The Australian Commonwealth Government has announced a fund designed to support feasibility studies into more reliable, secure and cost-effective energy supply to regional and remote communities in Australia. The program will fund projects between $100,000 and $10m.

The objective of the program is to support regional and remote communities to investigate whether replacing, upgrading or supplementing a microgrid or upgrading existing off-grid and fringe-of-grid supply with microgrid or related new energy technologies would be cost-effective.

The program is available to you for application if  your project is located in an inner regional, outer regional, remote or very remote area as defined by the Australian Statistical Geographic Standard (ASGS) Remoteness Area

Read more here.

Last month the Australian Competition and Consumer Commission (ACCC) released its Draft Determination and Interim Authorisation for the Large Format Retail Association (LFRA) to collectively purchase electricity.[1] In this update we look at the mechanism that allows businesses to do this and its implications for the energy sector.

1. Why is authorisation required?

The Competition and Consumer Act 2010 (the Act) prohibits anti-competitive conduct in a variety of ways. Provisions in the Act which prohibit specific behaviour include:

• division 1 of Part 4 of the Act which restricts ‘cartel conduct’. This occurs when a corporation makes, or give effect to, a contract, arrangement or understanding that fixes prices, restricts outputs, allocates customers or suppliers, or involves bid-rigging
• section 45 of the Act which prohibits a proposed contract, arrangement or understanding that has the purpose, or would have or be likely to have the effect, of substantially lessening competition.

Any businesses who are engaging in conduct, or plan to engage in conduct, which risks breaching these provisions can apply to the ACCC under sections 90(7) and 90(8) of the Act for authorisation to engage in that conduct.

The ACCC may grant such an authorisation if it is satisfied, in all the circumstances, that the proposed conduct would result or be likely to result in a benefit to the public, and the benefit would outweigh the detriment to the public that would be likely to result.

2. Who has been granted interim authorisation and what does this mean?

The LFRA is an association of major Australian commercial retailers. It is seeking authorisation to pool its members’ electricity demand and collectively invite tenders, and negotiate with suppliers, on the basis of that aggregated demand.

The participants constitute an impressive list with 32 major retailers signed up including such big names as Harvey Norman, JB HiFi, Bunnings, Spotlight and IKEA.

The draft determination proposes to grant authorisation for 11 years. The ACCC also granted interim authorisation to enable LFRA and its members to begin initial stages of the tender and negotiation process.

The interim authorisation allows for this list of participants to grow in the future, as long as it does not exceed 1 per cent of the demand in any state or territory.

3. What impact might this have on energy retailers, suppliers and embedded networks?

Any organisation which owns, operates or controls a private electricity network (i.e. an ‘embedded network), or supplies energy in such a network, needs to consider how this might affect their business. For example, if an organisation plans to convert an existing shopping centre into an embedded network which contains one of these retailers, they may face significant resistance or increased costs in doing so.[2]

On the other hand, individual embedded network operators may want to consider whether there would be benefits in collaborating with other embedded network operators to pool their electricity demand and consider applying to the ACCC for authorisation to do so.

This will present a business opportunity for some energy retailers and a problem for others. Energy retailers with longstanding agreements with some of the retail chains contained in the LFRA stand to lose business. On the other hand, this could present an opportunity for smaller and new entrant retailers to lock in energy contracts for a significant period allowing the opportunity to grow their business.

Overall, the ACCC’s view is that this will increase competition in the energy retail market and incentivise new energy generation (to supply that demand over the period).

A final determination will be made on the LFRA’s application sometime in November.

[1] See https://www.accc.gov.au/public-registers/authorisations-and-notifications-registers/authorisations-register/large-format-retail-association-limited-ors.

[2] For example, they may need to consider the possibility of ‘wiring out’ these retailers to allow them to continue with their existing supply agreements.

The Australian Energy Regulator (AER) has just 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.

2. 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.

3. 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.

With few exceptions, where a new connection to the National Energy Market is set up, or where an existing meter needs replacing, a retailer (through its Metering Coordinator) must replace that meter with a smart meter (National Electricity Rules, 7.8.3).

A smart meter (also known as an ‘advanced’ meter or a ‘type 4’ meter) is a device that digitally measures energy use. Energy data is sent to the retailer automatically, without the need for the meter to be manually read by a meter reader. Other mechanisms included within a smart meter allow for:

• remote switching power on or off;
• measuring power quality at the premises;
• customer monitoring of energy use; and
• notifying the distributor when the power goes out.

The Rule Change

In December 2018, the AEMC made a final rule that requires retailers to complete meter installations for new connections or a simple meter exchanges by a date agreed with the customer. We reported on the background to the proposed rule here.

If no timing can be agreed, then the retailer will need to install the meter within six business days at a new connection, or within 15 business days if the customer has requested a simple meter exchange.

