submission 4, p. 4.

[2]        For example, the RABs for distribution network service providers are outlined in schedule 6.2 of the NER.

[3]        National Electricity Rules, rules 6.5.1 and 6A.6.1.

[4]        Energy Users Association of Australia (EUAA), Submission 17, p. 7 (footnotes and emphasis omitted).

[5]        Mr Mark Grenning, Board Director, EUAA, Proof Committee Hansard, 18 February 2015, p. 17.

[6]        Australian Aluminium Council, Submission 27, p. 5; EUAA, Submission 17, p. 3.

[7]        Productivity Commission, Electricity networks regulatory frameworks, vo1. 1, April 2013, p. 227.

[8]        Mr Terence Effeney, Chief Executive Officer, Energex, Proof Committee Hansard, 16 February 2015, p. 5.

[9]        EnergyAustralia, Submission 23, p. 4.

[10]      Transend was a transmission network service provider in Tasmania. On 1 July 2014, the Tasmanian Government merged Transend's electricity transmission business with Aurora's electricity distribution business to form TasNetworks. TasNetworks, www.tasnetworks.com.au/‌about-us/corporate-profile/about-tasnetworks (accessed 31 March 2015).

[11]      Big Picture Tasmania, Submission 4, p. 4.

[12]      EUAA, Submission 17, p. 8; Major Energy Users, Submission 7, pp. 3–4.

[13]      EUAA, Submission 17, p. 8.

[14]      EUAA, Submission 17, p. 8.

[15]      Major Energy Users, Submission 7, pp. 3–4.

[16]      See Central Irrigation Trust, Submission 1, p. 4; Big Picture Tasmania, Submission 4, p. 4.

[17]      Professor David Johnstone, Submission 10, pp. 3–4.

[18]      Professor David Johnstone, Proof Committee Hansard, 17 February 2015, p. 42.

[19]      Professor David Johnstone, Submission 10, pp. 1–2.

[20]      Professor David Johnstone, Proof Committee Hansard, 17 February 2015, p. 42.

[21]      Professor David Johnstone, Submission 10, p. 2.

[22]      Professor David Johnstone, Submission 10, pp. 3–4.

[23]      Mr Ray Mostogl, General Manager, Bell Bay Aluminium, Proof Committee Hansard, 17 February 2015, p. 35.

[24]      Mr Michael Murray, Policy Manager, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 20.

[25]      Mr Michael Murray, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 25.

[26]      Mr Ray Mostogl, Bell Bay Aluminium, Proof Committee Hansard, 17 February 2015, p. 37.

[27]      Big Picture Tasmania, Submission 4, p. 4.

[28]      Australian Aluminium Council, Submission 27, p. 2.

[29]      Professor David Johnstone, Submission 10, p. 1.

[30]      Professor David Johnstone, Submission 10, pp. 3–4.

[31]      Canegrowers Isis, Submission 39, p. 1.

[32]      Ms Stefanie Schulte, Policy Manager, New South Wales Irrigators' Council (NSWIC), Proof Committee Hansard, 17 February 2015, p. 26.

[33]      Mr Michael Murray, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 25.

[34]      Mr Ray Mostogl, Bell Bay Aluminium, Proof Committee Hansard, 17 February 2015, p. 36.

[35]      EUAA, Submission 17, p. 7 (footnotes and emphasis omitted). Since 2014, the AER is able to review the efficiency of capital expenditure over a regulatory control period that exceeds the efficient amount estimated by the AER. The AER may disallow capital overspending it considers was inefficient.

[36]      Ms Michelle Groves, Chief Executive Officer, Australian Energy Regulator (AER), Proof Committee Hansard, 18 February 2015, p. 4.

[37]      National Gas Rules, rule 81(1); cited by Ms Stefanie Schulte, NSWIC, Proof Committee Hansard, 17 February 2015, p. 26.

[38]      Economic Regulation Authority (WA), Submission 30, pp. 3–4.

[39]      Department of Industry, Submission 34, p. 14.

[40]      Mr Kieran Donoghue, General Manager Policy, Energy Supply Association of Australia (ESAA), Proof Committee Hansard, 18 February 2015, p. 26.

[41]      Energy Networks Association (ENA), Submission 31, p. 4.

[42]      ENA, Submission 31, pp. 4–5.

[43]      ENA, Submission 31, p. 5.

[44]      Mr Kieran Donoghue, General Manager Policy, ESAA, Proof Committee Hansard, 18 February 2015, p. 26.

[45]      Mr Oliver Derum, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 17.

[46]      Mr Mark Grenning, EUAA, Proof Committee Hansard, 18 February 2015, p. 18.

