Better incentives, better outcomes

This submission responds to the Australian Energy Regulator’s (AER) Expenditure Incentives Guidelines Issues Paper, undertaken as part of The Better Regulation project. The Expenditure Incentives Guideline (the Guideline) is an integral part of the reform of network regulation, which is closely linked to the Better Regulation work-streams Rate of Return and Expenditure Forecast Assessment Guidelines.

In this submission PIAC argues that the lack of a strong capital expenditure sharing scheme (CESS) has been a major gap in the efficacy of the overall economic regulatory package to drive efficiency improvements in the provision of transmission and distribution network services. Furthermore, PIAC recognises in its submission the complexity of implementing and transitioning to an effective CESS but considers it an important matter for the future integrity of the regulatory regime.

The submission maintains that it is crucial the AER consider the long-term interests of consumers throughout the development of the Guideline. The submission concludes by stating that bringing down costs for consumers will require correctly targeting the continuity of incentives, including incentives that place a greater penalty on network service providers than consumers for overspending, and an efficient and effective operational expenditure benefit sharing scheme.