The Australian Energy Regulator (AER) regulates energy markets and networks under national energy market legislation and rules. Its functions, which mostly relate to energy markets in eastern and southern Australia, include:
- setting the prices charged for using energy networks (electricity poles and wires and gas pipelines) to transport energy to customers
- monitoring wholesale electricity and gas markets to ensure suppliers comply with the legislation and rules, and taking enforcement action where necessary
- regulating retail energy markets in the ACT, South Australia, Tasmania (electricity only) and New South Wales. This includes enforcing compliance with retail legislation; authorising retailers to sell energy; approving retailers’ policies for dealing with customers in hardship; administering a national retailer of last resort scheme; reporting on retailer performance, educating consumers and small businesses about their energy rights and managing the energy price comparison website – Energy Made Easy (link is external).
- publishing information on energy markets, including the annual State of the energy market report and more detailed market and compliance reporting, to assist participants and the wider community
- assisting the ACCC with energy-related issues arising under the Competition and Consumer Act, including enforcement, mergers and authorisations.
Governance and decision making
The AER operates under the Competition and Consumer Act 2010(the Act).
The AER Board is an independent entity, comprising three members who are statutory appointments. Ms Paula Conboy is the full-time Chair. The Act provides that one member of the AER must be a commissioner of the ACCC, appointed by the Commonwealth. Ms Cristina Cifuentes was appointed in this role from 30 May 2013. Mr Jim Cox commenced on 9 September 2013 as the acting state/territory appointed member of the AER Board for a 12 month term. Mr Cox was subsequently appointed as full-time Board member for a three year term from 26 June 2014.
The chair must preside at all AER Board meetings and a quorum requires both the chair and the member appointed by the Commonwealth. Questions arising at a meeting must be determined by unanimous vote of the members present and voting.
The AER may make decisions in relation to its functions under the National Electricity Law, National Gas Law and National Energy Retail Law. It can seek an order from the Federal Court that a person is in breach of a relevant energy law.
Decisions of the AER are subject to judicial review by the Federal Court.
The following operational information contains further detail on the work of the AER.
The Australian Energy Market Agreement (link is external) (as amended December 2013) sets out the legislative and regulatory framework for Australia’s energy markets. It provides for national legislation that is implemented in each participating state and territory.
South Australia is the lead legislator. Other jurisdictions introduce application legislation to give effect to the South Australian legislation.
The AER monitors, investigates and enforces compliance with the national energy framework, comprising the National Electricity Law and National Electricity Rules, and the National Gas Law and National Gas Rules . The AER’s core functions and powers in relation to monitoring, investigation and enforcement are set out in section 15 of the Electricity Law and section 27 of the Gas Law.
Our role in electricity networks and gas pipelines
The high cost of energy networks can make it efficient to have a single supplier of network services in a particular geographic area, leading to a natural monopoly industry structure.
The networks are regulated to manage the risk of monopoly pricing, where a business can charge higher prices or provide poorer services compared with the situation in a competitive market.
The AER is responsible for the economic regulation of electricity networks in the National Electricity Market (covering eastern and southern Australia) and gas pipelines in jurisdictions other than Western Australia and Tasmania. The AER is committed to applying consistent and transparent regulatory approaches to encourage the businesses to undertake efficient investment and provide reliable services to consumers.
Determinations and Access Arrangements
The AER is responsible for the economic regulation of electricity transmission and distribution networks and gas transmission and distribution pipelines in all Australian jurisdictions except Western Australia. Transmission refers to the transport of energy (electricity and gas) from the production source (generators or gas fields) to large end users and distribution businesses. Energy is transported through transmission networks (wires for electricity and pipelines for gas) that stretch across Australia. Distribution pipelines and electricity networks link the transmission systems to end users.
Electricity generated in the National Electricity Market (NEM) is sold in a wholesale spot market covering Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT. There is also a wholesale spot market for gas in Victoria and a short term trading market for gas in Sydney, Adelaide and Brisbane. The AER’s State of the energy market report outlines the operation of these markets.
AER compliance and enforcement - Statement of approach
The Australian Energy Regulator (AER) is Australia’s national energy market regulator. Among other functions, the AER is responsible for monitoring, investigating and enforcing compliance with obligations under the National Electricity Law, National Gas Law, National Energy Retail Law and the respective Rules and Regulations (national energy laws).
This Statement of Approach explains our approach to monitoring compliance, how we respond to potential breaches, and the factors we may have regard to when deciding whether to take enforcement action.
Retail energy markets are the final link in the energy supply chain. Energy retailers buy electricity and gas in wholesale markets, package it with transportation services and sell it to customers. This is typically the main interface between the electricity and gas industry, and customers such as households and small businesses.
Retail market compliance procedures and guidelines
Under the Retail Law, the AER is responsible for monitoring, investigating, enforcing and reporting on compliance by regulated entities with obligations under the Retail Law and Rules. To support these functions, the Retail Law provides wide ranging information gathering powers and requires the AER to produce Compliance procedures and guidelines.
On 17 September 2014 the AER released revised guidelines which refine the reporting framework and improve the quality of reports submitted by regulated entities.
Retail markets enforcement matters
The Retail Law provides the AER with a range of possible enforcement options when breaches of obligations under the Retail Law and Rules occur.
By taking enforcement action the AER seeks to build compliance with obligations under the Retail Law and Rules for the benefit of customers by:
- stopping the breach and the behaviour that constituted the breach
- correcting the damage that the breach has caused
- preventing the same behaviour from reoccurring, and deterring other regulated entities from repeating it, and
- clarifying the operation of the Retail Law, Rules and Regulations.
In determining an appropriate enforcement response, the AER will consider a range of factors. Each case will be assessed on its merits, with regard to all relevant circumstances.
Energy retailers' customer hardship policies
Under the Retail Law, authorised retailers must develop, maintain and implement customer hardship policies for their residential customers. The purpose of a retailer’s customer hardship policy is prescribed in the Retail Law—to identify customers experiencing payment difficulties due to hardship and to assist those customers to better manage their energy bills on an ongoing basis.