September 5, 2025
Following an extended consultation period that included requests for feedback on two additional proposed conditions to the Network Guideline, the Australian Energy Regulator (AER) has published their updated Network Exemption Guideline (Version 7) and Retail Exemption Guideline (Version 7).
Given the drawn-out consultation, multiple notice of draft documents and additional consultations, this article will breakdown the key changes impacting embedded network stakeholders, however, we also delve into some of the smaller changes that have found their way into the revised guidelines out of the spotlight.
(previously Electricity Network Service Provider – Registration Exemption Guideline)
The AER's Network Exemption Guideline, as the previous title suggests, outlines the requirements and conditions of holding an exemption from the requirement to register as an Electricity Network Service Provider. The Network Exemption Guideline allows for private supply of electricity to third parties, striking the balance between consumer protection,benefit and practical scenarios. This was the AER's first published major update of the Network Exemption Guideline since 2018, having previously released draft positions and review documentation that has been included in this latest publication.
Closure of ND1 and ND2 activity classes
Embedded Network owners with less than 10 residential or non-residential customers who could previously utilise a deemed exemption to operate and supply electricity can no longer do so, with new networks now falling under the Registrable categories of exemption requiring an application with the AER and the applicable conditions of that exemption.
Introduction of a voluntary primary registrant for exemptions and exempt parties
Applicants can now voluntarily nominate a 'Primary Registrant' in situations where there are multiple parties involved in owning, controlling or operating the network. The Primary registrant must be able to comply with the exemption conditions and may take on the compliance responsibility of the exemption conditions.
Protections for customers experiencing hardship on network only arrangements
Exempt providers with customers who have opted to go on market, and now invoicing them for network costs, are subject to a payment difficulties framework mirroring that of the Retail Exempt Selling Guideline.
New reporting condition (C1.18) requiring reporting of residential customers numbers, effective 1 July 2026
Effective from 1 July 2026, exempt providers in the NR2 Activity Class must report to the AER during the month of July each year, their updated number of residential customers. This may be undertaken by a voluntary Primary Registrant.
New notification condition (C1.19) for Authorised Representative Details
Effective immediately, Exempt providers must notify the AER within 20 business days of a change to the details of their authorised representative (i.e. billing agents or otherwise), including details such as the name, email, address and telephone number.
Individual Exemption Process
There have been substantial updates to the retrofit process. These include information around compliance with relevant jurisdictional requirements, contingency supply arrangements, independent assessment of the design and installation, and requirements for specific research, analysis or evidence supporting how the proposed supply will meet and be consistent with the National Energy Objective (NEO).
Changes in site ownership must be communicated via the AER portal on exemptions, prior to the change occurring
Change, amendment or cessation of an exemption must be communicated in advance to the AER via the exemptions portal on the AER website. During a transition period, stakeholders should be aware that until the date of the new exemption becoming effective, the existing conditions will still apply to the previous exemption holder.
Updates to the NDO1, NRO1 and NRO2 classes around requirements for AEMO approval and definitions.
Updates to the glossary for key definitions in these exemption classes have clarified their application for embedded network use cases, including the incorporation of the Small Resource Aggregator (SRA)and Integrated Resource Provider (IRP) roles.
During the consultation process, the AER identified that embedded networks had continued to expand rapidly through the NEM, with growth among residential embedded networks in NSW and QLD.Fortunately, the AER's action leading from 2017's AEMC changes has seen the market mature in that time, with stakeholder feedback supportive of a movement towards closer mirroring of consumer protections between embedded network customers and those within the broader retail market. Unsurprisingly, the revisions that have been implemented within the guideline are aligned to that stance, with further conditions put in place to strengthen customer protections and improve transparency.
Closure of the D1 and D2 activity classes
With the closure of the ND1 and ND2 network exemption categories, the corresponding deemed retail exemption classes are now also closed. New applicants will fall under the Registrable exemption categories, relevant conditions and apply via the AER website.
Family Violence protections policy (effective 1 January 2026 for new exemptions and 1 July 2026 for existing applicable exemption classes)
While the AER implemented their Hardship Policy requirements under the previous Retail Guideline release, the latest version now incorporates Family Violence Policy provisions. This applies to both small business and residential activity classes, with significant requirements and obligations in place for relevant exempt sellers.
