1 August 2011
Stakeholders have been invited to make submissions on the approach to Victorian specific regulation set out in DPI's discussion paper entitled "Victoria-Specific Regulatory Requirements under the National Energy Customer Framework" (the discussion paper).
In this submission the focus is on two aspects of metering regulation that needs to be retained in the Victorian specific regulatory framework.
Victorian regulation must continue to apply to metrology where the National Electricity Rules (the Rules) do not apply, these areas are;
- metrology regulation for franchise unmetered load, and
- the metering requirements for customers supplied by embedded networks.
David Cornelius Consulting welcomes the opportunity to make this submission and sets out in Attachment 2 its relevant experience in the electricity market metrology.
2.0 The Issue to be addressed in this submission
The discussion paper states in section 2.2.5, "Electricity Customer Metering Code", that;
"The metering code was published to regulate customer metering to the extent that the requirements were not regulated by the NER or the National Metrology Procedure which is published by AEMO in accordance with the NER. The majority of the obligations in this code have either been incorporated in these national instruments or now no longer impact the efficiency of the market."
The issue is that the national arrangements under the Rules do not set out the metrology arrangements for the;
- metrology regulation for franchise unmetered load including how distributors determine what loads qualify to be or remain unmetered and how the data for billing is to be determined, and
- the metering requirements (responsibility for installation, maintenance and meter standards) for customers in embedded networks when the customer is supplied by the embedded network operator
Currently it is jurisdictional regulatory instruments that must prescribe these requirements.
3.0 The National arrangements
The standards of metering and the arrangements for metering data collection and processing and the responsibility for these activities in the National Electricity Market (NEM) for most first tier and second tier metered customers is now regulated by national metrology instruments. Prior to the publication of the revised arrangements in the national Metrology Procedure by AEMO in June 20081 the first tier arrangements were regulated by jurisdictional instruments. The Electricity Customer Metering Code (ECMC) being the relevant instrument for Victoria. There are however two areas where the NEM instruments do not apply as discussed in section 2 above.
3.1 Unmetered supplies
The national arrangements are not intended to apply to franchise unmetered loads. Rules Schedule 7.2, Table S22.214.171.124, Item 5 that sets out the conditions under which loads can be unmetered. However this clause does not regulate the conditions under loads may be franchise unmetered loads, only loads that are NEM connection points and subject to contestability under the jurisdictional arrangements.
While the national arrangements apply to unmetered loads that are classified as market loads they do not apply to franchise unmetered loads as;
- The franchise loads are not market loads as they are supplied by the local retailer.
- Franchise load connection points are not NEM connection points. NEM connection points are those classified by the participating jurisdiction so that a person is able to purchase power in the spot market for the connection point.2
Currently, the only unmetered load that is contestable in Victoria is public lighting. In NSW and South Australia Traffic lights are competitive as unmetered market loads through the publication of load tables, the development of an inventory and the Minister's agreement.
3.2 Embedded networks
The national arrangements do not apply to customers when supplied by an embedded network operator. This is because the Rules obligations apply to connection points to a registered network service provider's (NSP) network. Exempt networks (embedded networks) are exempt from registering as a network service provider under clause 2.5.1 (d) of the Rules.
When customers in an embedded network have chosen their own retailer "these customers have only a deemed connection (not a physical connection) to the main distribution network"3. In these circumstances the national metrology (metering and metering data collection and processing) arrangements are also deemed to apply so that market settlement and customer billing can proceed.
While the Rules do not have coverage of metering where the customer is supplied by the embedded network the Victorian regulations must prescribe this requirement. In a recent paper the AER has sought to ensure all customers in embedded networks are appropriately metered;
"The AER's conditions with regard to metering aim to ensure exempt networks are consistent with the metering requirements in the NER for NSPs and comply with the requirements of the National Measurement Institute.