[47]      Mr Oliver Derum, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 17.

[48]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 63.

[49]      Mr Mark Grenning, EUAA, Proof Committee Hansard, 18 February 2015, p. 18.

[50]      A vanilla WACC is the simplest form of WACC. A nominal vanilla WACC excludes all tax‑related matters, combining a post-tax return on equity and pre-tax return on debt, for consistency with other building blocks. See AER, Draft decision: ActewAGL distribution determination 2015–16 to 2018–19, Overview, November 2014, www.aer.gov.au/sites/‌default/files/AER%20draft%20decision%20ActewAGL%20distribution%20determination%20-%20Overview%20-%20November%202014.pdf (accessed 30 March 2015), p. 39.

[51]      National Electricity Rules, rules 6.5.2(b), (c); 6A.6.2(b), (c).

[52]      AER, Draft decision: ActewAGL distribution determination 2015–16 to 2018–19, Overview, November 2014, p. 81.

[53]      ESAA, Submission 25, p. 2.

[54]      ENA, Submission 31, p. 6.

[55]      ESAA, Submission 25, p. 2.

[56]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 68.       

[57]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 68.       

[58]      Professor David Johnstone, Submission 10, p. 2.

[59]      Central Irrigation Trust, Submission 1, p. 3; Mr Bruce Robertson, Submission 16, p. 7; EUAA, Submission 17, p. 3;

[60]      Public Interest Advocacy Centre, Submission 18, p. 15.

[61]      Mr Michael Murray, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 27.

[62]      Canegrowers Isis, Submission 39, p. 2.

[63]      Mr Bruce Mountain, Submission 19, p. 16.

[64]      Economic Regulation Authority (Western Australia), Submission 30, p. 8.

[65]      AER, Better regulation: Rate of return guideline, December 2013, www.aer.gov.au/sites/‌default/files/AER%20Rate%20of%20return%20guideline%20-%20December%202013.pdf (accessed 30 March 2015), p. 11.

[66]      AER, Better Regulation: Equity beta issues paper, October 2013, www.aer.gov.au/sites/‌default/files/AER%20-%20equity%20beta%20issues%20paper%20-%20rate%20of%20‌return%20guideline%20-%20October%202013.PDF (accessed 13 March 2015), p. 8.

[67]      The AER noted that some companies have an equity beta of 1 in previous and current determinations as a result of transitional arrangements put in place when the company came under the national framework. At present, only the NSW distribution companies still have an equity beta of 1. See Ms Michelle Groves, AER, Proof Committee Hansard, 18 February 2015, p. 13.

[68]      AER, Better regulation: Rate of return guideline, p. 16.

[69]      AER, Better regulation: Rate of return guideline, p. 15.

[70]      Big Picture Tasmania, Submission 4, p. 6 and Major Energy Users, Submission 7, p. 5.

[71]      Major Energy Users, Submission 7, p. 5.

[72]      EUAA, Submission 17, p. 3.

[73]      Cotton Australia, Submission 3, p. 3.

[74]      NSWIC, Submission 5, p. 5.

[75]      This approach considers the average interest rate that a network business would face if it raised debt annually in ten equal parcels. The trailing average portfolio approach means that the return on debt is updated annually based on an assumption that one-tenth of the debt of a network business is re-financed each year. AER, Draft decision: ActewAGL distribution determination 2015–16 to 2018–19, Overview, November 2014, pp. 81–82.

[76]      AER, Better regulation: Rate of return guideline, pp. 19, 21.

[77]      NSWIC, Submission 5, p. 5.

[78]      ENA, Submission 31, pp. 7–8.

[79]      Agriculture Industries Electricity Taskforce, Submission 21, p. 7.

[80]      Major Energy Users, Submission 7, p. 6.

[81]      Major Energy Users, Submission 7, pp. 5–6.

[82]      ENA, Submission 31, p. 8.

[83]      AER, Better regulation: Rate of return guideline, p. 9.

[84]      Big Picture Tasmania, Submission 4, p. 7.

[85]      Major Energy Users, Submission 7, pp. 5, 6.

[86]      National Electricity Rules, rule 6.5.3.

[87]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 68.

[88]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 68.

[89]      See Andrew White, 'Power firms in $1.1bn tax stoush', The Australian, 17 March 2015, p. 19; Michael West, 'Tax strategies may distort power sales', The Age, 23 March 2015, p. 25.

Chapter 5 - Regulation of state government-owned network companies

[1]        Mr Bruce Mountain, Submission 19, pp. 15–16.

