Submission: Australian Energy Market Commission – Electricity Pricing Review

10 July 2025

To: Australian Energy Market Commission
Re: Draft 2025 Electricity Network Options Report

Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input to the Australian Energy Market Commission (AEMC)’s Pricing Review Discussion Paper.

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 thanks AEMC staff for the significant effort put into discussion paper and recognises the importance of reviewing electricity pricing to ensure it is suitable in the future National Energy Market (NEM). Our insights and recommendations for the AEMC to consider are summarised below:

• Retail market
  • Improving electricity pricing structures is necessary to incentivise customers to reduce peak demand, which can reduce wholesale costs and network costs for all consumers.
  • The ability of virtual power plants (VPPs) to deliver services to the grid could be enhanced through increasing the number of revenue streams available to them. Furthermore, the AEMC review should consider how to ensure VPPs have appropriate consumer protections in place.
• Retail and network interface
  • The AEMC should consider updating the network tariff setting process to give the Australian Energy Regulator (AER) a larger role in the tariff structure proposal process, as distribution network service providers (DNSPs) who currently propose tariff structures do not have significant commercial incentives to reduce peak demand and network augmentation requirements. The AER could set standardised network tariff structures across the NEM or jurisdictions to improve consumer awareness of tariff structures and reduce retail costs.
• Network tariffs
  • A first principles review of the economic regulation of distribution networks in a high-distributed energy resource (DER) world should be undertaken, given that DER can provide a range of network services.
     

Kind regards,

Johanna Bowyer – Lead Analyst, Australian Electricity
Jay Gordon - Energy Finance Analyst, Australian Electricity