Energy Network Regulatory Framework

Energy Network Regulatory Framework

Regulatory bodies

The Energy Safe Victoria Act establishes Energy Safe Victoria to enable it to perform its functions and exercise powers in such a manner as it considers best to achieve the objectives of Energy Safe Victoria specified in the Electricity Safety Act 1998 and the Gas Safety Act 1997 and any other Act. Energy Safe Victoria (ESV) is the independent technical regulator responsible for electricity, gas and pipelines in Victoria.

ESV regulates networks, and parts thereof, once they are set to be commissioned and put into service to ensure they can safely operate. ESV does not have direct involvement in the economic regulation of the networks; this is undertaken by the Australian Energy Regulator (AER).

The Australian Energy Market Operator (AEMO) is also responsible for overseeing the market and operation, including the planning and system design of the transmission network across Australia.

How electricity network safety is regulated

The safety of the Victorian electricity networks is governed by the Electricity Safety Act 1998 (the Act) and relevant regulations, under which the electricity network businesses must adhere to the following:

  • Electricity Safety (Management) Regulations 2019, referencing the Australian standard (AS 5577) for an Electricity Safety Management Scheme (ESMS) which set out the requirements for an ESMS that is required to be submitted by all Major Electricity Companies (MECs) for acceptance and audit by ESV
  • Electricity Safety (Bushfire Mitigation) Regulations 2013, which set out the requirements for a BMP that is required to be submitted in a Bushfire Mitigation Plan (BMP) by all MECs for acceptance and audit by ESV
  • Electricity Safety (Electric Lines Clearance) Regulations 2020, which set out the requirements for an Electric Line Clearance Management Plan (ELCMP) that is required to be submitted for approval and audit by ESV.
  • Electricity Safety (General) Regulations 2020, which specify the safety requirements relating to electrical installations and electrical work and certain requirements for electricity suppliers.

The electricity infrastructure safety regime (inclusive of ESMS) utilises principle, performance and outcome based regulatory approaches. The primary reason is that the safety risks are complex, geographically diverse, have significant consequences (regardless of frequency), and often require tailored solutions. It also describes how MECs will meet the general duties of the Act, and comply with regulations and prescribed standards, in order to minimise safety risk.

How is this responsibility discharged?

The obligations on MECs require them to proactively eliminate, where practicable, the risk of an incident before it occurs, or otherwise to minimise the risk of failure to the extent that the cost of doing so is not grossly disproportionate to the risk reduction achieved. This is the effect of legislative and regulatory requirements that oblige MEC’s to maintain a safe workplace, safe systems of work, a safe supply and the safety of staff and the public. This goes beyond an obligation to mitigate the risks when a safety incident, despite precautions, actually occurs.

The required practice is to demonstrate what is reasonably practicable by implementing all controls unless the implementation of that control is technically not feasible, and demonstrate that the cost of implementation far outweighs the risk reduction benefit (e.g. costs are grossly disproportionate to risk), or that implementation of the control creates other unacceptable risks.

In general, what is considered to be acceptable costs will depend on the societal benefits gained from that expenditure, versus the willingness of the community to bear the costs of implementing the control. As part of its role as the economic regulator, the Australian Energy Regulator (AER) reviews the costs to be borne by the electricity users and determines, at a high level, whether any extra expenditure is warranted to reduce risk whilst maintaining increasing costs within a reasonable accepted range. Where required, Governments may also mandate expenditure on controls to reduce risk that are above and beyond what the AER has determined reasonable.

ESV is not a planning referral authority, and does not have direct involvement in planning decisions. ESV holds MECs to account by monitoring and enforcing the safety of the design, construction, operation, maintenance and decommissioning of their networks; and monitors compliance with the obligations under the Act to minimise risk, as far as practicable, as articulated in an ESV accepted ESMS and BMP, and approved ELCMP.

Share This Post