Nexa Advisory Submission – AER VIC 2026-31 DNSP determinations

Nexa Advisory welcomes the opportunity to comment on the Australian Energy Regulator’s (AER) electricity distribution determination for Victorian Distribution Network Service Providers (DNSPs) for the 2026-31 regulatory control period.

The revised proposals and AER’s determinations are occurring within the existing paradigm of distribution network regulation; the Victorian determinations are being made against a backdrop of rapidly changing demand drivers, with growing need for new incentive structures to support efficient utilisation of existing networks, competitive procurement of services and cost-reflective yet customer-protective tariff designs.

The current five-year reset framework is increasingly misaligned with the pace of change in distribution networks. Nexa has previously highlighted that the combination of long reset periods and ex-ante forecasting can create regulatory lag, with network costs effectively ‘locked-in’ each five-year revenue reset period – despite rapid changes in technology, market and demand drivers we are now seeing within this window.

As such, we support a broader review of the economic regulation of DNSPs (including incentive design and tariff regulation) and notes the review of distribution network regulation commenced by the AEMC. We encourage the AER to align its decision-making to support this reform agenda.

Additionally, the AER’s final decisions must not lock in unnecessary expenditures for areas which are the focus for many reform programs currently underway – including the National CER Roadmap and Integrated Distribution System Planning rule change.

Summary of key asks

  1. Support the AEMC’s review of distribution networks and address the capex bias
    • The AER must prioritise reforms that improve utilisation and avoid unnecessary network investment, enabling households with and without CER to benefit from lower future network costs. Namely, the AER should work with the AEMC in completing its recently initiated Electricity Network Regulation Review.
    • As we have advocated previously, the network capex bias is the underlying root cause of these challenges and as such, an alternative model such as the ‘totex’ model should be reviewed and adopted as a fundamental priority reform.
    • The review should assess whether existing governance arrangements and regulatory oversight ensure value for energy consumers (e.g., whether the existing capital expenditure bias can be addressed through an alternative ‘totex’ model).
  1. Avoid locking in expenditure where major national reform programs are actively being designed – namely the National CER Roadmap
    • Given DCCEEW’s National CER Roadmap workstream currently underway, the AER should avoid approving expenditure in ways that are likely to require rework once national frameworks and obligations are settled – namely around DSO functions.
    • Where expenditure is approved, it should be tightly scoped and conditional on demonstrable consumer outcomes. For example, CER integration and “DSO-enabling” spend should only be approved where it demonstrably unlocks hosting capacity and/or defers augmentation (particularly via flexible exports).
  1. Strengthen data transparency obligations on DNSPs
    • Nexa recommends the AER link any approved funding for enhanced visibility/digital systems to stronger obligations and practical deliverables: timely, standardised, open-access network capacity and constraint information (including hosting capacity) that third parties can use to make efficient connection and investment decisions.
  1. Drive tariff innovation that enables flexible response (including EV charging) and reduces reliance on blunt demand charges
    • Nexa supports accelerating tariff innovation that better aligns incentives with renewable supply and local network conditions, shifting flexible demand away from constrained periods and reducing augmentation pressure. This can be achieved through:
      • Dynamic pricing trials – such as that proposed by CitiPower/Powercor/United Energy, with granular (5-minute) signals and a clear pathway to deployment – brought forward so EV charging can benefit sooner than ~2028.
      • Critical peak response trial tariffs that enable customers with flexible load to respond to critical peak events.
      • Demand charge protections – limiting exposure to demand charges where they do not reflect sustained demand patterns and supporting mechanisms such as opt-outs/eligibility pathways for smaller EV charging sites, plus longer evidence periods before tariff re/assignment.
      • Dedicated EV charging tariffs (and broadened kerbside trials beyond narrow AC use cases) – which can incentivise off-peak and daytime charging when it improves utilisation, while incorporating critical peak event response. The AER should mandate DNSPs to accelerate and broaden eligibility (i.e. by including DC charging and other EV charging applications).
  1. Require material improvement in connections performance, transparency, and contestability – especially for EV charging
    • Nexa recommends the AER to require DNSPs to move towards standardised, transparent and enforceable connection timeframes in negotiating Service Level Agreements (SLA), streamlined connection requirements and fees, flexible connection options which provide clear signals for utilising latent network capacity, and shifting towards genuine contestability models (e.g., Authorised Service Provider-style approach in New South Wales) to improve timeliness and reduce costs.
    • The AER should also reinforce negotiated service protections and good-faith negotiation requirements for kerbside charging by requiring a minimum set of negotiating framework provisions to ensure the negotiated service classification delivers real access outcomes – including clear timeframes, transparent negotiation processes and clear dispute resolution – for connection proponents.

Read our submission here: Nexa Advisory submission – AER VIC 2026-31 DNSP determinations

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