[2]        Productivity Commission (PC), Electricity networks regulatory frameworks, vo1. 1, April 2013, p. 287

[3]        Mr Ian McLeod, Chief Executive, Ergon Energy, Proof Committee Hansard, 16 February 2015, p. 18. However, the utility of figures based on customer density per square kilometre was questioned. Mr Bruce Mountain argued that these figures make 'little sense as a basis for comparison, since a large part of the surface area of each state is not inhabited, and neither does electricity infrastructure cover it' (Submission 19, p. 12).

[4]        Mr Ian McLeod, Ergon Energy, Proof Committee Hansard, 16 February 2015, p. 18.

[5]        Mr Alistair Parker, General Manager Asset Management, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 32.

[6]        Mr Alistair Parker, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 33.

[7]        Mr Alistair Parker, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 33.

[8]        A relevant example given was that the natural monopoly of electricity transmission was integrated with electricity generation, an activity that was potentially competitive. Independent Committee of Inquiry into Competition Policy, National Competition Policy, August 1993, p. 218.

[9]        Competition Principles Agreement, 11 April 1995 (as amended to 13 April 2007), http://ncp.ncc.gov.au/docs/Competition%20Principles%20Agreement,%2011%20April%201995%20as%20amended%202007.pdf (accessed 19 March 2015).

[10]      Since the 1990s vertical re-integration of some retailers and generators has occurred to form what are known as 'gentailer' structures. See Australian Energy Regulator (AER), State of the energy market 2014, p. 40.

[11]      See Energy Users Association of Australia (EUAA), Submission 17, p. 11.

[12]      Energex, Submission 14, p. 5.

[13]      EUAA, Submission 17, p. 11.

[14]      Mr Bruce Mountain, Submission 19, p. 20.

[15]      EUAA, Submission 17, p. 11.

[16]      Mr Bruce Mountain, Submission 19, p. 20.

[17]      Agriculture Industries Electricity Taskforce, Submission 21, p. 8.

[18]      EUAA, Submission 17, p. 11.

[19]      Mr Bruce Mountain, Submission 19, p. 18.

[20]      Mr Bruce Mountain, Submission 19, p. 18.

[21]      Mr Bruce Mountain, Submission 19, p. 18.

[22]      This figure does not include the cost of AER officers or in-house lawyers. AER, Answers to questions on notice 8, received 10 April 2015, p. 10.

[23]      Mr Sebastian Roberts, General Manager, Networks, AER, Proof Committee Hansard, 18 February 2015, p. 4.

[24]      Ms Michelle Groves, Chief Executive Officer, AER, Proof Committee Hansard, 18 February 2015, p. 4.

[25]      Mr Paul Smith, Chief Executive, Australian Energy Market Commission (AEMC), Proof Committee Hansard, 17 February 2015, p. 9.

[26]      Mr Paul Smith, Chief Executive, AEMC, Proof Committee Hansard, 17 February 2015, p. 9.

[27]      Mr Matthew Warren, Chief Executive Officer, Energy Supply Association of Australia (ESAA), Proof Committee Hansard, 18 February 2015, p. 27.

[28]      Competition Policy Review, Final report, March 2015, p. 50.

[29]      Mr Bruce Robertson, Submission 16, p. 3.

[30]      VETO, Submission 55, p. 7.

[31]      Australian Sugar Industry Alliance, Submission 32, p. 3.

[32]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, pp. 62–63.

[33]      Mr Robert Mackenzie, Director, Canegrowers Isis, Proof Committee Hansard, 16 February 2015, p. 28.

[34]      Mr Oliver Derum, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 15.

[35]      Mr Bruce Mountain, Submission 19, p. 20.

[36]      Mr Kieran Donoghue, General Manager, Policy, ESAA, Proof Committee Hansard, 18 February 2015, p. 27.

[37]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 63.

[38]      Mr Oliver Derum, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 15.

[39]      EnergyAustralia, Submission 23, p. 5.

[40]      Mr Warren Males, Head, Economics, Canegrowers; and Chairman, Sugarcane Gene Technology Group, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, p. 23.

[41]      Agriculture Industries Electricity Taskforce, Submission 21, p. 14.

[42]      Agriculture Industries Electricity Taskforce, Submission 21, p. 14.

[43]      Mr Dominic Nolan, Joint Secretary, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, p. 23.

[44]      New South Wales Irrigators' Council, Submission 5, p. 8.

[45]      EnergyAustralia, Submission 23, p. 5.

[46]      Public Interest Advocacy Centre, Submission 18, p. 13.

[47]      Public Interest Advocacy Centre, Submission 18, p. 14.

