The Australian Energy Regulator (AER) announced $40,000 in penalties for a caravan park operator for allegedly selling electricity to customers at caravan parks without holding either a retailer authorisation or appropriate retail exemptions, as required to do so by law.
There have been several such infringement notices in recent years for entities selling energy without holding the correct exemption.[1] In light of this, it would be wise for all energy sellers to carry out an internal compliance audit and check that their operations are compliant.
- The issue
Under section 88 of the National Energy Retail Law, any individual that sells energy must hold a retail authorisation of an exemption from the Australian Energy Regulator, when operating in the National Energy Customer Framework jurisdictions (Queensland, NSW, ACT, and Tasmania). Retail or multiple activity exemptions are also required by the Essential Services Commission for selling energy in Victoria.
Retail authorisations and retail exemptions have some similarities. They both require sellers of energy to cohere with consumer protections which include:
- consent requirements
- minimum requirements for invoices
- disconnection restrictions
- payment plan requirements
- life support provisions.
A retail authorisation, however, subjects the seller of energy to more onerous obligations under the National Energy Retail Law and National Energy Retail Rules including:
- extra informed consent requirements
- providing ‘standard retail contracts’ to customers
- disclosure requirements
- pricing information requirements (e.g. submission to the ‘Energy Made Easy’ website)
- performance and compliance reporting to the AER.
Historically, retail exemptions have been the more common method for selling energy within an ‘embedded network’;[2] the kind of private energy network which is often found in caravan parks, shopping malls, strata and retirement villages. Any embedded network wishing to determine whether they are eligible for an exemption or should operate under a retail authorisation should consult the Retail Exempt Selling Guideline.[3]
If an energy seller does not hold either a retail authorisation or an exemption then it is likely that their customers are being deprived of important customer protections, hence why this is an enforcement focus of the AER.
Note, a new framework for embedded networks that would require most entities to hold a retail authorisation has been recommended by the Australian Energy Market Commission and is due to be considered by the Council of Australian Governments’ (COAG) Energy Council.[4]
With respect to the latest penalties, while the caravan park operator held a range of different exemptions, it did not hold exemptions specifically for the two sites in question, as it was required to do so.
- The difference between a retail, network and generation exemption
It is common for embedded networks to not only involve the sale of energy to customers but its distribution (through an embedded network), and sometimes its generation (such as through solar PV). Any party that owns, controls or operates an embedded electricity network needs to ensure that they hold a ‘network exemption’ or distribution licence, in addition to any retail authorisation or exemption.[5]
Those owning, controlling or operating gas distribution pipelines need to check whether this requires a licence in the particular jurisdiction they operate in.
If generating energy, an entity should check whether they are required to hold a generation registration exemption as determined by the Australian Energy Market Operator.
- What you need to do
Any entity involved in the operation of an embedded network, whether through selling energy, operating network assets or generating energy, should carry out a compliance check to ensure they are fully compliant. This includes asking the following questions:
- Does every entity that owns, operates or controls an embedded network hold the necessary network exemption? I.e. it is not enough for just one of those entities to hold the exemptions.
- Does every entity that sells energy on the embedded network also hold a retail exemption or retail authorisation?
- Are entities selling under the correct type of exemption (e.g. deemed versus registrable) and correct exemption class (e.g. R4 or D3)?
- Is an exemption is in place for every site that energy is sold in? Note that one exemption cannot cover multiple sites.
- Are all exemption details on the AER website correct and up-to-date? E.g. are all the National Metering Identifiers (NMIs) for that site listed?
- Is there compliance with all state laws which also place restrictions on embedded networks? For example, in NSW and Queensland there are restrictions in place which restrict how much can be charged for energy in residential parks and manufactured housing.
If we can be of any further assistance, please don’t hesitate to contact us.
[1] See also https://www.aer.gov.au/retail-markets/compliance/enforcement-matters/infringement-notices-issued-to-taplin-for-allegedly-selling-energy-without-appropriate-authorisation-or-exemption and https://www.aer.gov.au/retail-markets/compliance/enforcement-matters/property-company-stockland-pays-five-infringement-notices-for-selling-electricity-without-an-exemption.
[2] This is changing with many more energy sellers in embedded networks now holding retail authorisations.
[3] https://www.aer.gov.au/retail-markets/retail-guidelines-reviews/retail-exempt-selling-guideline-march-2018.
[4] For more information see https://www.aemc.gov.au/sites/default/files/2019-06/Updating%20the%20regulatory%20frameworks%20for%20embedded%20networks%20-%20FINAL%20REPORT.PDF.
[5] For further information on network exemptions see https://www.aer.gov.au/networks-pipelines/guidelines-schemes-models-reviews/network-service-provider-registration-exemption-guideline-march-2018.
