Australian Energy Regulator’s Statement of Expectations

Australian Energy Regulator’s Statement of Expectations

AU Energy Compliance

On 27 March 2020, the Australian Energy Regulator (AER) released a ‘Statement of Expectations’ which sets out ten principles they expect businesses to adhere to during this time, to the maximum extent possible.

While the statement is not legally binding, it is obviously in energy retailer’s bests interests to comply with the statement. In our view, it is likely that the Government will codify obligations in due course.

Below, we look at each of the ten principles in turn.

PRINCIPLES

1.Offer all residential and small business customers who indicate they may be in financial stress a payment plan or hardship arrangement, regardless of whether the customer meets the ‘usual’ criteria for that assistance.

2. Do not disconnect any residential or small business customers who may be in financial stress, without their agreement, before 31 July 2020 and potentially beyond.

 

3. Do not disconnect any large business customer, without their agreement, before 31 July 2020, and potentially beyond, if that customer is on-selling energy to residential or small business customers (for example, in residential parks or retirement villages).

NOTES

  • Retailers should not refuse entry into a hardship program on ‘technical grounds’. The AER is likely to be actively testing a retailer’s understanding of their obligation to assist customers in hardship at this time. It is in a retailer’s best interests to work with a customer as soon as possible and to provide whatever assistance they are able to provide. 

 

  • Disconnections should not occur unless a customer agrees. The AER is concerned to ensure that any existing hardship is not exacerbated by disconnection of energy supply. The AER has made specific reference to embedded networks here. 

 

 

4. Defer referrals of customers to debt collection agencies for recovery actions, or credit default listing until at least 31 July 2020.

5. Be prepared to modify existing payment plans if a customer’s changed circumstances make this necessary.

6. Waive disconnection, reconnection and/or contract break fees for small businesses that have ceased operation, along with daily supply charges to retailers, during any period of disconnection until at least 31 July 2020.

  • Retailers can continue to send reminder notices etc with respect to non-payment but should ensure that such notices are not misleading with respect to the potential for disconnection of that customer’s energy supply. This may require changes to your reminder notice templates. 
  • Retailers should ensure that system changes are made to give effect to charge limitations. 
  • A point of contention here will be whether the LNSPs agree to waive Daily Supply Charges. We expect to see more announcements on this issue soon.

7. Prioritise the safety of customers who require life support equipment and continue to meet responsibilities to new life support customers.

8. Prioritise clear, up-to-date communications with customers about the issues addressed in this Statement, including by keeping website, social media and call centre waiting and hold messages up to date, so customers can readily access updates when they need them and relieve some pressure on affected call centres.

9. Prioritise clear communications with customers about the availability of retailer and other supports, including the availability of payment plans, energy efficiency advice and fault repair.

10. Minimise the frequency and duration of planned outages for critical works, and provide as much notice as possible to assist households and businesses to manage during any outage.

  • Retailers should take care where a customer is due to return a medical confirmation form. Such a customer may not be able to visit a doctor and so retailers should provide additional times for responses. 
  • Retailers should develop customer communications, ensure that their call centre staff are able to identify hardship and consider wider comms including notices on bills and on websites. 
  • Retailers should ensure that they have a clear understanding of the assistance that they can provide customers including government rebates and concessions. 
Alinta Energy Pays Penalties

Alinta Energy Pays Penalties

AU Energy Compliance

Energy retailer Alinta Energy has paid numerous penalty notices to the Essential Services Commission (ESC) for alleged breaches of Explicit Informed Consent obligations. 

A retailer is prohibited from requesting the transfer of a customer without EIC. The alleged breach was that Alinta Energy’s agents failed to obtain EIC for customers who were then switched to Alinta Energy. According to reports in a newspaper the agents used false accents to pretend to be the customers in question. 

