The Authority finalised new model use-of-system agreements (MUoSAs) in September 2012 in response to section 42(2)(f) of the Electricity Industry Act 2010 (Act) which required the Authority to amend the Code to facilitate more standardised use-of-system agreements (UoSAs), or consider alternative methods by which more standardisation may be provided for. The rationale for more standardisation was driven by a desire to improve retail competition and efficiency.
In finalising the MUoSAs, the Authority expected to observe a significant increase in the level of engagement between retailers and distributors in negotiating and agreeing UoSAs that were based on the MUoSAs. The Authority was optimistic that a significant improvement in the level of standardisation of UoSAs would eventuate in the years following the publication of the MUoSAs, and that those UoSAs would contain efficient and pro-competitive terms.
In January 2013, the Authority established a feedback channel to enable the Authority to keep abreast of any MUoSA issues uncovered by participants, including when participants are unable to agree a UoSA based on the relevant model agreement. Staff also actively sought the views of retailers and distributors on the uptake of the MUoSA, and had subsequent meetings with several participants.
Feedback received from participants suggested the Authority’s expectations are not being consistently met, with some distributors and retailers variously:
- not engaging in negotiations to update existing UoSAs
- extensively varying from the fundamental commercial provisions of the MUoSA, resulting in potentially adverse effects on efficiency or competition either through the nature of those terms or from the fact that standardisation was not occurring.
As a result of the feedback received through these channels, the Authority became concerned that the MUoSAs are not delivering more standardisation of UoSAs, nor achieving the expected benefits of improving efficiency and promoting retail competition. Consequently, the Authority initiated this project to consider options for achieving the Authority’s expectations for more standardisation of UoSAs, including potentially setting the MUoSA as a mandatory or default agreement.
Objectives and approach
The objective of this project is to improve competition and efficiency for the long-term benefit of consumers by promoting greater standardisation of arrangements relating to the provision of distribution services. In particular, the Authority is seeking:
- greater standardisation in the terms and conditions included in the UoSAs between retailers and distributors
- more efficient and pro-competitive terms included in the UoSAs between retailers and distributors
- stronger incentives for distributors and retailers to engage in putting standardised terms and conditions in place.
The Authority intends publishing a consultation paper (late 2013/early 2014) setting out:
- a clear problem definition
- options for addressing the problem
- the Authority’s preferred solution
- a cost-benefit analysis of the preferred solution.