By Sarah Pick, Partner
On 17 March 2025, the Australian Energy Regulator (AER) released its draft decision[1] (Draft Decision) for its Review of the Exemptions Framework for Embedded Networks[2] (Review) along with proposed amendments to the Network Exemptions Guideline[3] (Network Guideline) and the Retail Exempt Selling Guideline[4] (Retail Guideline) (Guidelines).
This Article aims to:
Before getting into the details of the Review, it is important to set the context and explain what an embedded network is, and who is likely to be impacted by the outcome of the Review.
In my experience, there is often a misconception of who needs to be aware of the regulatory regime impacting embedded networks.
Set out below are some Embedded Network Quick Facts:
An embedded network is a privately owned electricity network that is typically located ‘behind the meter’.
In other words, it’s a private electricity network that sits behind a ‘parent connection point’ that connects the entire embedded network to the distribution network. The embedded network will have ‘child connection points’ that measure electricity usage for a particular premises or buildings that sit behind the ‘parent connection point’.
Embedded networks can be in residential or commercial apartment buildings, shopping centres, industrial parks, retirement villages and holiday parks, to name a few.
Selling electricity and delivering/supplying electricity are the two different activities that can be undertaken in relation to an embedded network.
| Activity | Description | Who can undertake this activity |
| Physical supply of electricity | The delivery of the electricity from the parent connection point to each child connection point, utilising the private electricity infrastructure.
This is also described as the operation of an electricity network |
· A registered network service provider; or
· A person exempt from the requirement to be registered as a network service provider, in accordance with the Network Exemption Guideline |
| Sale of electricity consumed | The electricity sold utilising an embedded network is measured at the child meter for a particular premises | · An authorised (licensed) retailer; or
· A person exempt from the requirement to hold a retailer authorisation, in accordance with the Exempt Selling Guideline |
People or entities undertaking the following activities should be aware of, or complying with, the regulatory requirements relating to embedded networks:
In addition to the standard traditional electricity sale and supply arrangements, the Guidelines can also impact renewable energy activities being utilised in embedded networks.
In particular, if:
the Guidelines may to apply those activities.
The AER initiated the Review in November 2023 when it published an Issues Paper[5] seeking stakeholder feedback on:
The AER received 37 submissions from consumer advocates, industry and government.
The Draft Decision indicates that whilst some of the concerns and gaps highlighted and identified through the Review will be able to be addressed through amendments to the Guidelines, that some of them are beyond the AER’s regulatory remit and will need to be addressed by a broader review of the regulatory regime and jurisdictional governments working together to reform the relevant laws and rules.[6]
The AER also noted that:
“There are many parallels between our findings and the conclusions reached by the Australian Energy Market Commission (AEMC) in its 2017–19 Review of the embedded networks regulatory frameworks. While we do not recommend any specific regulatory solutions to address the gaps and barriers above, we consider the AEMC’s comprehensive identification of issues and approach to holistic reform may be a useful starting point for further consideration.”[7]
There is likely to be further regulatory review and potentially reform in this area, so what this space!
There are 2 key proposed amendments in relation to the Deemed and Registrable class exemptions in the Network Exemptions Guideline:
Class ND1 exemption applies to persons supplying metered or unmetered electricity to fewer than 10 small customers within the limits of a site, via a network that they own or operate;
Class ND2 exemption applies to persons supplying metered or unmetered electricity to fewer than 10 residential customers within the limits of a site, via a network that they own or operate.
Registrable classes NR1 and NR2 will be expanded to include the two activities described above, regardless of the number of customers.
The expanded Class NR2 exemption will apply to persons supplying metered or unmetered electricity to residential customers within the limits of a site, via a network that they own or operate.
Two new conditions have been proposed:
There are 4 key proposed amendments in relation to the Deemed and Registrable class exemptions in the Exempt Selling Guideline.
It has been proposed to expand Condition 7, to include the requirement that exempt sellers to publish their residential and small business customer tariffs on their website (or displayed in a communal area if they do not have a website), including the percentage off the local area retailer’s standing offer.
A new condition, condition 27, has been proposed that imposes a new requirement on Exempt Sellers to develop, implement, maintain and comply with, a family violence policy.
This condition will apply to most exemption categories.
A new condition, condition 28, has been proposed to apply to most of the registrable exemptions.
Proposed new condition 28 provides that an exempt seller must notify the AER within 20 business days any revised contact details of the exempt seller’s authorised representative.
Class D1 exemption applies to persons selling metered energy to fewer than ten small commercial/retail customers within the limits of a site that they own, occupy or operate.
Class D2 exemption applies to persons selling metered energy to fewer than ten residential customers within the limits of a site that they own, occupy or operate.
Registrable classes R1 and R2 will be expanded to include the two activities described above, regardless of the number of customers.
It is important to consider if the Guidelines apply to any activities, you are currently undertaking or any activities you plan to undertaken in the future.
If you are undertaking an activity that is regulated by the Guidelines, it is important that you currently have processes and procedures in place to enable you to comply with the conditions associated with any exemption that applies to that activity.
One of the key purposes of the Review is to increase the AER’s visibility on compliance with the Guidelines – so compliance with the Guidelines is a focus for the AER.
Consider whether you, or an industry body that represents you, should make a submission.
—
[1] https://www.aer.gov.au/industry/registers/resources/reviews/review-aer-exemptions-framework-embedded-networks/draft-decision
[2] https://www.aer.gov.au/industry/registers/resources/reviews/review-aer-exemptions-framework-embedded-networks
[3] https://www.aer.gov.au/documents/draft-network-exemptions-guideline-version-7
[4] https://www.aer.gov.au/documents/draft-retail-exempt-selling-guideline-version-7
[5] https://www.aer.gov.au/documents/aer-issues-paper-review-aer-exemptions-framework-embedded-networks-november-2023
[6] Page 2 of Draft Decision.
[7] Page 29 of Draft Decision.
If you would like further information or have any queries regarding other matters, please do not hesitate to contact:
