Nexa Advisory welcomes the opportunity to respond to the AEMC’s Pricing Review Draft Report.
Nexa supports the AEMC’s stated objective of a pricing framework that:
- strengthens retail competition and engagement;
- enables consumers and their agents to access and capture the value of flexibility and consumer energy resources (CER); and
- reduces total system costs over time.
While the Draft Report addresses some of these themes, it leaves material gaps that risk undermining consumer trust and affordability. Nexa has significant concerns with the Draft Report’s approach which progresses a suite of proposed recommendations with limited supporting evidence or analysis despite the lengthy consultation throughout the Review.
In particular, the Draft’s most consequential proposals are Recommendations 5 and 6 – where the AEMC appears to default towards a network pricing end-state dominated by fixed charges, without transparent justification or clear assessment of consumer impacts. This represents a network-centric approach that shifts risk onto households, weakens consumer agency, and entrenches regressive outcomes.
Additionally, while Recommendations 1-4 are worthwhile – and have attracted most of the early media attention – they are also relatively ‘small ticket’ reforms, and the focus on them risks drawing scrutiny away from the more consequential network pricing and tariff governance choices in Recommendations 5 and 6.
Our recommendations, outlined below, are intended to strengthen the outcome of the Review, calling for clearer evidence and competition-led reforms that meaningfully improve consumer outcomes. Nexa recommends the AEMC to:
- Publish and consult on a transparent evidence base before locking in direction towards fixed network charges, including bill and distributional impacts and behavioural responses.
- Use real-world consumption data across a broad range of customer segments (including low-consumption households, renters, customers in hardship, and CER/non-CER customers), with analysis stratified by meter type, CER ownership (PV/BTM storage), and current retail product.
- Provide confidence in the bill analysis by verifying sample representativeness / randomisation in any data provided by DNSPs.
- Leverage upcoming market settings (including the Solar Sharer Offer) as a near-term ‘natural experiment’ to observe demand shifting and bill outcomes in practice.
- Treat ‘predominantly fixed’ residual recovery as a last resort, not the default.
- Undertake a comparative assessment of alternative residual recovery approaches.
- Specify upfront the consumer risks and mitigants that must accompany any move toward fixed-dominant residual recovery, including protections for customers experiencing vulnerability and guardrails that preserve bill controllability.
- Recognise that distributional impacts under fixed-dominant tariffs are structural (ongoing) rather than merely transitional, and therefore must be addressed as core design requirements prior to final recommendations.
- Preserve customer intelligibility and customer voice in any shift toward ESP-centric tariff design and governance
- Any evolution of tariff principles must not weaken expectations around customer impact, customer understanding and consultation without equivalent safeguards and a demonstrated net benefit to end customers.
- Maintain clear accountability for how tariffs ultimately affect household bills and risk allocation, particularly where intermediaries (retailers/ESPs) are expected to ‘translate’ network tariff signals into consumer products.
- Commit to reforms that neutralise capex bias by moving toward a genuine totex framework – namely through the related Electricity Network Regulation Review – prior to progressing tariff reform. This will ensure least-cost service delivery is rewarded regardless of whether capex/opex/demand-side solutions are delivered, minimising the residual cost to be recovered through network tariffs.
Read our submission here: Nexa Advisory submission – AEMC Pricing Review Draft Report