This penalty highlights the importance of retailers having robust processes in place to prevent EIC breaches and fraud by agents. Even a verification call can be thwarted by a clever sales agent. As discussed elsewhere, retailers should pay careful attention to the incentive structures they use for sales. If a group of people are incentivised to obtain sales, it shouldn’t come as a surprise that some within that group resort to illegal or unethical means to obtain that incentive. 

The impact of COVID-19 on Energy Retailers

The impact of COVID-19 on Energy Retailers

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COVID-19 is having a dramatic impact on all areas of the economy. On an individual level it is resulting in illness, isolation, and a loss of income.

Energy retailers provide an essential service that is at the foundation of our economy. In this article we look at the consequences of COVID-19 on energy retailers.

  1. Existing Contracts & Key Service Providers

Many energy retailers are reliant on third party service providers for functions including billing and customer service. Customer service is typically centralised in call centres which may, over the coming months, simply close down or have reduced capacity.

Energy retailers should review the contracts they have in place with key service providers and take particular note of the following:

  • Termination for convenience

Now is an important time to review your service provider contracts and the circumstances in which termination occurs.

Should your contract expressly provide for ‘termination for convenience’ it may be open to your business or, potentially, the service provider to rely on such a clause. A termination for convenience clause allows the benefiting party to terminate the contract for any reason. 

A termination for convenience clause removes the need to wait for a breach, repudiation, frustration, or some other stated termination trigger.

  • Force Majeure

Force Majeure is an expression that derives from French Civil Law. A force majeure clause is a risk allocation mechanism used to limit the liability of a party for events which delay, restrict, or hinder the performance of the contract – where such events are beyond the control of the parties and fall within defined triggers. 

The party seeking to rely on a force majeure clause has the ‘burden of proof.’ i.e. is required to prove that the clause has been triggered. The triggers of a force majeure event often include acts of God such as fire, storms, earthquakes, and floods, as well as civil unrest, strikes, riots, and acts of war or terrorism.

As COVID-19 has and will continue to have far reaching consequences, a force majeure clause may be triggered even where the clause does not specify that an epidemic or pandemic is a trigger i.e. triggered as a result of a secondary consequence of COVID-19.

Force majeure is different to frustration. Force majeure is a contractual construct and typically operates to suspend performance. Frustration, on the other hand, operates where the performance of the contract is impossible or radically different and termination results. As such, force majeure can only be relied upon if express provision is made for it within the contract (it cannot be implied as a term of the contract). 

  • Frustration

The common law principle of frustration may come into play where performance of a contract becomes impossible or illegal. For example, in the case of Taylor v Caldwell, a licence to use a music hall for a series of performances was held to be frustrated when the hall burnt down. As a result, the owner of the hall was not liable to reimburse the hirer for advertising expenses and the hirer was relived from the obligation to pay the licence fee for use of the hall. 

A contract will be frustrated where, without the default of either party, circumstances would result in performance being radically different from that originally contemplated in the contract. So the question is (as expressed in Brisbane City Council v Group Projects Pty Ltd by Stephen J:)  ‘how dramatic must be the impact of an allegedly frustrating event. To what degree or extent must such an event overturn expectations, or affect the foundation upon which the parties have contracted…’

In considering frustration, a court will look at whether events were foreseeable at the time the contract was made. Consequently, it will be harder to argue that COVID-19 has frustrated a contract made yesterday than it would be if the contract had been made in November 2019.  

There are some clear cases where a contract will be frustrated: such as when a customer service team has been given an order by a government department to isolate themselves for a set period of time, their contractual obligation to attend a particular location to take calls will be frustrated.

  1. Customer Hardship

Under the Retail Law, all authorised retailers must develop, maintain and implement customer hardship policies for their residential customers. Hardship policies represent regulatory obligations- if a retailer breaches their hardship policy they will be in breach.  Retailers are required to identify customers experiencing payment difficulties due to hardship and to assist those customers to better manage their energy bills on an ongoing basis.