Under the general conditions of the network Guideline, the AER considers that
- all customers must be individually metered except where the AER has determined an unmetered supply is permitted (Part B, section 5(2))
- all meters used for the measurement of electrical energy must comply with the requirements of the National Measurement Institute for electricity meters and sub-meters and with the requirements set out in schedule 7.2 of the NER (Part B, section 5(1)) and adhere to the accuracy classes stipulated in schedule 7.2 of the NER, unless exempt by the National Measurement Institute (Part B, section 6)." 4
4.0 How has the Victorian arrangements dealt with these matters up to now?
The Victorian ECMC has previously set out the metrology arrangements for both franchise unmetered loads and customers supplied by an embedded network operator.
The ECMC was varied to take account of the revised NEM metrology that commenced in 2008 in Issue 6 of the ECMC in June 2009. However the two areas where the NEM instruments do not apply were mistakenly omitted on the basis that they were to become regulated under the national instruments.
This meant that the ECMC from Issue 6 in June 2009 has not prescribed the metrology for franchise unmetered supplies and embedded networks when the customer is supplied by the embedded network operators. This has left a gap in these arrangements with no metrology regulation applying.
4.1 ECMC Coverage of unmetered supplies
The ECMC (version 6, June 2009 and version 7, February 2011) defines "franchise unmetered loads" and the definition includes traffic lights as an example of such a load. The ECMC however does not set out any conditions to be applied by a distributor or any other party to determine whether a load may be a franchise unmetered load or whether it must, conversely, be metered. Additionally there is no regulation in the ECMC that sets out how the energy data for franchise unmetered loads will be calculated, it is this data that determines a customer's billed consumption.
The current version of the ECMC does set out arrangements for the testing of unmetered loads by requiring the tests under the national Metrology Procedure to be applied. This testing is concerned with the accuracy of the inventory of unmetered loads. That is, the number of public lights of a particular characteristic, and is not concerned with whether the load qualifies to be unmetered in the first place.
Previous ECMC Coverage of unmetered supplies
Previous versions of the ECMC (up to Issue 4, March 2007) did set out the criteria to be met for a load to remain unmetered. Issue 4 of the ECMC was the last that dealt with the requirements for metering provision for first tier customers prior to this regulation transferring to the national instruments in June 2008.
This criterion was that, if the cost of installing a meter is likely to exceed the "amounts" to be paid for electricity then it may be unmetered. This clause 7.1(d) in Issue 4 of the ECMC reads;
"Subject to clause 7.1(e) if the cost of installing, testing and maintaining new metering equipment to measure and record the amount of electricity supplied to an electrical installation of a first tier customer is likely, in the reasonable opinion of the distributor, to exceed the amounts to be paid for the supply and sale of electricity to the first tier customer in respect of the electrical installation, the distributor and the first tier customer may agree that electricity supplied is to be treated as an unmetered load, in which case the amount of electricity supplied must be the amount determined in accordance with clause 18." 5
4.2 ECMC Coverage of embedded networks
The issue is the requirement for the provision, maintenance, standard of metering and relevant responsibilities for customers when supplied by the embedded network operator.
The ECMC applies to embedded network operators under clause 1.3 and under ECMC clause 1.4 (a) sets out that
"A person who provides or operates an embedded network must only allow a person who proposes to take or who takes supply from an embedded network to connect or remain connected to the embedded network on the basis that the person must comply with the Metrology Procedure and this Code."
While this clause places a responsibility on the person connected to the embedded network to comply with the Metrology procedure, it does not place a clear responsibility on the embedded network operator to supply metering of a certain standard to customers connected to its network.
The ECMC also sets out in clause 6.2 which party is responsible for the costs of metering in an embedded network; with a requirement that customers are responsible for some of these costs. If this clause is not carried in the VERR, these arrangements will fall away and there will no longer be a specific requirement for customers to pay for certain metering.
