The Australian Energy Regulator (AER), which began operation in 2005, is an independent statutory authority and part of the Australian Competition and Consumer Commission (ACCC). It regulates electricity networks and gas pipelines in southern and eastern Australia (and gas pipelines in the Northern Territory), enforces energy market law and monitors wholesale energy markets. The AER will take on additional roles in retail energy markets under new legislation expected to be introduced in 2010. The AER also assists the ACCC on energy competition matters such as merger reviews and energy authorisations. One of our key roles under the national energy framework is to approve the revenues and prices that electricity network businesses may earn from the services of transporting electricity to customers. We undertake a similar role for gas pipelines, but under a framework that derives prices for reference services. The AER has taken the basis of projected efficient capital and operating expenditure needed to meet expected demand and licence conditions. We also assess an appropriate benchmark rate of return. While our role is to approve what is needed for efficient service delivery, network businesses have significant discretion as to how they spend their allowances in response to changing circumstances and priorities.
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