COVID-19 clearly has the potential to cause financial hardship as families are isolated, unable to work, or unable to derive their usual income. Household illness is recognised, in standardised statement one of the AER’s Hardship Guideline, as being a factor that may give rise to financial hardship.

Given the increased likelihood of financial hardship over the coming months, retailers need to ensure that they strictly comply with the Retail Law and with their own Hardship Policies. Typically, this will mean that retailers:

  1. Need to exercise vigilance in their monitoring of customer accounts- specifically looking for customer’s self-identifying, for missed payments, and for customers who are sent disconnection warning notices.
  2. Should consider the assistance they are planning to provide to customers experiencing hardship as a result of COVID-19. There are a range of government rebates and concessions available and emergency payments- such as EAPA- that may be available to those experiencing hardship. Retailer should ensure that they are familiar with the support options available and that all customer facing staff understand the measures that can be taken to support someone experiencing hardship.
  3. Consider their approach to the disconnection of customers for non-payment. There is no prohibition on the disconnection of energy supply during pandemic- as there is during ‘extreme weather events’ (see r 108 of the National Energy Retail Rules) however there is a greater risk that a retailer will disconnect a customer who is in hardship at this time. Consequently, additional steps may need to be taken to ensure that disconnection is conducted in accordance with the rules.

 

  1. Business Continuity

As with all other businesses, retailers should be examining their business continuity plans and ensuring that they are fit for purpose.

Should your employees work from home, ensure that they are set up to do so and that you are discharging your obligations under Workplace Health and Safety legislation. Over the coming days we will be developing specific online training for our clients on working from home- including on how to set up a safe workplace, how to communicate with your staff, and what to avoid. 

Attention all caravan parks, strata and other embedded networks: Do you hold all the correct exemptions to sell and distribute energy?

Attention all caravan parks, strata and other embedded networks: Do you hold all the correct exemptions to sell and distribute energy?

AU Energy Compliance

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.

  1. 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.

  1. 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.

  1. 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.

Why Compliance Matters

Why Compliance Matters

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CQ covers (13)
Connor James

Connor James

Connor James is the Principal of Compliance Quarter.

Why Compliance Matters

Unsurprisingly, it is our view that compliance matters. We say this in the context of a business environment characterised by increasing and increasingly complex regulation.

More Regulation and More Complexity

Despite various governments now having ‘deregulation’ Ministers or Departments, the truth is that regulation is increasing. Whether it’s driving home from work in complying with the Road Rules or speaking to a customer at work in complying with the National Energy Retail Rules, much of what we do on a day-to-day basis is regulated.

The purpose of regulation is to codify society’s expectations. Society’s expectations are constantly changing, and so, regulation is constantly trying to catch up. This is evident in industries that are marked by technological advance with regulation constantly lagging technological advances. Despite various shortcomings, regulation -by and large – does its job and does it well. 

Regulatory Burden

The consequence of additional regulation and additional complexity in regulation is regulatory burden. Regulatory burden is felt both at an organisational level and at an individual (senior executive and director) level.  Personal liability on directors continues to expand, including recently personal liability with unpaid PAYG, meaning that directors can no longer rely on the protection afforded to them by the corporate veil.

A lot of regulatory burden can be lifted with simple rules based automation, but not all. Ask any lawyer who has argued about the meaning of a specific sub-section of an act in the Supreme Court whether all legislation can be codified and be prepared to be laughed at. 

Why Comply

Businesses should understand and operate to the expectations of the society in which they operate.  A business that is not operating in a compliant manner is typically operating outside of society’s expectations and often with negative consequences for its customers, employees, and wider society.

Compliance is closely linked to ethics. Ethical conduct is typically compliant conduct and unethical conduct is often non-compliant. When making a business decision, rather than starting with your lawyer on a technical question of interpretation, first ask yourself if the outcome would be ethical. 