Previous ECMC Coverage of embedded networks
Previous issues of the ECMC were explicit in requiring metering to be supplied by the ENO. Clause 1.3 required exempt networks to comply with the code and clause 7.1(a) placed an obligation on the distributor (the embedded network operator) to provide metering;
"Subject to clauses 7.1(d), 7.1(f) and 7.1(g), if a first tier customer seeks a supply of electricity, the distributor or retailer (whichever is responsible for providing the metering services under clause 7A.1) must provide, install, commission, test and maintain metering equipment to measure and record the amounts of electricity supplied to the first tier customer's electrical installation"
Additionally, clause 8 set out the minimum standards of metering equipment for first tier customers which in summary required meters to meet the same standards as metering under the Rules.
4.3 Other jurisdictions
Other jurisdictions have also considered how to deal with this residual metrology when the Rules were varied to provide regulation of first tier as well as second tier customers.
Both South Australia and Queensland when they varied their jurisdictional metering codes to take into account the national arrangements of June 2008 retained their requirements relating to these matters.
Attachment 1 outlines the approach taken by South Australia and Queensland and sets out some of the relevant provisions of their codes.
While it would be desirable if the NEM metrology arrangements were extended to apply to all connection points and customers, currently it is the Victorian regulatory instruments that should prescribe the requirements for;
- the metrology for franchise unmetered loads, and
- the metering requirements, (provision, installation, maintenance) and metering data requirements for customers who are supplied by the embedded network operator.
If these requirements are not regulated in Victorian instruments there will be no regulation that applies to these situations.
Does there need to be regulation of these matters? While there is no current regulation around franchise unmetered loads it most likely distributors have continued to apply the previous customary arrangements in the ECMC based on relative cost in the absence of other specific regulation.
In my view there does need to be regulation to ensure consistency with the national approach, it needs to be clear which party makes the decision if a load may be unmetered and how the energy data is determined for these loads.
It is recommended that the loads that are franchise unmetered in Victoria should be the loads that would be eligible to be unmetered market loads in the NEM if all the criteria for contestability were met. The VERR should mirror the national arrangements, as South Australia has done. This approach means that meters and metering data calculations and hence customer's bills will not be impacted if the unmetered load becomes contestable.
For all customers, including those in an embedded network, there are requirements for customer's bills to be based on the reading of a meter but in embedded network there are no clear requirements to install metering. As noted by the AER above this is not a matter that should be unregulated.
It is recommended the requirement to provide, install and maintain metering of a required standard be set out in the VERR. It is further recommended that these requirements mirror those in the NEM.
Additionally consideration needs to be given to whether clause 6.2 of the ECMC should be carried into the VERR, without this requirement metering costs for NEM connected customers would be allocated in accordance with Rules clause 7.3A whereby the customer's retailer is generally responsible for all metering costs and are not placed directly on customers.
Approach of other Jurisdictions
All NEM jurisdictions have had to deal with the change to metrology that incorporated first tier metrology under the Rules and consider how to manage the residual metrology obligations.
The application of South Australia's metering code (clause 1.3.1) clearly states it applies as follows;6
"This industry code regulates standards for meters and metering installations at customer connection points and connection points for non-market generators:
…(b) in respect to chapters 2 and 4 for;
- unmetered connection points that have not been classified as market load in accordance with the National Electricity Rules;
- connection points to an embedded network where a child has not chosen its own retailer; and…"
South Australia retained the clause that was equivalent to ECMC clause 7.1(d) but referenced the national criteria to test whether loads to meet the requirements to be unmetered. This is appropriate as it is the national instruments that will be subject to ongoing development and further franchise loads may become contestable.
The South Australian code in clause 2.3.1 sets out the requirements for how to determine if a load may remain unmetered;
"A connection point must be metered in accordance with this industry code unless the person responsible for the metering installation determines that the connection point meets the criteria for the classification as a metering installation type 7 [an unmetered load] in accordance with Schedule S7.2.3 of the National Electricity Rules."
Similarly, the Queensland Electricity Industry Code (EIC) sets out in clause 9.1.3(e) that; 7
"A distribution entity may only classify a connection point as a type 7 metering installation [an unmetered load] if the metering installation meets the criteria for the classification of a type 7 metering installation in Schedule 7.2.3 of the National Electricity Rules."