Chapter 6 - Information asymmetry, incentives to 'game' the regulator and merits review

[1]        Energex, Submission 14, pp. 5–6.

[2]        Big Picture Tasmania, Submission 4, p. 2.

[3]        Energy Users Association of Australia (EUAA), Submission 17, p. 14.

[4]        Agriculture Industries Electricity Taskforce, Submission 21, p. 5.

[5]        EUAA, Submission 17, p. 14.

[6]        Total Environment Centre, Submission 43, p. 3.

[7]        Mr Bruce Mountain, Submission 19, p. 24. The AER provided details of the number of pages it has received in submissions to support regulatory proposals and revised regulatory proposals for the upcoming regulatory control periods. See AER, Answers to questions on notice 8, received 10 April 2015, p. 8.

[8]        EUAA, Submission 17, p. 14.

[9]        Major Energy Users, Submission 7, pp. 2–3.

[10]      Cotton Australia, Submission 3, p. 2.

[11]      Agriculture Industries Electricity Taskforce, Submission 21, p. 6.

[12]      Mr Bruce Mountain, Submission 19, p. 24.

[13]      Mr Bruce Mountain, Submission 19, p. 24.

[14]      Mr Bruce Mountain, Submission 19, p. 25.

[15]      Major Energy Users, Submission 7, pp. 2–3.

[16]      EUAA, Submission 17, p. 14.

[17]      Mr Phillip Barresi, Chief Executive Officer, EUAA, Proof Committee Hansard, 18 February 2015, p. 20.

[18]      Public Interest Advocacy Centre, Submission 18, pp. 17–18.

[19]      Although the AER added that, following efforts to better engage consumers, it is seeing greater involvement in its consultation processes from a wider variety of interested parties. AER, Answers to questions on notice 8, received 10 April 2015, p. 9.

[20]      AER, Answers to questions on notice 8, received 10 April 2015, p. 9.

[21]      EUAA, Submission 17, p. 14; Major Energy Users, Submission 7, p. 3.

[22]      Agriculture Industries Electricity Taskforce, Submission 21, p. 5.

[23]      Public Interest Advocacy Centre, Submission 18, p. 14.

[24]      Mr Bruce Mountain, Submission 19, p. 25.

[25]      Mr Bruce Mountain, Submission 19, p. 25.

[26]      Public Interest Advocacy Centre, Submission 18, pp. 16–17.

[27]      Mr Oliver Derum, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 13.

[28]      Dr Gabrielle Kuiper, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 13.

[29]      Mr Phillip Barresi, Chief Executive Officer, Energy Users Association of Australia (EUAA), Proof Committee Hansard, 18 February 2015, p. 22.

[30]      Essential Energy, Regulatory proposal 2014–19, May 2014, p. 16; cited in New South Wales Irrigators' Council (NSWIC), Submission 5, p. 4.

[31]      NSWIC, Submission 5, p. 4.

[32]      Mr Michael Murray, Policy Manager, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 22.

[33]      Mrs Angela Bradburn, Policy Officer, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 22.

[34]      Mr Michael Murray, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 22.

[35]      Ms Stefanie Schulte, Policy Manager, NSWIC, Proof Committee Hansard, 17 February 2015, p. 22.

[36]      Veto Energex Towers Organisation (VETO), Submission 55, p. 2.

[37]      Mr Ray Mostogl, General Manager, Bell Bay Aluminium, Proof Committee Hansard, 17 February 2015, p. 37.

[38]      For example, see Senate Select Committee on Electricity Prices, Reducing energy bills and improving efficiency, November 2012, pp. 134–35.

[39]      Australian Energy Regulator (AER), 'Consumer challenge panel', www.aer.gov.au/about-us/‌consumer-challenge-panel (accessed 20 March 2015).

[40]      Ms Michelle Groves, Chief Executive Officer, AER, Proof Committee Hansard, 18 February 2015, pp. 2, 3.

[41]      Mr Warren Males, Head, Economics, Canegrowers; and Chairman, Sugarcane Gene Technology Group, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, pp. 25–26.

[42]      Mr Phillip Barresi, EUAA, Proof Committee Hansard, 18 February 2015, p. 22.

[43]      Dr Gabrielle Kuiper, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 14.

[44]      Mr Paul Smith, Chief Executive, Australian Energy Market Commission (AEMC), Proof Committee Hansard, 17 February 2015, p. 4.

[45]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 5.

[46]      Consumer Action Law Centre, Submission 20, p. 6.