How to Comply

The first step every business should take in seeking to comply is identifying the various applicable obligations and standards. Many businesses have not taken this first step and operate without knowing what they should or indeed must be doing. All businesses should have a regulatory obligation register that sets out all of the key applicable obligations and standards. All businesses should have a process in place to ensure that their regulatory obligation register is up-to-date at all times.

Once your business has an obligation register it needs to consider what steps it will take to ensure compliance. The steps that a business takes to ensure compliance are the controls that it has in place. Controls can take the form of training, regular meetings, updates, systems, and policies and procedures.

Once controls have been mapped to obligations, on an ongoing basis, your business should consider whether those controls are adequate and fit for purpose. This means monitoring non-compliance as you would monitor any other risk. The consequence of non-compliance is obvious and may include fines, negative PR, loss of revenue, and termination of licence.

Of all the businesses that we are involved with, we can predict future non-compliance with close to absolute certainty based on the attitude demonstrated by its directors and senior executives. When we come across a senior executive in a business that has no interest in compliance we can tell that that business is significantly more likely to be found to be non-compliant, to be fined, to lose revenue, or to lose a licence. 

In order to ensure compliance, senior executives and directors must have a good understanding of their businesses’ regulatory obligation registers and the function of each control. If, for example, you are a senior executive in an energy retail business you must read the National Energy Retail Rules and the various other regulatory guidelines. Once you have done so, you should then ask your business whether it has adequate controls in place, whether it is monitoring the effectiveness of those controls, and whether your business is operating in the way that society would expect it to. 

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How to obtain an energy retail authorisation

How to obtain an energy retail authorisation

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If you’re planning to become an energy retailer in those states that have adopted the National Energy Customer Framework, you will require a retail authorisation issued by the Australian Energy Regulator. Broadly, you will need to demonstrate that you:

  • Have the necessary organisational and technical capability;
  • Have financial resources, or access to resources, to operate as a retailer; and
  • Are a suitable person to hold a retail authorisation.

In this post we look at some of the key components of an energy retail authorisation application. 

Organisational and technical capability

When examining your organisational and technical capacity to hold a retail authorisation, the AER will look at your industry experience, operational systems and staff expertise. In practice this means reviewing the resumes of your key staff, the various policies and procedures that you have to ensure compliance with all applicable law, and the systems that you will rely upon to ensure that you operate compliantly.

Experience in the industry

The AER will expect you to have key staff and executives with the necessary level of experience in the energy market. Typically, this means that you will need to have individuals with responsibility for operations, compliance, finance, and risk management who each have experience in the energy market. If you do not have individuals with such experience, you will need to explain how you will bring such capability into the business for example by working with an experienced consultant.

Business plan

your business plan will form the foundation of the AER’s assessment of your retail authorisation application. It provides the context of your proposed operations and scope of operations. In broad terms, your business plan should describe your business, its objectives, its unique selling position, financial and operating forecast for the first 3 to 5 years including anticipated customer growth, revenue and expenses, and a cash flow analysis.

Compliance and risk management

Energy retail is a highly regulated industry, more so than any other industry in Australia. In your energy retail authorisation application, you will need to clearly demonstrate how you are able to comply with all applicable laws. This means that you will need to show that you have a compliance program that is consistent with the relevant Australian standard and that you have various documents in place that set out how you will comply. Alongside compliance is risk management. You will need to provide details of your risk management strategy covering both financial and operational risks.

Financial capability

The AER carries out a point in time assessment of an applicant’s financial capacity. They are looking to ensure that an applicant has (or has access to) adequate financial capacity to support the planned retail operations. Consequently, such an assessment relies heavily on an applicant’s business plan and approach to managing financial risk. In practice, the AER looks to ensure that you will have access to capital equal to at least one years’ worth of operating expenses assuming that you have no revenue. In examining operating expenses, the AER would expect you to include staffing, insurance, accommodation, wholesale acquisitions, network service costs, customer support and billing system cost, and ombudsman fees.

