Submission: AEMC Pricing Review Consultation

12 February 2025

To: Australian Energy Market Commission
Re: Pricing Review

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the Draft report - The pricing review – Electricity pricing for a consumer-driven future.

IEEFA is an independent energy finance think tank that examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

IEEFA believes there could be merit in further exploration of recommendations 1, 2 and 4. However recommendation 5, which proposes a move to predominantly fixed network charges, has a number of issues and should be reconsidered. Higher fixed network charges could advantage households that use more energy, and disadvantage households that use less. It could also reduce incentives for energy efficiency and peak demand reduction, potentially leading to higher than necessary network costs. The additional dynamic charge proposed by the AEMC appears to have a number of challenges that could prevent it from containing peak demand rises. 

IEEFA recommends a first-principles review of the economic regulation of electricity networks be undertaken prior to adjusting network tariffs to understand the full picture of the costs, risks and benefits associated with network assets and how they are sized and allocated across all stakeholders: generators, network businesses, households, businesses and large industrial loads. 

Please find detailed comments on the various recommendations in the following pages.

Please do not hesitate to get in touch with any questions on any part of this submission at [email protected].

Kind regards,
Johanna Bowyer – Lead Analyst, Australian Electricity, IEEFA
Jay Gordon – Energy Finance Analyst, Australian Electricity, IEEFA