By Sarah Pick, Partner

The Final Decision

The Australian Energy Regulator (AER) has completed its review of the AER exemptions framework for embedded networks (Review) and on 29 August 2025, published its Final Decision (Final Decision) incorporating the notice of final instruments, the final Retail Exempt Selling Guideline (version 7) and final Network Exemption Guideline (version 7).

The Review commenced in November 2023 with the AER releasing an Issues Paper, with the key focus being the AER better understanding the benefits, harms and risks faced by customers serviced by embedded networks (Embedded Network Customers) and determining whether changes should be made to the AER’s retail and exemption frameworks.

The AER has determined that the Review has confirmed the findings of earlier regulatory reviews (including the Australian Energy Market Commission’s 2017–19 Review of the embedded networks regulatory frameworks) that there are:

• clear consumer protection gaps for Embedded Network Customers connected to embedded networks that are owned, operated and controlled by exempt network service providers (Exempt NSPs), compared to customers who are directly connected to the national electricity grid; and
• inconsistencies in protections received by Embedded Network Customers depending on whether their electricity is sold to them by someone exempt from the requirement to hold a retailer authorisation (an Exempt Seller) or an authorised retailer.

The Final Decision confirms the AER’s position in the Draft Decision (published on 17 March 2025) that there are two pathways towards closing the current gaps and inconsistencies that are currently faced by Embedded Network Customers:

1. Changes to the Retail Exempt Selling Guideline and the Network Exemptions Guideline to improve protections; and
2. Holistic reconsideration of the regulatory framework for embedded networks by jurisdictional governments.

These pathways as proposed by the AER, are identified below.

Changes to the Retail Exempt Selling Guideline

The Final Decision identified a number of changes that have been made to the Retail Exempt Selling Guideline that are intended to close the consumer protection gaps faced by Embedded Network Customers. The key and most substantial amendments are set out in the below table.

Consumer protection gap	Amendments	Exemptions impacted
		Deemed	Registrable
Family violence protections	New Condition 27 has been introduced that extends the family violence obligations included in the National Energy Retail Rules  (protecting residential customers and small business customers) to Embedded Network Customers.	D1, D2 and D6	R1, R2, R3, R4 and R6
Increasing exempt seller visibility	New Condition 28 has been introduced that provides that an Exempt Seller must notify the AER within 20 business days of any revised contact details of the Exempt Seller’s authorised representative.	None.	R1, R2, R3, R4, R5 and R6
Price visibility	New Condition 7(4) has been introduced that provides than an Exempt Seller must publish on its website, or its billing agent’s website: the Embedded Network Customer tariffs and charges; and a percentage comparison of the Embedded Network Customer tariffs to the local area retailer’s standing offer.[1]	D2 and D6	R2 and R3
Deemed Exemption Class Closure	From 1 January 2026: classes D1 and D2 will be closed to Exempt Sellers commencing new supply activities; and classes R1 and R2 will be expanded to include the activities that were covered by D1 and D2 (i.e. class R1 will apply to the activity of the sale of electricity to any number of small commercial customers and class R2 will apply to the activity of the sale electricity to any number of residential customers).	D1 and D2	R1 and R2
Billing	New condition 3(q) has been introduced which requires Exempt Sellers to include on their Embedded Network Customer bills, a telephone number and website details for the relevant energy ombudsman scheme.	D2, D3, D5 and D6	R2, R3 and R4
Credit refunds	New condition 22(3) has been introduced which provides that if an Exempt Seller becomes aware that an Embedded Network Customer’s account is in credit, upon termination of the energy supply agreement, the Exempt Seller must use best endeavours obligation to refund the full credited amount within 10 business days.	D1, D2, D5, D6, D9 and D10	R1, R2, R3, R4, R6 and R7
R6 Retail Class Reopened	Class R6 (Persons selling metered energy to small commercial/ retail customers at a site or premises adjacent to a site that they own, occupy or operate) has been reopened, effective immediately.	–	R6

Changes to the Network Exemption Guideline

The Final Decision identified a number of changes that were also made to the Network Exemption Guideline that are intended to close the consumer protection gaps faced by Embedded Network Customers and ensure consistency between the Network Exemption Guideline and the Retail Exempt Selling Guideline. The key and most substantial amendments that have been made to the Network Exemption Guideline are set out in the below table.

Consumer protection gap	Amendments	Exemptions impacted
		Deemed	Registrable
Customer visibility	New condition 1.18 has been introduced which requires Exempt NSPs to report to the AER on an annual basis the updated number residential customer numbers serviced by the Exempt NSP.	–	NR2
Notification	New condition 1.19 has been introduced that provides that an Exempt NSP must notify the AER within 20 business days of any revised contact details of the Exempt NSP’s authorised representative	–	All registrable class exemptions
Deemed class closure	From 1 January 2026: classes D1 and D2 will be closed to Exempt NSPs commencing new supply activities; and classes R1 and R2 will be expanded to include the activities that were covered by D1 and D2 (i.e. class R1 will apply to the activity of the supply of electricity to any number of small commercial customers and class R2 will apply to the activity of the supply electricity to any number of residential customers).	ND1 and ND2	NR1 and NR2
Life Support Customers	Condition 1.10.1(b) has been amended so that it now requires an Exempt NSP to notify the relevant Exempt Seller that their customer is a life support customer. New condition 1.10.2 has been introduced which requires an Exempt NSPs to maintain medical confirmation records and advice provided in accordance with conditions 10.1(a) and (b).	ND1, ND2, ND3 and ND6	NR2, NR3, NR4, NR5, NR6 and NRO5

Holistic reconsideration of the embedded networks framework

The AER has noted in its Final Decision that it is unable to address a significant number of the consumer protection gaps it had identified by amending the Retail Exempt Selling Guideline and/or the Exempt Network Guideline as closing those gaps will require amendments to the National Energy Retail Law, the National Energy Retail Rules and jurisdictional legislation.

In particular, the AER identified the following consumer protection gaps that require broader amendment and a holistic approach from all participating jurisdictions:

• No Retailer of Last Resort protections for Embedded Network Customers.
• Embedded Network Customers ineligible for some concessions and benefits, and/or face administrative barriers.
• No obligation for retailers to offer ‘energy only’ offers to Embedded Network Customers.
• No obligation for a retailer to supply electricity to Embedded Network Customers.
• No obligation for a retailer to notify Exempt NSP that an Embedded Network Customer is registered as having life support equipment.
• Limited or no obligations for a retailer to notify Embedded Network Customers or Exempt NSP of planned and unplanned interruptions to their supply.
• AER not able to tailor penalties for smaller Exempt Sellers.

Consequently, it appears that it is likely that there will be more regulatory change in relation to the sale and supply of electricity to Embedded Network Customers.

Next steps

If you are a current Exempt Seller or an Exempt NSP, it is important that you consider whether your exemption class has been impacted by the amendments and ensure that you continue to comply with the conditions applicable to your exemption.

If you are considering becoming an Exempt Seller or an Exempt NSP, it is important that you understand which exemption or exemptions apply to your activities and the conditions associated with the relevant exemptions.

Protections for Embedded Network Customers and compliance of Exempt Sellers and Exempt NSPs with their exemption conditions is certainly something that the AER is currently actively monitoring.

If you need assistance ensuring compliance with the AER exemption framework for Exempt Sellers and Exempt NSPs, don’t hesitate to contact us for assistance.

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[1] If the exempt seller does not have a website or a billing agent, the exempt seller must display the information set out in Condition 7(4)(a) and Condition 7(4)(b) in a location accessible to exempt customers (for example, a communal area or office).