Terms of reference have been released for an inquiry by the Productivity Commission into aspects of national electricity network regulation, as foreshadowed at the time of the release of the Clean Energy Future package.


The Minister for Resources and Energy, Martin Ferguson, chaired a meeting last week of the Ministerial Standing Council on Energy and Resources, where State and Territory Energy Ministers discussed the importance of regulatory frameworks and were provided with the terms of reference for the Productivity Commission inquiry.


“Australia’s energy sector is facing a number of challenges in the years ahead. In particular, significant investment will be required in our electricity networks to replace and upgrade ageing assets to meet growing levels of demand reliably and facilitate a transition towards clean energy technologies,” Minister Ferguson said.


“The cost of upgrading and building new network infrastructure has flowed through to increases in electricity prices for consumers in recent years, and these price rises reflect the costs associated with maintaining reliability and meeting demand growth.


“Critical to delivering our energy needs is ensuring that our network regulatory frameworks are delivering efficient and reliable outcomes for consumers.


“Recognising the need to periodically test regulatory settings, this inquiry provides an opportunity to ensure Australia's network regulatory regime is delivering maximum efficiency in the long-term interests of consumers.”


The inquiry by the Productivity Commission will test whether there are any barriers in the regulatory framework to the greater use of productivity benchmarking by energy networks, which could deliver more efficient outcomes to consumers. It will also examine if efficient levels of transmission interconnectors are being delivered to support the efficient operation of the National Electricity Market.


This work is intended to build on the work underway on efficient network regulation and transmission frameworks by the Australian Energy Regulator and the Australian Energy Market Commission.


The Productivity Commission is expected to commence the inquiry in January 2012 and will be required to deliver its final report to the Government within 15 months. As part of this process, a draft report will be released for consultation and public hearings will be conducted.


The Terms of Reference at www.pc.gov.au