In terms of satisfying this criterion, the AER will examine your financial reports, if you are an existing business, and details of your current financial position such as interim financial statements and bank statements. The AER will also examine your ownership structure, contractual arrangements, and require declarations from your chief financial officer or chief executive officer. Finally, the AER requires a written declaration from an independent auditor or from your principal financial institution stating that an insolvency event has not occurred, that an insolvency official has not been appointed, and that they are unaware of any other factor that would impede your ability to finance your energy retail activities under the authorisation.

The AER’s assessment of financial capacity is a point in time assessment. On an ongoing basis AEMO is responsible for oversight of a retailer’s financial capacity with respect to wholesale acquisitions.

Suitable Person

The question of whether a person is suitable to retail energy goes beyond an assessment of financial and organisational capacity and extends to a person’s character and reputation. The test here is similar to that applied when a regulator is considering whether a person is ‘fit and proper.’ In examining suitability, the AER looks to previous commercial dealings, as well as that of your offices, associates and any other entity that exerts control over your business activities. Such assessment looks at the degree of honesty and integrity shown in those commercial dealings and whether you are likely to contribute to the national energy retail objective. In satisfying this criterion, you will be required to include a number of declarations including as to any previous criminal convictions and regulatory actions.

Webinar on obtaining a retail authorisation

In the following webinar we provide an overview of the application process for a retail authorisation along with detail on some of the common traps. 

Frequently Asked Questions

No, Victoria has a separate guideline and there are a range of significant differences in the process and expectations of the Victorian Essential Services Commission when compared to those of the Australian Energy Regulator. Typically, you will require new documents i.e. a financial hardship policy, specifically for Victoria. You should also note that the Essential Services Commission also takes significantly longer to assess an application than the Australian Energy Regulator.

As noted above, you will need to satisfy the AER that you have access to the resources you require elsewhere for example from a consultant. 

If your entity is the one selling energy, it will have the need for a retail authorisation. There is no option to rent a retail authorisation. From the perspective of the AER, the applicant is the entity who was assessed and so needs to satisfy the eligibility criteria. 

If your main business activity is selling energy then it is likely that you will need a retail authorisation. There are various exemptions available if you are selling energy incidentally, for example if you are an owners corporation, however a number of these will be phased out over time.

There is no application fee payable to the AER. There is a fee to apply to become a market participate with AEMO, which is needed if you are going to trade on the energy market and supply on market customers. There are also fees for joining the ombudsman schemes in each state and, finally, SA charge a fee for retailers operating in their state. 

Ausgrid’s Proposed Embedded Network Tariff.

Ausgrid’s Proposed Embedded Network Tariff.

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Ausgrid's Proposal

The Australian Energy Regulator (AER) has published its determination on Ausgrid’s proposed Amendments to its Tariff Structure Statement (TSS). The AER has decided to not approve the proposed amendments which would have introduced a new network tariff for embedded networks. The AER was not satisfied that the threshold to amend the TSS had been met.

Ausgrid’s current TSS applies for the 2019 to 2024 period, and was approved by the AER in April 2019. In September 2019, Ausgrid submitted a proposal to amend its current TSS. The proposal sought to introduce a new network tariff for certain embedded networks on 1 July 2020.

The AER's Consideration and Conclusion

In considering the proposed amendment, the AER examined whether an event had occurred that was beyond the Ausgrid’s reasonable control and that could not have been foreseen by the Ausgrid at the time of the final decision, and secondly, whether as a result of the event, the proposed amended TSS would be, or would be likely to be, materially better comply to the distribution pricing principles than the existing TSS.
Ausgrid based its proposal on three events:

1. The AER’s decision not to approve its placeholder network tariff embedded networks;
2. An unanticipated forecast increase in the number of embedded network customers in its distribution area; and
3. the release of the AEMC’s final report on updating the regulatory arrangements for embedded networks.

The AER concluded that it was not reasonably satisfied that there was an event that occurred beyond Ausgrid’s reasonable control or that could not have been reasonably foreseen at the time the final decision was made.

