Draft guidance note on insurance cost pass through events

PIAC lodged a submission to the Australian Energ Regulator’s (AER) draft guidance note on insurance cost pass through events.

The impact of recent storms and bushfires on the use and cost of network insurance has highlighted the importance of risk management for extreme weather events and how standards for reliability consider such events. With a changing climate and projections of more frequent and more severe weather, mechanisms are needed that deliver a resilient energy system where risks and costs are distributed fairly. 

There are two complementary approaches businesses must balance to efficiently manage the risk to infrastructure caused by extreme weather events: spending to prevent or mitigate the impact of extreme weather events; or accept they may occur and pass through the costs if they do.  Network Service Providers must determine the combination of each approach to optimally manage these risks and meet consumers’ interests. PIAC considers an additional guiding principle is needed in the AER’s guidance note requiring network businesses to demonstrate how they have determined and employed the optimal balance of the two complementary approaches

PIAC also provides comments on the AER’s proposed guiding principles and the proposed information that network businesses must provide to the AER.