Are you compliant with the disconnection rules?

Are you compliant with the disconnection rules?

AU Energy Compliance

The Australian Energy Regulator (AER) recently released summaries of compliance audits for 2017 in relating to customer disconnection and AER reporting processes.[1] In today’s article, we look at the audit outcomes and what retailers might do to ensure they are compliant with the disconnection rules.

disconnection rules - moose head

Photo by Malte Wingen on Unsplash

By Dr Drew Donnelly, Regulatory Specialist, Compliance Quarter


Under AER’s Compliance and Procedure Guideline (the Guideline), and the National Energy Retail Rules (NERR), retailers are required to report to AER on breaches of certain NERR obligations at prescribed intervals and in a prescribed manner. At the same time the Guideline sets out the rules for when the AER may require compliance audits to be carried out. The AER required that audits be carried out by five retailers in relation to the customer disconnection rules. We set out the finding of these audits below and indicate what retailers could do in response.

Compliance reporting to the AER

Several retailers were found not to be in full compliance with reporting requirements under the Guideline. Retailers must report to AER at the following intervals:

  • Immediately, when certain retailer-initiated de-energisation and life support obligations are breached;
  • Quarterly, in relation to some de-energisation and re-energisation rules;
  • Half-yearly, in relation to explicit informed consent, customer hardship, payment plans, energy marketing activities, billing, some aspects of market retail contracts, notice on deployment of new meters and retailer interruption to supply.

Retailers need to ensure that they have the right processes in place for accurately recording breaches for reporting purposes and appropriate training for staff.

Rule 111 –De-energisation for not paying bill

Under NERR 111, a strict procedure must be followed if a customer is to be disconnected for not paying a bill. The compliance audits found that it could not always be verified that a retailer had used “best endeavours” to contact a customer after a disconnection warning notice had been sent. Similarly, in one case, there was no record as to whether customers had been offered two payment plans within the 12-month period prior to disconnection for non-payment (as required by subrule 111(2)).

Retailers must ensure that the process they follow around de-energisation is carefully recorded and recognise that ‘best endeavours’ sets a high bar for retailers. It is unlikely to be enough, for example, to send a notice electronically to the customer with no acknowledgement of receipt from the customer.

Rule 115 – De-energisation for non-notification by move-in or carry over customers

In one case, wrongful de-energisation occurred as a result of disconnection warning notices not being sent in a mailing error, as required by this rule.

Retailers should regularly test any IT systems to ensure that their system for sending disconnection notices is robust.

Rule 116 – When retailer must not arrange de-energisation

This rule sets out a range of circumstances where disconnection is not permitted. This includes when the customer has life support needs or where they have made a complaint to the relevant Ombudsman about the proposed disconnection. This rule has been partially breached in at least one case.

Retailers need to ensure that staff are appropriately trained as to when disconnection is not permitted.

If you would like us to review your policies for compliance with the disconnection rules or AER Guideline, or would like specific training with respect to the disconnection rules, please get in contact with us.

[1] See

Three innovation opportunities presented by the AEMC 2018 Retail Energy Competition Review

Three innovation opportunities presented by the AEMC 2018 Retail Energy Competition Review

AU Energy Compliance

In today’s article, our focus is not on any regulatory proposals, but three innovation opportunities for energy businesses that are suggested by AEMC’s observations in the Review.

The Australian Energy Market Commission (AEMC) has just released its mammoth (351 page) review (the Review) of competition in retail energy markets for 2018.[1] In one sense, it is a depressing read. The overriding theme is increased consumer dissatisfaction and hardship as a result of retail price increases over the period. In response, AEMC has recommended various regulatory reforms to improve the efficient operation of the energy retail markets. Of course, there are already a plethora of initiatives underway at both the Commonwealth and State/Territory level with that stated goal. In our May Energy Update, we identified 17 (!) consultations initiated by government agencies in May relating to electricity, the majority focused on a more efficient retail market.[2]

innovation opportunities AEMC review - view of Sydney opera house

Photo by Liam Pozz on Unsplash

By Dr Drew Donnelly, Regulatory Speciliast, Compliance Quarter

The Price Increases

The major cause of price increases in 2017 was a substantial increase in wholesale costs, caused primarily by the retirement of the Northern and Hazelwood generators, as well as high gas commodity prices.[3] While retailers cannot directly control wholesale energy prices, AEMC observes a range of behaviour that retailers engage in that could be having a detrimental effect on prices, including:

  • Not engaging in network pricing regulatory processes;
  • Transferring complex tariff structures from network businesses into their own retail offerings;
  • Opaque discounting and tariff structures that make it difficult for customers to compare offers.[4]

Innovation Opportunity 1: Alternative Solar PV and Battery Solutions

As a response to increasing prices, AEMC notes the consumer-driven shift to solar photovoltaic (solar PV) and battery storage over the past year. Consider:

  • 154,877 residential solar PV installations in 2017, an increase of 25 per cent from 2016, which added 938MW of solar capacity to the National Electricity Market;
  • battery installations increased by around 275 per cent in 2017 from a low base, and consumer interest in household batteries increased considerably.[5]

AEMC observes that there are considerable barriers to solar PV adoption for some consumers such as renters, apartment dwellers and those of limited finance.[6] This suggests an opportunity for businesses that can offer innovative solar PV ownership arrangements and financing initiatives.

Innovation Opportunity 2: Data-driven innovation

AEMC notes the improved access to customer consumption data that has arisen from Smart Meter adoption.[7] This should be further amplified by the introduction of the new Consumer Data Right across the energy sector. This means more innovation opportunities for businesses that can leverage the consumer’s consumption profile to offer them a better energy deal.

