The Australian Energy Market Commission (AEMC) today published a report by Frontier Economics that surveys the use of total expenditure (totex) regulatory frameworks in a number of jurisdictions, including the UK, Germany, the Netherlands, and in Victoria during the early 2000s.

Totex frameworks seek to provide balanced incentives for regulated businesses to find the most efficient way to deliver regulated services, and were a response to a perception that regulated businesses tended to favour capital expenditure solutions, even when operating expenditure solutions may have been more efficient. The Frontier Economics report also considers how a totex framework could be implemented in Australia to regulate energy networks.

The AEMC has announced its intention to consider the financial incentives faced by regulated energy networks when delivering regulated services, during its 2018 Electricity Network Economic Regulatory Framework Review. The 2018 review will examine, among other issues, the totex frameworks adopted by regulators in other jurisdictions, drawing on the recent report by Frontier Economics.

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