Submission: Australian Energy Market Commission Consultation Paper – Electricity Network Regulation Review – Package 2

24 September 2026 

To: The Australian Energy Market Commission (AEMC)
Re: Consultation Paper – Electricity Network Regulation Review – Package 2 

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the AEMC Consultation Paper – Electricity Network Regulation Review – Package 2.

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 welcomes the AEMC’s Package 2 consultation paper and the review of the economic regulation of electricity networks, which is much needed. IEEFA agrees with the AEMC’s approach to “not rule out ambitious and substantive reform”. However, we note that the AEMC's starting point “to consider changes within the existing ex ante incentive-based regulatory framework” could miss key opportunities to improve the economic efficiency of network services delivery. There is evidence that the current building block, propose-respond framework has not delivered efficient network costs for consumers. We recommend the AEMC broaden its scope to consider a wide range of alternatives for reform of the regulatory framework, not only refinements within it. Given this, IEEFA’s submission makes three key points:

1. The existing framework is not delivering. Key issues within the regulatory regime include $15 billion in supernormal profits from 2014–2023, an ineffective demand management incentive scheme, a structural capex bias, and falling network utilisation alongside rising Regulated Asset Bases (RABs). In IEEFA’s view, these are major problems that may not be solvable by adjusting incentive schemes and making changes to the current framework.
2. The AEMC should consider a broad range of reform options, including options to address excess returns and improve efficiency, to level the playing field for non-network solutions, and to protect consumers from over-investment. 
3. The AEMC should take a holistic, evidence driven, future-focused approach to the review. IEEFA recommends international regulatory frameworks be studied and compared to the NEM. Significant evidence should also be gathered on the historical performance of the regulatory regime. Further, the processes from Packages 1 and 2 should converge as service classification decisions cannot be separated from considerations of underlying incentives and efficiency. The review should also be future focused to enable the energy system to innovate and decarbonise over the next 25 years or so. 

IEEFA thanks the AEMC for the opportunity to provide comments, and looks forward to the next stages of the electricity network regulation review.

Kind regards,

Johanna Bowyer, Lead Analyst, Australian Electricity