In March the Australian Energy Markets Commission (AEMC) released a directions paper on rule improvements to ensure that monopoly energy networks charge no more than necessary for electricity and gas services. The directions paper provides the AEMC's initial response to rule change requests from the Australian Energy Regulator (AER) and a coalition of large energy-using companies, in relation to three areas: capital and operating expenditure; rate of return; and regulatory determination process. The AEMC Power of Choice review released a directions paper looking at possible changes to the National Electricity Market (NEM) to help consumers better manage their energy consumption. The AEMC Reliability Panel also published the final report of its latest annual review which examines the performance of the NEM in the 2010-2011 financial year. The Panel's findings include observations and commentary on various aspects of the power system performance. The report also consolidates key market information relating to the reliability, security and safety of the NEM.  

In February the AEMC published the Schedule of Reliability Settings (indexation of the MPC and CPT for 2012-2013). The National Electricity Rules require that the MPC and CPT are subject to indexation each financial year, and set out the formulae for the AEMC to apply in calculating their value. Earlier in the month, the AEMC published a paper by The Brattle Group on approaches to delivering electricity distribution reliability outcomes across Australia and internationally. Finally, the AER issued the 2009-10 electricity performance report for transmission network service providers (TNSPs) in the NEM. The performance report provides information on the financial performance and reliability of transmission networks managed by the TNSPs and how they are performing in comparison to performance targets. The results show that businesses are continuing to deliver higher service standards and meet demand through improving operations and investing in their networks.

In January the Australian Competition Tribunal (Tribunal) published decisions in several merits reviews that were heard in 2011.  The decisions related to applications for review of revenue and pricing determinations made by the AER in respect of the Victorian electricity distribution businesses and the Queensland and South Australian gas distribution businesses.  There were a number of issues before the Tribunal in each of those reviews, including the rate of return, expenditure forecasts and the implementation of efficiency schemes.  On a number of these issues the Tribunal found error in the AER's decision, and decided to either vary the decision or remit it to the AER for further consideration.

In December, the AEMC received submissions to its initial consultation on the proposed changes to the National Electricity Rules and National Gas Rules.  A wide-ranging proposal for changes to the rules was submitted by the AER in September 2011, and proposals have also been submitted subsequently by user groups.  The AER and industry rule change proposals reflect a view that the current rules are to some extent biased in favour of network businesses and offer the AER insufficient discretion in performing its regulatory functions.  The AEMC plans to issue a Directions Paper on the proposed changes to the rules in late February, at which point it will launch a second round of consultation.