Pricing visibility Effective 1 July 2026
Exempt Sellers in relevant activity classes will now need to publish their tariffs and charges on their website, or their billing agent's website, including a percentage discount from local area retailer's standing offer. The AER has indicated that they will utilise local ombudsman feedback to enforce this.
Must notify within 20 business days of a change to details and authorised representative
Mirroring the Network Exemption Guideline, Exempt parties must notify the AER of changes to the details of their authorised representative within 20 business days of any change.
All Retrofits require AER Approval
The AER has made changes to many elements of the retrofit process and documentation, providing further guidance and clarification. This includes the requirement that in all cases, AER approval is required prior to converting an Embedded Network. This includes explicit statements that retrofitting a site must meet the requirements of both the Network and Retail Exemption Guideline processes.
Agents used for billing must comply with relevant sections of the exempt guideline
While third party service providers support exempt sellers and are not themselves required to hold a retail exemption, they should still comply with the relevant exemption conditions that pertain to the service they provide for their client. However, this is not a transferral of responsibility by the exemption holder to the service provider. The exempt party is still responsible for adherence with their conditions.
R6 Activity Class re-opened
Throughout the consultation process the AER has become aware of circumstances where the R6 activity class can provide mutual benefits to both the seller and the customer and as such has been re-opened. This relates to the sale of metered energy to commercial/retail customers at a site or premise that is adjacent to the site that the seller owns, occupies or controls.
The supply and sale of energy within embedded networks continues to move further towards requiring the services of a professional provider, particularly as the burdens of on-selling increasingly mirror the obligations of market retailers. Smaller embedded networks or those who have been operating for extended periods of time under self-management will soon face greater challenges from their obligations to comply with current requirements. While the AER acknowledges the potential benefits of embedded networks, including proven pricing benefits, their approach to these revised guidelines is clear and one that all stakeholders should be aware of when determining where to prioritise the next steps for their Embedded Network/s.
Customer protections and rights are a key pillar of the changes made by the AER, taking further steps as available to them for both supply and sale of energy. Similarly, removal of deemed exemption classes will result in a significantly larger picture of the embedded network market and bring the requirements of these smaller networks in line with those of larger size. Notably for Embedded Network Operators, it is explicitly stated that Agents performing services at an exempt network should comply with the relevant sections of the retail guideline that apply to their service.
Now more than ever, having the right partners supporting you to ensure you retain knowledge over time and stay on the right side of your embedded network requirements is crucial. There are a plethora of compliance layers detailed knowledge required to ensure that, across both supply and sale of energy, you are on top of your obligations and take any next steps appropriately.
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While the AER has taken all available steps to implement further protections for Embedded Network Customers, they acknowledge that there remain systemic gaps in how they can regulate through the Exemption Guidelines to address these concerns. Within their final decision, the AER noted that jurisdictional protections and regulation may be required to help address some of these gaps. Over recent years, most states within the NEM have in fact undertaken some form of review of embedded networks within their jurisdiction. The proposed path forward following each review has varied significantly and highlights the importance of strong central regulations that is consistent across the NEM, improving the ability for customers, providers and regulators to deliver efficient and effective outcomes for customers. That said, it is inevitable that jurisdictional governments are likely to act on their own review outcomes. Whether this takes the form of a licensing framework as is proposed within Victoria, or altered powers of enforcement and pricing protection as has been tabled in NSW; further change aligned to customer protection and outcomes is very likely to continue.
Alongside these changes, we have already seen DNSPs consider Embedded Network tariffs that are likely to have commercial viability impacts for some embedded networks. Embedded Network Operators and Owners will watch closely over the coming years to see how the AER responds to these outcomes, as well as the approach of distributors in other states that may look to mirror this approach.
With many Embedded Network Stakeholders not having had to take a detailed look at their compliance and conditional responsibilities, these updates mark a strong reason to take that time now for two reasons. Firstly, there are more updates across the two guidelines than in the previous drafts, or previous Retail Exempt Selling Guideline update. Secondly, the AER has made specific reference to their powers, ability and reasoning for cancelling Exemptions should there be material breach of their conditions. This highlights an intent to take action on compliance issues,rather than just monitor overall performance of stakeholders under the exemption framework.
Should you like to discuss what these changes mean for you or your networks or require further information about any of the above, please don't hesitate to reach out to our team either via the contact details linked HERE or submitting a query via the contact form.