Increased Retailer Reporting and the CDR in NSW

AU Energy Compliance

At the end of December 2019, the Independent Pricing and Regulatory Tribunal NSW (IPART) released its final report on its Review of the Performance and Competitiveness of the NSW Retail Electricity Market for 2018-2019 (Report). We previously provided an update upon the release of the interim report here. The Report found that smaller retailers have continued to increase market share and that prices fell for those customers engaged in the market. IPART also made three recommendations to the Minister for implementation in NSW going forward. These recommendations are aligned with two significant changes in the energy sector in 2020: i) the Consumer Data Right; and ii) increased price regulation and financial reporting.

Recommendation 1: Interval meter data on comparison sites

IPART recommended that: “Energy Made Easy and NSW Energy Switch should allow customers to input interval meter data to make more accurate estimates of customers’ bills under different offers. This should be ready for the launch of the Consumer Data Right on 1 July 2020”.

The Report found that more than 65% of customers in the Ausgrid distribution area would benefit from moving to time of use tariffs, but noted that the current comparison websites could be more useful to customers with time of use meters. NSW Energy Switch is a NSW Government backed price comparator service which operates by analysing customer bills, while the AER’s Energy Made Easy website allows customers to input their own data.

Noting the introduction of the Consumer Data Right for the energy sector later this year, IPART was conscious of the shift towards consumers taking control of their data and it is logical that energy regulators are in step with the Consumer Data Right being introduced by the Australian Competition and Consumer Commission (ACCC).

Recommendation 2: Publication of Bill and Consumption Data

IPART recommended: “that the NSW Government publish more information on the distribution of consumption and bills for customers that have used the NSW Energy Switch website to help inform regulators on how prices actually paid by customers are changing over time. This should be broken down by network area, market vs standing offers and published each financial year to identify differences pre and post the implementation of the Default market Offer (DMO)”.

This suggestion aligns with the recent rule change proposal to require regular financial reporting by retailers to assist regulators – the Retail Market Transparency Rule discussed here. The general tenor from policymakers and regulatory agencies has been that they do not have enough information to accurately report on the state of the retail market. In IPART’s case, the information it could have regard to was limited by statute.

The rationale is that publishing this information would assist the national regulators in their annual reporting on energy markets. However, given the information will be limited to NSW and other jurisdictions will not necessarily have access to similar data, it may be of limited use to the AEMC, AER and ACCC.

Recommendation 3: Removal of Market Monitor

IPART stated that: “Market monitoring by multiple agencies increases costs for taxpayers, retailers and consumers. Rather than requiring IPART to duplicate annual market monitoring, a better use of resources would be for IPART to investigate or review NSW specific matters as required”.

The primary reason given for this change is the implementation of the ACCC’s market monitoring role for the electricity market as a whole. It will report every 6 months on the state of the market for 7 years and has similar information gathering powers to IPART, but is not limited to NSW only. ACCC reporting is in addition to the annual reports on the retail market developed by the AEMC and the Australian Energy Regulator. It was noted that “market monitoring by multiple agencies increases costs for taxpayers, retailers and consumers”.

Importantly, while the regular annual reporting function is set to be abolished, IPART will still be available to review or investigate special matters pertaining specifically to the NSW market as required. The last time this function was exercised was in respect of metering installation timeframes in 2018.

Review of Queensland Energy Legislation

AU Energy Compliance

In mid-2018, the Queensland Government carried out an initial consultation on a Review of Queensland Energy Legislation (the Review). The Review covers the operation of the Electricity Act 1994, the Gas Supply Act 2003, the Energy and Water Ombudsman Act 2006 and the Liquid Fuel Supply Act 1984. Two further documents have now been released for consultation as part of the Review. The first options paper summarises ‘regulatory impact statements’ for a range of proposed changes while a second paper goes into more significant detail with respect to those changes.

In this article we summarise the areas of proposed change, focusing on those areas that will impact on authorised retailers and/or embedded networks in Queensland.