For a meter exchange that requires a connection alteration to be completed by a distribution network service provider (DNSP), the retailer is required to install the meter by a date agreed with the customer and the DNSP.

Under the final rule, metering coordinators must replace or repair a small customer’s malfunctioning meter as soon as practicable, but no later than 15 business days after they have been notified of the meter installation malfunction

The rules are heavily reliant on contact with the customer. Stakeholders raised concerns that some customers may be non-contactable. Unfortunately, this issue was not addressed in the final rule.

There are additional rules regarding the provision of information to customers in relation to metering installations. Rule 56C of the National Energy Retail Rules sets out the obligations of retailers with respect to installation timeframes for electricity meters. Retailers are required to publish various information about their obligations under the National Electricity Rules. That information must also be provided to a customer on request and in writing.

The Australian Energy Market Commission has published its final report on regulatory sandbox arrangements to support proof of concept trials. The final report contains recommendations to the Council of Australian Government’s Energy Council aimed at better facilitating regulatory sandbox arrangements in the National Energy Markets.

The final report follows the publication of the consultation paper on 20 December 2018 that sought feedback from stakeholders on the need for regulatory sandbox arrangements. The commission published its interim advice on 7 March 2019 proposing a regular tree sandbox initiative that could make use of a variety of existing and new tools to be applied according to their suitability within a proposed trial. Stakeholders overwhelmingly supported the introduction of the regulatory sandbox toolkit.

The objective of the regulatory sandbox is to encourage innovation that has the potential to contribute to the long-term interests of consumers. Tools within the regulatory sandbox include the following:

• Coordinated feedback and guidance and regulatory issues. A new coordinated approach will be implemented to provide feedback and guidance to proponents of innovative trials, technologies and business models. This would be led by the AER as the first point of contact for proof of concept trials. The AER has been tasked with providing “fast, frank feedback” on a range of issues.
• A new AER regulatory waiver power. Limited regulatory relief will be provided to eligible trials. This will enable trials to obtain an exemption from specific rules or from registration requirements. This would involve a broad power for the AER to grant specific exemptions and waivers to facilitate the conduct of proof of concept trials, subject to trial projects guidelines developed by the AER.
• A new AMC rule change process for proof of concept trials. Where a rule change or alteration is required, a new rule change process will be available with the aim of completing rule change processes within 10 weeks.
• Existing regulatory tools. There are a variety of existing regulatory tools including the AER’s ring-fencing waivers and retail exemptions.

The implementation of the recommended sandbox tools will require a package of changes to the national energy law and rules.  You can read the Commission’s full report here.

Under the National Energy Customer Framework there are two types of contracts: a market retail contract, being a contract that is negotiated, and a standard retail contract, in effect a default contract governing the supply of electricity where no market contract is in place. Energy may be supplied under a market retail contract or a standard retail contract. Energy may also be supplied under what is known as a deemed supply arrangement.

Deemed supply is governed by Division 9 of the National Energy Retail Law (NERL). Where a deemed supply arrangement exists, the terms and conditions of a deemed customer retail arrangement are the terms and conditions of the retailer’s standard retail contract and the prices are the retailer’s standing offer prices.

In most cases, a consumer moving into new premises will contact their retailer of choice and enter into a market retail contract. They will typically do this by reviewing available offers on energy made easy. However, from time to time a consumer will move into premises and failed to enter into a market retail contract. Where the premises are energised, i.e. already supplied with electricity, the existing supplier will remain financially responsible for that connection point despite not knowing the identity of the individual consuming electricity.

Division eight of the National Energy Retail Rules (NERR) govern steamed customer retail arrangements. Where a retailer is aware that a small consumer is consuming energy under a deemed customer retail arrangement, it must give the consumer the required information under r 53. The information to be supplied under r 53 includes:

1. the retailer’s contact information;
2. detail of the prices, terms and conditions applicable to the sale of energy to the premises concerned under the deemed customer retail arrangement;
3. the customer’s options for establishing a customer retail contract (including the availability of a standing offer); and
4. the consequences for the consumer if the consumer does not enter into a customer retail contract (whether with that retailer or another), including the entitlement of the retailer to arrange for the disconnection of the premises and details of the process for disconnection.

The information specified above does not need to be given where the consumer is a carry-over customer of the retailer and the retailer has already provided the customer with a notice under r 48 relating to a market retail contract and containing that information.

Under r 54 the financially responsible retailer for a move-in customer or carry- over customer may treat that customer as requesting the sale of energy under the retailer’s standing offer and may take all appropriate steps for the formation of a standard retail contract with the customer if the customer has provided the retailer with the customer’s name and acceptable identification and contact details for billing purposes and if the customer has not advised the retailer as to the type of customer retail contract under which the customer wishes to be supplied.

Rule 54 is inelegantly drafted. It appears to mean that where a move in customer fails to provide acceptable identification and contact details, the retailer is required to continue to rely on the standard retail contract applying by virtue of division 9 of the NERL.