[47]      Administrative Review Council, What decisions should be subject to merit review?, 1999, www.arc.ag.gov.au/Publications/Reports/Pages/Downloads/Whatdecisionsshouldbesubjecttomeritreview1999.aspx (accessed 24 March 2015).

[48]      National Electricity Law, s. 71C(1).

[49]      Further, if deciding to vary a decision, the Tribunal must be satisfied 'that to do so will not require the Tribunal to undertake an assessment of such complexity that the preferable course of action would be to set aside the reviewable regulatory decision and remit the matter to the AER to make the decision again'. National Electricity Law, ss. 71C(1a), (2)(d).

[50]      National Electricity Law, s. 71C(2).

[51]      National Electricity Law, s. 71YA.

[52]      Energy Networks Association, Submission 31, p. 14.

[53]      Energex, Submission 14, p. 14.

[54]      This has been recognised by the Standing Council on Energy and Resources (SCER), the precursor to the COAG Energy Council. See SCER, Statement of policy intent: Review framework for the electricity and gas regulatory decision making, December 2012, https://scer.govspace.gov.au/files/2012/12/LMR-Statement-of-Policy-Intent-December-2012.pdf (accessed 25 March 2015).

[55]      G Yarrow, M Egan, J Tamblyn, Review of the limited merits review regime: Stage one report, June 2012, www.scer.gov.au/files/2012/06/Stage-One-Report-to-SCER-29-June2.pdf,
pp. 18–21; cited in Consumer Action Law Centre, Submission 20, p. 3. See also Public Interest Advocacy Centre, Submission 18, pp. 10–11.

[56]      Public Interest Advocacy Centre, Submission 18, pp. 10–11.

[57]      Consumer Action Law Centre, Submission 20, p. 3.

[58]      Consumer Action Law Centre, Submission 20, p. 3.

[59]      EUAA, Submission 17, p. 18.

[60]      EUAA, Submission 17, p. 18.

[61]      EUAA, Submission 17, p. 18.

[62]      Mr Mark Grenning, Board Director, EUAA, Proof Committee Hansard, 18 February 2015, p. 20.

[63]      Major Energy Users, Submission 7, p. 3.

[64]      Dr John Tamblyn and the Hon Michael Egan were the other members of the expert panel.

[65]      Public Interest Advocacy Centre, Submission 18, p. 11.

[66]      Public Interest Advocacy Centre, Submission 18, p. 11.

[67]      Consumer Action Law Centre, Submission 20, p. 5.

[68]      EUAA, Submission 17, p. 18; Mr Bruce Mountain, Submission 19, p. 16.

Chapter 7 - The rule-making process and institutional framework

[1]        Australian Energy Market Commission (AEMC), Submission 41, p. 1.

[2]        Mr Paul Smith, Chief Executive, AEMC, Proof Committee Hansard, 17 February 2015, p. 3.

[3]        Total Environment Centre, Submission 43, p. 3; AEMC, 'Rule changes: Demand Management Incentive Scheme', www.aemc.gov.au/Rule-Changes/Demand-Management-Embedded-Generation-Connection-I (accessed 16 March 2015).

[4]        Total Environment Centre, Submission 43, p. 3.

[5]        Mr Oliver Derum, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 16.

[6]        Dr Gabrielle Kuiper, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, pp. 15–16.

[7]        Mr Gerard Brody, Chief Executive Officer, Consumer Action Law Centre, Proof Committee Hansard, 18 February 2015, p. 57.

[8]        Dr Gabrielle Kuiper, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 16.

[9]        Mr Oliver Derum, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 16.

[10]      Mr Gerard Brody, Consumer Action Law Centre, Proof Committee Hansard, 18 February 2015, p. 57.

[11]      Mr Brian Green, Board Chairman, Energy Users Association of Australia (EUAA), Proof Committee Hansard, 18 February 2015, p. 21.

[12]      Mr Brian Green, EUAA, Proof Committee Hansard, 18 February 2015, p. 21.

[13]      Total Environment Centre, Submission 43, p. 2.

[14]      Mr Bruce Mountain, Submission 19, pp. 23–24.

[15]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 65.

[16]      Mr Paul Smith, Chief Executive, AEMC, Proof Committee Hansard, 17 February 2015, p. 6.

[17]      Mr Bruce Mountain, Submission 19, p. 23.

[18]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 62.

[19]      Ms Michelle Groves, Chief Executive Officer, Australian Energy Regulator (AER), Proof Committee Hansard, 18 February 2015, p. 7.

[20]      UnitingCare Australia, Submission 60, p. 1.

[21]      Mr Paul Smith, Chief Executive, AEMC, Proof Committee Hansard, 17 February 2015, p. 6.

