Michelle Groves, CEO, AER presentation to the inaugural Women in Electricity Forum, at Deloitte Melbourne, 8 August 2013

1. Women in Energy Networking
Michelle Groves
CEO, Australian Energy Regulator

2. The AER’s role
Wholesale gas &
electricity
markets
Transmission
networks &
pipelines
Distribution
Networks for
gas/electricity
Retail
We monitor
wholesale markets
and enforce rules
We regulate
revenues of
transmission
businesses
We regulate
revenues of
distribution
businesses
We regulate non-
price retail
activities in some
jurisdictions

3. Recent price increases
• Rising network costs main contributor to price
increases
• Drivers include the need to replace ageing
equipment, meet peak demand and higher
finance costs
80
100
120
140
160
180
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Index
1991
=
100
Household electricity cost across the NEM

4. New regulatory framework
• New framework allows for a balanced
assessment of the need for the ongoing
investment required for continued reliable
energy supply, with the need to minimise
costs to consumers.
• AER has initiated Better Regulation
Program to implement these reforms

5. Rate of return
• The focus is on providing an overall rate of
return that more accurately reflects actual
financing practices
• The new rules allow for a common rate of
return framework in which a broader range
of materials can be considered

6. Expenditure assessment framework
• More holistic assessment of required
expenditure
• Range of tools, including benchmarking,
for assessment of efficient expenditure
needs
• Processes for standardisation and
analysis under development

7. Efficiency incentives
• New rules provide stronger incentives for
efficient investment
– Capex sharing scheme i.e
• Benefits of underspend shared with consumers
• Costs of over-runs shared with consumers;
• Discussion over whether same sharing ratios
would apply
– Potential for ex post reviews and exclusion of
inefficient capex

8. Consumer engagement
• Requirement for network businesses to
consult with consumers in the
development of regulatory proposal
• Range of engagement initiatives:
– Consumer Reference Group
– Consumer Challenge Panel
– National Energy Consumer Advocacy Body

9. Putting the consumer at the centre of
the market
• The vision must be for a market which
operates to serve consumers.
• This vision requires consumers to have:
– Better information – consumption data
– Better incentives – more efficient pricing
– Better technology – to help understand
consumption patterns.
• ‘Power of Choice’ implementation critical

10. Women in Energy Networking
Michelle Groves
CEO, Australian Energy Regulator