Briefing Note | March 2021
The distribution and transmission networks in the NEM are treated as natural monopolies and so they are heavily regulated by the Australian Energy Regulator (AER)
The majority of their revenue is earned from the basic electricity transportation services they provide – moving electricity from big generators to our homes and businesses. This revenue is capped annually under a five-year review process (see our briefing paper How networks get paid)
When national regulation was first introduced, poorly designed rules allowed a big increase in network revenue, but subsequent changes to the rules have improved the process.
Future issues are likely to arise due to the energy transition – the switch from coal to renewables at transmission level and the rise of rooftop solar and other distributed energy sources at the distribution level. It will be a challenge for regulation to keep up with this rapidly changing environment.