[22]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 6.

[23]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 6.

[24]      Mr Richard Owens, Senior Director, Transmission and Distribution Networks, AEMC, Proof Committee Hansard, 17 February 2015, p. 10.

[25]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 62.

[26]      Mr Bruce Mountain, Proof Committee Hansard, 18 February 2015, p. 62. A similar point was made in the Agriculture Industries Electricity Taskforce' submission. See Submission 20, pp. 17–18.

[27]      Major Energy Users, Submission 7, p. 2.

[28]      Consumer Action Law Centre, Submission 20, p. 6.

[29]      Agriculture Industries Electricity Taskforce, Submission 20, pp. 17–18.

[30]      Cotton Australia, Submission 3, p. 3.

[31]      Ms Cally Wilson, Proof Committee Hansard, 24 March 2015, p. 3.

[32]      Ms Michelle Groves, AER, Proof Committee Hansard, 18 February 2015, p. 4.

[33]      Ms Michelle Groves, AER, Proof Committee Hansard, 18 February 2015, p. 2.

[34]      Ms Michelle Groves, AER, Proof Committee Hansard, 18 February 2015, p. 4.

[35]      Total Environment Centre, Submission 43, p. 3.

[36]      Energy Users Association of Australia, Submission 17, p. 19.

[37]      Mr Robert MacKenzie, Director, Canegrowers Isis, Proof Committee Hansard, 16 February 2015, p. 27.

[38]      Mr Sebastian Roberts, General Manager, Networks, AER, Proof Committee Hansard, 18 February 2015, p. 9.

[39]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 7.

[40]      The AER's statement of intent may be viewed here: www.treasury.gov.au/~/media/Treasury/‌Policy%20Topics/Public%20Policy%20and%20Government/Statements%20of%20Intent/Downloads/PDF/AER_Statement_of_Intent.ashx.

[41]      AER, Statement of intent 2014–15, www.aer.gov.au/sites/default/files/AER%20Statement%‌20of%20Intent%20in%20response%20to%20the%20COAG%20Energy%20Council%27s%20Statement%20of%20Expectations_0.pdf (accessed 31 March 2015).

[42]      Mr Gerard Brody, Consumer Action Law Centre, Proof Committee Hansard, 18 February 2015, p. 57.

[43]      The Australian Government issues independent statutory authorities with public statements of expectations, which the authority responds to via a statement of intent.

[44]      Financial System Inquiry, Final report, November 2014, pp. 236, 239.

[45]      Department of Industry, Submission 34, p. 17; COAG Energy Council, Review of governance arrangements for Australian energy markets: Terms of reference, https://scer.govspace.gov.au/‌files/2014/12/Governance-Review-terms-of-reference-FINAL1.pdf (accessed 16 March 2015).

[46]      EUAA, Submission 17, p. 19.

[47]      Mr Bruce Mountain, Submission 19, p. 23.

[48]      Consumer Action Law Centre, Submission 20, p. 7.

[49]      Total Environment Centre, Submission 43, p. 3.

[50]      Ms Stefanie Schulte, Policy Manager, New South Wales Irrigators' Council, Proof Committee Hansard, 17 February 2015, p. 25.

[51]      Dr Gabrielle Kuiper, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 16.

[52]      Mr Bruce Mountain, Submission 19, pp. 23–24.

[53]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 11.

[54]      Mr Paul Smith, AEMC, Proof Committee Hansard, 17 February 2015, p. 10.

[55]      Ms Michelle Groves, AER, Proof Committee Hansard, 18 February 2015, p. 7.

[56]      Productivity Commission (PC), Electricity networks regulatory frameworks, vo1. 2, April 2013, p. 780.

[57]      PC, Electricity networks regulatory frameworks, vo1. 2, p. 780.

[58]      PC, Electricity networks regulatory frameworks, vo1. 2, p. 784.

[59]      Competition Policy Review, Final report, March 2015, p. 80.

[60]      Consumer Action Law Centre, Submission 20, p. 6.

[61]      Consumer Action Law Centre, Submission 20, p. 7.

Chapter 8 - Demand-side participation and response to technological and market changes

[1]        Department of Industry, Submission 34, pp. 6–7.

[2]        Mr Matthew Warren, Chief Executive Officer, Energy Supply Association of Australia (ESAA), Proof Committee Hansard, 18 February 2015, p. 25.

[3]        Mr Alistair Parker, General Manager Asset Management, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 36.

[4]        Mr Terence Effeney, Chief Executive Officer, Energex, Proof Committee Hansard, 16 February 2015, p. 9.

