Draft Ring-Fencing Guideline Version 3

PIAC responded to the Australian Energy Regulator’s (AER) draft Ring-Fencing Guideline (the Guideline) concerning Distribution Network Service Providers (DNSP). Ring-fencing aims to prevent regulated businesses, such as DNSPs, from:

• discriminating in favour of their related parties to disadvantage competitors operating in these markets
• using revenue earned from regulated services to cross-subsidise contestable services

PIAC supports many aspects of the Guideline and consider the AER has largely found an appropriate balance between protecting consumers against the potential harms of regulated businesses operating in contestable spaces, while still ensuring the timely and efficient rollout of critical new technologies and services.

However, PIAC does not support the Guideline requiring DNSPs to have a waiver to provide excess battery capacity to third-parties. The need for ring-fencing waivers adds time, cost and uncertainty to community scale storage projects, damaging their investment case.  PIAC is concerned in needing a waiver to lease excess battery capacity, the ring-fencing framework will unnecessarily restrict the prudent and efficient investment in community storage. 

PIAC also highlights a number of concerns around the AER’s proposals for DNSP-led SAPS, including a need for higher revenue caps for Category 3 DNSPs, and a need for an exemption for certain circumstances.