By Dr Drew Donnelly, Compliance Quarter

Rationale for the Review

The overarching motivation for the Review is to deal with the duplication and perceived lack of alignment between Queensland state energy laws and regulations and laws and regulations that are applied national/across states and territories such as the National Electricity Law. It also considers whether the existing laws are well-calibrated to deal with new forms of energy generation and distribution. The Review does not consider the operation of the National Energy Retail Law/National Energy Retail Rules in Queensland as they are the subject of a separate review.

General Changes

The changes described below are general recommendations and options for change:

  • Update of the purpose sections of Queensland energy laws to align with the purposes of national laws;
  • Removal of duplication in demand management and energy efficiency in state/territory and national laws, while maintaining demand management reporting for standalone power systems (e.g. micro-grids);
  • Interaction between state and national laws. It is recommended that definitions across both be made more consistent. In addition, work will be carried out to support the operation of the Distributed Energy Resource (DER) Register at the state level;
  • Licensing. It is proposed that there be changes to remove duplication to authorisation and exemption processes. Standalone power systems would no longer have a blanket exemption from distribution authorisation. It is recommended that electricity and gas distribution licensing be preserved, but further aligned with national arrangements;
  • Technical requirements. Currently there are restrictions on distributors providing services via stand-alone power systems (e,g, microgrids). There may also be a need for new technical rules to help deal with the sensitivity of isolated networks to solar installations as well as clearer rules about battery installations;
  • Modernise the regional feed-in tariff, including allowing for exporting form a battery systems.
  • Ombudsman Framework. It is recommended that the Energy and Water Ombudsman Queensland (EWOQ) be retained as a statutory entity, but that it be given greater flexibility. The Ombudsman would have increased flexibility to adjust scope of complaints and cost recovery arrangements, as well as stronger review powers.
  • Complaints processes. Currently complaints by public entities are overseen by both the Department of Natural Resources, Mines and Energy (DNRME) and the Queensland Competition Authority (QCA). It is recommended that this role be assigned entirely to the QCA.
  • Modernising emergency powers. Changes to the Electricity Act 1994 are recommended to replace the rationing order provisions with powers for Minister to declare an electricity supply emergency and make emergency directions. The Electricity Act 1994 and the Liquid Fuel Supply Act 1984 would be amended to include information request powers to support emergency management planning.
  • Offences and Enforcement. Currently enforcement powers are split between ‘the Regulator’(Chief Executive of DNRME) and the Queensland Competition Authority (QCA). Feedback is sought on whether the administrative and enforcement functions should be completely separated.

Changes with specific impact on retailers, embedded networks or exempt sellers

The changes proposed below are of particular importance to authorised energy retailers, exempt sellers or anyone who owns, operates, controls or provides services to embedded electricity or gas networks.

  • Powers of entry/access. It is proposed that there be new/enhanced rights of access in embedded networks to allow works for operation, maintenance and repair to support system safety and reliability;
  • Access to Ombudsman. Following other National Energy Customer Framework jurisdictions, it is recommended that small customers in embedded networks have a right of complaint to EWOQ. It is also recommended there be no annual membership fee for ‘exempt sellers’. It is proposed, rather, that that fees for access to the ombudsman be based on a sliding scale that relates to the number of customers the embedded network ‘exempt seller’ has. This option is seen as going partway to covering the costs associated with an Ombudsman investigation while acknowledging the exempt seller’s ability to pay. It is also being recommended that the fee scheme be deferred for 12 months;
  • Customer protections. At the moment there are restrictions on accessing the energy concessions scheme as concessions are administered by retailers. It is proposed that this be altered so that all customers of exempt sellers have direct access to concessions (including those in standalone power systems/microgrids who currently have no access to the scheme).

For more information see https://www.dnrme.qld.gov.au/energy/initiatives/review-energy-legislation. If you wish to make a submission, consultation closes on 31 January 2020.