[5]        Australian Energy Market Commission (AEMC), 'Fact sheet: Distributed generation', www.aemc.gov.au/getattachment/9aac3077-50e9-41a6-bff6-09bc30a00182/Distributed-generation.aspx (accessed 27 March 2015).

[6]        Cogeneration and trigeneration involve the generation of electricity and the use of the other energy produced as a result of the generation process. Cogeneration involves the generation of electricity and the use of the heat that is produced. Trigeneration also includes the production of cooling. In Australia, the cogeneration or trigeneration facilities in buildings generally use either natural gas or a form of biomass, such as sugar cane waste. Clean Energy Council, 'Cogeneration and trigeneration', www.cleanenergycouncil.org.au/‌technologies/cogeneration-trigeneration.html (accessed 27 March 2015).

[7]        AEMC, 'Fact sheet: Distributed generation'.

[8]        EnergyAustralia, Submission 23, pp. 2–3.

[9]        Mr Stuart Traill, Queensland State Organiser, Electrical Trades Union, Proof Committee Hansard, 16 February 2015, p. 44.

[10]      Mr Lance McCallum, National Policy Officer, Electrical Trades Union, Proof Committee Hansard, 16 February 2015, p. 44.

[11]      Mr Gavin McMahon, Chief Executive Officer, Central Irrigation Trust, Proof Committee Hansard, 19 February 2015, p. 7.

[12]      Ergon Energy, Submission 24, p. 12.

[13]      Mr Alistair Parker, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 39.

[14]      Mr Alistair Parker, AusNet Services, Proof Committee Hansard, 18 February 2015, p. 39.

[15]      Mr Geoff Bragg, New South Wales Chairman, Solar Energy Industries Association, Proof Committee Hansard, 17 February 2015, p. 33.

[16]      Mr Geoff Bragg, Solar Energy Industries Association, Proof Committee Hansard, 17 February 2015, p. 32.

[17]      Mr Geoff Bragg, Solar Energy Industries Association, Proof Committee Hansard, 17 February 2015, p. 33.

[18]      City of Sydney, Submission 67, p. 5.

[19]      City of Sydney, Submission 67, p. 5.

[20]      Submission 65.1, p. 1.

[21]      Submission 65.1, p. 94.

[22]      Mr Alan Wilson, correspondence published in Submission 65, p. 229.

[23]      City of Sydney, Submission 67, p. 7.

[24]      ESAA, Submission 25, p. 3.

[25]      Mr Matthew Warren, Chief Executive Officer, ESAA, Proof Committee Hansard, 18 February 2015, p. 30.

[26]      Energy Networks Association (ENA), Submission 31, p. 11. The cross-subsidy estimates were based on studies by the AEMC and Oakley Greenwood.

[27]      New South Wales Irrigators' Council, Submission 5, p. 11.

[28]      Department of Industry, Submission 34, p. 16.

[29]      Department of Industry, Submission 34, p. 16.

[30]      The Solar Energy Industries Association provided two recent examples where commercial customers who had installed a solar system had to wait over four and five months respectively for the metering upgrade. See Solar Energy Industries Association NSW, Submission 15, p. 3.

[31]      Solar Energy Industries Association NSW, Submission 15, p. 3.

[32]      Ms Claire O'Rourke, National Director, Solar Citizens, Proof Committee Hansard, 17 February 2015, p. 62.

[33]      Mr Geoff Bragg, Solar Energy Industries Association, Proof Committee Hansard, 17 February 2015, p. 30.

[34]      Department of Industry, Submission 34, p. 16.

[35]      AEMC, Submission 41, p. 10.

[36]      City of Sydney, Submission 67, p. 7.

[37]      City of Sydney, Submission 67, p. 7.

[38]      City of Sydney, Submission 67, p. 7.

[39]      Public Interest Advocacy Centre, Submission 18, p. 19.

[40]      Direct load control technologies allow remote control of electrical appliances in a home (or a business) to manage electricity demand. A common form is where a consumer agrees (as a result of taking up a product offer from a retailer or distribution business) for remote cycling or 'on-off' switching of certain appliances/equipment for short periods of time. Such technologies have been used for household hot water systems since the 1960s. AEMC, Power of choice review—giving consumers options in the way they use electricity: Final Report, November 2012, www.aemc.gov.au/Media/docs/Final-report-1b158644-c634-48bf-bb3a-e3f204beda30-0.pdf (accessed 30 March 2015), pp. 74–75.

[41]      Queensland Consumers' Association, Submission 47, p. 1.

