Watt’s up: Regulatory round-up – September 2025

The Australian Energy Regulator (AER) has published its final updated Capital Expenditure Incentive Guidelines (Guidelines). These Guidelines outline the ex-ante and ex-post measures to incentivise efficient capital expenditure for networks.

The updates address:

• The Australian Energy Market Commission’s (AEMC) amending rule on managing Integrated System Plan (ISP) project uncertainty through targeted ex-post reviews (the AER are to now carry out a separate targeted ex-post review for ISP projects and non-ISP projects).
• Exclusions from the application of the Capital Expenditure Sharing Scheme.
• Adjustments to the CESS to accommodate abandoned ISP projects.

These amendments were aimed at ensuring that the measures to incentivise efficient capital expenditure remain fit for purpose by enabling sufficient flexibility, without undermining the existing design and robustness of the schemes.

The AER has published the final decision from its Review of the minimum disconnection amount. It has decided to increase the minimum disconnection amount from $300 to $500 (including GST). The amount applies to both electricity and gas customers.

The AER has released guidance for electricity market participants outlining its expectations regarding compliance with critical Projected Assessment of System Adequacy (PASA) obligations under the National Electricity Rules (NER).

PASA is used to indicate to the Australian Energy Market Operator (AEMO) and market participants the forecast of overall balance of supply and demand for electricity in the National Electricity Market (NEM).

The new PASA Compliance Bulletin refreshes the AER’s expectations around PASA compliance that were previously included as part of the AER’s NEM Readiness Guide. The new standalone Bulletin focuses on PASA obligations and relevant updates for participants to be aware of, while the checklist sets out tasks that may assist participants to achieve compliance.

• Have a clear understanding of crucial PASA obligations following the latest changes to the NER, including:
  • New obligations to submit unit state and recall times in Medium Term PASA.
  • Changes to the definitions of PASA availability and energy constraint under the NER.
  • A new requirement to submit a recall period in Short Term PASA.
• Familiarise themselves with AEMO’s new Short Term PASA Procedure and ensure they are up to date with any changes to the Short Term PASA Procedure and Medium Term PASA Process Description.
• Ensure PASA submissions reflect current intentions and best estimates and promptly update submissions as changes to those intentions and estimates occur.

The PASA Compliance Bulletin and Checklist was published on 29 August 2025.

The AER has published the revised Network Exemptions Guideline and Retail Exempt Selling Guideline (versions 7), alongside the final decision for its review of the exemptions framework for embedded networks.⁶

The AER commenced its review to better understand the benefits, harms and risks embedded network customers may be facing and whether any action is needed, including whether the AER should restrict the growth of residential embedded networks via our Network Exemptions Guideline. They released an issues paper in November 2023, and a draft decision in March 2025.

The guidelines published include several new conditions or measures to address the issues identified through the review. These include:

• New requirements for all exempt entities to keep key registration details up to date – effective immediately.
• Measures to increase oversight of smaller embedded networks, by closing the deemed exemption classes to new embedded network configurations (in effect, requiring most new networks to register an exemption) – effective 1 January 2026.
• Strengthened consumer protections, including introducing new family violence protections for residential and small business customers – effective 1 January 2026.
• Requirements for some exempt sellers to publish their customer tariffs – effective 1 July 2026.
• New obligations for some exempt sellers to include ombudsman scheme contact details on customer bills – effective 1 July 2026.

The final decision acknowledges that all energy customers should have a comparable level of consumer protections, to the extent possible, regardless of their energy supplier.

The final decision for the Embedded Network Review was published on 29 August 2025.

The revised Network Exemptions Guideline and Retail Exempt Selling Guideline have new requirements and protections that take effect throughout 2026 (see details in the column to the left).

The AER published its final decision on 20 August 2025 to amend the interim Contracts and Firmness Guidelines for the Retailer Reliability Obligation (RRO) to reflect a recent rule change to the National Electricity Rules (NER).

The interim Contracts and Firmness Guidelines are one of 6 guidance documents that set out how the AER exercises its functions under the RRO.

When the RRO is triggered, retailers (and any large customers who opt-in) are required to hold sufficient electricity contracts to meet their share of demand. The interim Contracts and Firmness Guidelines set out how to report on these contracts to the AER.

In 2026, the AER will conduct a broader review of the interim Contracts and Firmness Guidelines. Under this review, it will consider integrating price-responsive resources into the NEM Rule 2024 No. 24 rule change alongside a broader range of matters. The interim Reliability Instrument Guidelines and interim Market Liquidity Obligation Guidelines will also be updated alongside the interim Contracts and Firmness Guidelines, with the aim to finalise all 3 guidelines in 2026.

The Electricity Infrastructure Investment Act 2020 (NSW) (EII Act) was amended on 13 August 2025 to:

• Broaden the meaning of a priority transmission infrastructure project to include a priority network infrastructure project.
• Broaden and clarify the Minister’s powers relating to directing network operators to carry out REZ network infrastructure projects and priority network infrastructure projects.
• Extend the functions of an infrastructure planner in relation to priority network infrastructure projects.
• Make provision for other miscellaneous matters.

The amended regulation commenced on 24 August 2025.

• Prescribe new activities to be undertaken which will result in a reduction in greenhouse gas emissions.
• Prescribe new requirements relating to nominating a prescribed activity.
• To allow a transfer of projects from one accredited provider to another.
• Introduce new methods of calculating energy efficiency for the purposes of project-based activities.
• Make consequential and other amendments.