Furthermore, the South Australian code also establishes how the electricity usage of franchise unmetered loads is to be calculated, clause 4.5 requires in part;
"Where it has been determined that a connection point does not require a meter in accordance with clause 2.3, the person responsible for the metering installation must ensure that metering data for the unmetered connection point is calculated in accordance with the distributor's procedure which should be based on a methodology in the Metrology Procedure. If the unmetered connection point does not have a predictable load pattern, then the person responsible for that metering data must have regard to the methodology in the Metrology Procedure when calculating the metering data at such connection points"
Similarly Queensland's EIC in clause 9.4.6 sets out arrangements for the calculation of energy data for type 7 metering installation.
The South Australia code (clause 2.2.1) sets out that the ENO is responsible for installing metering for its customers in an embedded network;
"The person responsible for the metering installation at each connection point is:
- the distributor for an unmetered connection point to its distribution system;
- the person exempt from holding a distribution licence for that embedded network for a connection point to an embedded network where the customer has not chosen its own retailer; and"
The South Australian code also sets out the requirements or data collection (section 4) and the standards of metering (clause 2.7) that reference the Rules requirements.
This submission is made by David Cornelius Consulting and is not made on behalf of any other party.
Dr David Cornelius is an expert in a number of specialist areas relating to competitive energy markets including metering policy, smart meters and metrology regulation, the operation of competition in embedded networks and customer transfer arrangements.
Representative energy regulatory and policy consulting projects
AEMO (and NEMMCO):
- Provision of advice on a number of aspects of metrology particularly the national harmonisation of the jurisdictional metrology procedures and related treatment of embedded networks and unmetered loads.
- Advice on the metering service provider arrangements and drafting the submission to the Australian Energy Market Commission (AEMC) and the corresponding National Electricity Rules changes required to bring all metering service providers under the Rules.
- Advice in connection with retail transfer arrangements for customers whose electricity is supplied by an embedded network ("Embedded Network Guideline").
- The National Smart Metering Program (NSMP) the regulation and development of industry procedures for smart meters.
Queensland Competition Authority (QCA):
- Advice and corresponding drafting for the revision of Queensland's metering code following the development of the national metrology procedure.
Essential Services Commission of South Australia (ESCOSA):
- Advice and corresponding drafting for the revision of South Australia's metering code following the development of the national metrology procedure.
Department of Primary Industries (Victorian government):
Providing regulatory, policy and economic advice to the in connection with its decision to mandate smart metering infrastructure (SMI) for Victorian electricity customers including;
- the preparation of its Rules derogation submission (metering responsibility) to the AEMC in relation to the implementation of SMI by distributors,
- economic advice on incremental functionality for SMI, and
- the policy for smart meters for electricity customers in embedded networks.
Essential Services Commission, Victoria (ESC):
Providing advice in connection with;
- the regulatory arrangements for smart meters,
- the arrangements for unmetered supplies in Victoria under the national and jurisdictional regulations
- electricity metering regulations in transition to AMI in Victoria,
- small scale licensing of "exempt" retailers and distributors and the arrangements for electricity retail competition in embedded networks,
- the arrangements for electricity and gas bulk hot water supply,
- tariff assignment regulation under interval meter installation.
1 The exception to this rule for metered customers is usually considered to be metered customers in an embedded network where the customer has not chosen its own retailer.
2 Rules clause 2.3.1(e)
3 AER 2011, Draft Exempt selling guideline, June 2011 page 9
4 AER approach to electricity network service provider exemptions Consultation Paper, AER June 2011, section 7.2 metering
5 ECMC version 4, March 2007, clause 7.1(d)
6 Electricity Metering Code, ESCOSA, December 2010
7 Electricity Industry Code, QCA, Ninth edition July 2011. Note that Queensland does not have corresponding arrangements for embedded networks