[42]      The Centre explained that in other jurisdictions demand management can be used to reduce up to ten per cent of peak demand, however, in Australia the figure is around one per cent. Total Environment Centre, Submission 43, p. 4.

[43]      Total Environment Centre, Submission 43, p. 4.

[44]      ENA, Submission 31, p. 16.

[45]      AEMC, Submission 41, p. 3.

[46]      AEMC, Power of choice review—giving consumers options in the way they use electricity: Final Report, November 2012, www.aemc.gov.au/Media/docs/Final-report-1b158644-c634-48bf-bb3a-e3f204beda30-0.pdf (accessed 30 March 2015), p. 205.

[47]      AEMC, Power of choice review: Final Report, pp. 205–06.

[48]      The consultation follows rule change requests based on the AEMC report that were lodged by the Total Environment Centre (November 2013) and the COAG Energy Council (December 2013). AEMC, 'Rule changes: Demand Management Incentive Scheme', www.aemc.gov.au/Rule-Changes/Demand-Management-Embedded-Generation-Connection-I (accessed 30 March 2015).

[49]      Ergon Energy, Submission 24, p. 12; Energy Networks Association, Submission 31, p. 16.

[50]      Dr Gabrielle Kuiper, Senior Policy Officer, Energy and Water Consumers' Advocacy Program, Public Interest Advocacy Centre, Proof Committee Hansard, 17 February 2015, p. 16.

[51]      Total Environment Centre, Submission 43, p. 5.

[52]      Mr Chris Pattas, General Manager, Networks, Australian Energy Regulator, Proof Committee Hansard, 18 February 2015, p. 11.

[53]      Total Environment Centre, Submission 43, p. 4.

[54]      Mr Ian McLeod, Chief Executive, Ergon Energy, Proof Committee Hansard, 16 February 2015, pp. 12–13.

[55]      Agriculture Industries Electricity Taskforce, Submission 21, p. 22.

[56]      Agriculture Industries Electricity Taskforce, Submission 21, p. 22.

[57]      Mr Michael Murray, Policy Manager, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 20.

[58]      Mr Michael Murray, Cotton Australia, Proof Committee Hansard, 17 February 2015, p. 20.

[59]      Ms Sharon Denny, Senior Executive Officer, Government and Business Development, Australian Sugar Milling Council, Proof Committee Hansard, 16 February 2015, p. 21.

[60]      Mr Warren Males, Head, Economics, Canegrowers; and Chairman, Sugarcane Gene Technology Group, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, p. 22.

[61]      Department of Industry, Submission 34, pp. 6–7.

[62]      Energy Users Association of Australia (EUAA), Submission 17, p. 16.

[63]      ENA, Submission 31, p. 11. See also Ergon Energy, Submission 24, p. 12.

[64]      ENA, Submission 31, p. 11.

[65]      ESAA, Submission 25, p. 3.

[66]      Smart meters are intended to allow customers to better understand and manage their electricity usage. Smart meters are the standard meter in Victoria, but are not common elsewhere in Australia. The ESAA noted that some of the pricing structures for reflecting the cost consumers impose on the network would require smart meters (ESAA, Submission 25, p. 3). The rollout of smart meters has not been without controversy, with some people concerned about their cost, safety and concern about adverse health effects (see Stop Smart Meters Australia, Submission 52).

[67]      Mr Harry Creamer, Submission 29, p. 3.

[68]      City of Sydney, Submission 67, p. 6.

[69]      Agriculture Industries Electricity Taskforce, Submission 21, p. 22.

[70]      Consumer Action Law Centre, Submission 20, p. 7.

[71]      Total Environment Centre, Submission 43, p. 4.

[72]      Mr Mark Grenning, EUAA, Proof Committee Hansard, 18 February 2015, p. 17.

Dissenting Report from the Australian Greens

[1]        Phillip Coorey and Anna Patty, 'Gillard threatens to use shock therapy on electricity prices', Sydney Morning Herald, 8 August 2012.

[2]        See recent reports by the NSW Independent Pricing and Regulatory Tribunal, Victoria's Essential Services Commission and the South Australian Council of Social Service.

[3]        Mr Bruce Mountain, Submission 19, p. 10.

[4]        Mr Dale Holiss, Bundaberg Regional Irrigators Group, Proof Committee Hansard, 16 February 2015, pp. 37–38.

[5]        Mr Warren, Head, Economics, Canegrowers; and Chairman, Sugarcane Gene Technology Group, Australian Sugar Industry Alliance, Proof Committee Hansard, 16 February 2015, p. 26.

[6]        Sourced from the AER's regulatory information notices. $29.9 billion was capital expenditure, $14.8 billion was operational.