Innovation Opportunity 3: Leveraging Innovation in Embedded Networks

AEMC notes the introduction of ‘power of choice’ to embedded network customers and the associated Embedded Network Manager role.[8] Much of the emphasis so far has been on the opportunities that this presents for market retailers who wish to serve embedded network customers. However, this also presents an opportunity for embedded network businesses themselves (such as embedded network owners, utility management companies and service providers); the opportunity to consider how they might leverage their physical and regulatory advantages to retain customers. Embedded network businesses should consider:

  • How smart meters at the ‘gate meter’ might be used to negotiate a better deal from their gate meter retailer;
  • How flexibility in metering requirements, compared to market retailers, can be used to cut costs in metering provision to customers;
  • How ownership and design of physical infrastructure (i.e. wiring, connection points and transformers) might be used to reduce costs to the embedded network. For market retailers, the physical infrastructure is controlled by network businesses and is subject to more stringent regulatory requirements.

For further support, please contact the Compliance Quarter team by clicking here. Or if you’d like to talk through the three innovation opportunities from the AEMC review, please feel free to book a call with us directly by clicking here.

[1] See

[2] See

[3] AEMC 2018 Retail Energy Competition Review, p6.

[4] Ibid., pii.

[5] Ibid., p137.

[6] Ibid., p150.

[7] Ibid., p111.

[8] Ibid., p38.

What is the new Financial Benchmark Regime?

What is the new Financial Benchmark Regime?

Financial Services

On 12 June the Australian Securities & Investments Commission (ASIC) announced the final regulatory regime for Financial Benchmarks. This regime, introduced through a 2018 amendment to the Corporations Act 2001, empowers ASIC to determine that certain benchmarks are ‘significant’ and to impose a licensing regime on the ‘administrators’ of those benchmarks. In today’s article, we ask, what is the new Financial Benchmark Regime?

What is the new Financial Benchmark Regime?

Photo by Paul Gilmore on Unsplash

By Dr Drew Donnelly, Regulatory Specialist, Compliance Quarter

Background: What is a Financial Benchmark?

A Financial Benchmark has been defined as:

an index or indicator calculated from a representative set of underlying data or information, used as a reference price for a financial instrument or financial contract or to measure the performance of an investment fund.[1]

Reliable Financial Benchmarks are crucial to the operation of financial markets. If Financial Benchmarks are inaccurate, that is, they fail to reflect underlying forces of supply and demand, financial markets cannot efficiently allocate capital. Inaccurate Financial Benchmarks can happen for a range of reasons, including intentional behaviour of traders, such as:

  • trading with the intent of altering a benchmark rate for a financial institution’s own benefit;
  • inappropriate handling of client orders or positions;
  • inappropriate disclosure of confidential client information (e.g. by disclosing client orders to traders at competing banks);
  • inappropriate submitter conduct (e.g. by making submissions in order to reduce the institution’s borrowing costs).[2]

A licensing regime has been introduced in order to counteract and prevent such behaviour.

The Five Significant Financial Benchmarks

The five significant Financial Benchmarks are:

  • The Australian Bank Bill Swap Rate (BBSW) administered by ASX Benchmarks Pty Ltd. This identifies a set of key short-term interest rate benchmarks for the Australian dollar and is the key reference rate used by issuers of securities in Australian dollars;
  • The S&P/ASX200 Index administered by S&P Dow Jones Indices LLC. This is an equity index which measures the performance of the 200 largest index-eligible stocks listed on the ASX;
  • The ASX Bond Futures Settlement Price administered by ASX Clear (Futures) Pty Limited. This is used to calculate the value of Bond futures contracts for 3-, 10- and 20-year Australian Government bonds listed on the ASX;
  • The Australian Interbank Overnight Cash Rate administered by the Reserve Bank of Australia. This consists in the weighted average of the interest rate at which overnight unsecured funds are transacted in the domestic interbank market. The Cash Rate is the Reserve Bank Board’s operational target for monetary policy and is also an important benchmark for the Australian financial markets.
  • The Australian Consumer Price Index (CPI) administered by the Australian Bureau of Statistics.  This measures quarterly changes in the price of a range of goods and services which are a significant portion of household expenditure. It is a benchmark in a for many financial products, including bonds and derivatives.[3]

The Financial Benchmark Licensing Framework

Under Part 7.5B of the Corporations Act 2001, ASIC is empowered to set up a licensing regime for administrators of financial benchmarks that are designated ‘significant’. Central to the licensing regime for the administrators of these Financial Benchmarks are the following obligations:

  • a requirement to act efficiently, honestly and fairly in generating and administering each benchmark specified in its licence;
  • having adequate arrangements for the governance and management of the licensee. These must be reviewed, audited and tested periodically;
  • if outsourcing any of the functions involved in generating or administering a licensed benchmark, documenting this and having adequate arrangements put in place to ensure compliance;
  • transparency to the public with respect to the benchmarks;
  • a requirement to co-operate with ASIC;
  • having adequate arrangements for handling conflicts of interest in relation to generating and administering each of its licensed benchmarks;
  • a requirement to have sufficient human, technological and financial resources in place;
  • record-keeping obligations.

To read more about the new Financial Benchmark regime go to

Feel free to leave a comment or contact us if you’d like further information or have any questions.


[1] See ASIC Report 440: Financial Benchmarks (2015) at, para 20.

[2] Ibid, para 46.

[3] See ASIC Corporations (Significant Financial Benchmarks) Instrument 2018/420, section 5 and associated Explanatory Statement, section 4.