The AER sets the amount of revenue that network businesses can recover from customers using the electricity networks in the NEM (QLD, NSW, SA, ACT, VIC and TAS). The revenue component affects the distribution component of a customer's electricity bill. The network businesses periodically apply to the AER to assess their forecast expenditure and revenue requirements (typically, every 5 years).

The AEMC has determined that distribution businesses must move towards tariff structures that better reflect the efficient costs of providing network services to consumers, such as peak and off peak (time-of-use tariffs). The reform will allow solar PV, electric vehicles and batteries to be efficiently integrated into the grid. As such the AER is adapting by allowing competitive markets to be more transparent and allowing choice and innovation while still maintaining consumer protection through the regulatory framework.

Current tariff structures may not necessarily signal costs to consumers of electricity use during peak times with some tariffs currently only based on total usage. Those who use electricity at peak times will pay for it under the new structures, at rates that better reflect the impact their high use places on delivering electricity at those peak times. Proposed changes consolidate and simplify existing tariffs by including a charge for maximum demand as well as usage. Capacity management at peak times is a key driver for investment by the networks and the proposed tariff structures will allow network providers to manage capacity more accurately by time and location.

From a residential and small business customer perspective incorporating a demand based component into the tariff structure will allow them to have more control and manage their demand through demand side initiatives such as choice of appliances, electricity plans better suited to usage patterns, and use of electric vehicles, batteries and solar panels.

Residential and small business customers who have a relatively flat or steady demand profile are expected to benefit most from the changes. Customers who have peaky or fluctuating demand are expected to see higher electricity charges assuming they do not alter usage patterns. The actual impact varies depending on the network provider and how they propose to manage the transition to the new tariffs.