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The Updated Framework for Embedded Networks

The Updated Framework for Embedded Networks

AU Energy Compliance

On 31 January 2019, the Australian Energy Market Commission (‘AEMC’) released its draft report on its project labelled ‘Updating the regulatory frameworks for embedded networks’ (‘Report’). In total, the Report exceeded 1000 pages and included specific suggestions for amendments to the National Electricity Law (‘NEL’) and National Energy Retail Law (‘NERL’), as well as draft changes to the National Electricity Rules (‘NER’) and National Energy Retail Rules (‘NERR’) to complement the proposed legislative amendments.

By Alex Silcock, Compliance Quarter. 

The Report is the first practical step taken by the AEMC to update the regulatory framework for embedded networks since the review undertaken for COAG in 2017. The report confirms details of previously discussed legislative changes, gives an estimated timeframe for their implementation and provides opportunities for submissions by stakeholders. These details should be carefully considered by businesses involved in embedded networks, not only in relation to regulatory compliance, but also in a strategic context.

Timeframe

The AEMC helpfully released an infographic with the anticipated timeframe for the implementation of the changes which can be accessed here: https://www.aemc.gov.au/sites/default/files/2019-01/Updating%20regulatory%20frameworks%20for%20embedded%20networks%20draft%20report.pdf

The consultation, rule-making and recommendation process will take place in the first half of 2019, with a view to submitting the draft legislation to the South Australian Parliament later in the year. It is likely that the updated framework will come into effect during 2020.

The updated framework will have legal and compliance ramifications for all stakeholders, but will impact businesses differently according to how they currently conduct their operations. All embedded network operators have been put on notice and have sufficient lead-in period to make strategic and operational decisions as well as updates to their compliance programs.

Proposed Legislative Changes

The recommended changes are driven by the AEMC’s finding that ‘customers in embedded networks should … be provided the same protections, access to retail market competition and regulatory oversight as standard supply customers’. The tenor of the Report is that most of the recommendations in the 2017 report will be implemented. The changes will centre on:

  • the registration and exemption framework;
  • market and system integration;
  • network billing;
  • connection and network charging;
  • consumer protections; and
  • monitoring and compliance.

While the central themes remain, the suggested changes to the text of the regulatory instruments are different than initially conceived. The broad rule change recommendations at the review stage contained less changes to the NERL and the NEL, and focused on amendments to the Rules that sit underneath them. The Report suggests numerous changes to the legislation itself and fewer rule changes than first contemplated. The draft package set out in the Report is preferable to the previous suggestions. While the rules allow for flexibility and swift adaptation which is important in an innovative sector, embedded networks have become so fundamental to our supply system that it seems absurd not to address the mere concept of an embedded network in the NERL.

Finally, the amendments will predominately only apply to new embedded networks. However, some changes will apply to legacy embedded networks as well and the AEMC flagged that there is a possibility of legacy networks being gradually transitioned over to the new framework overtime.

Summary of Impact on Authorised Retailers

The draft report is welcome for most authorised retailers who on-sell in embedded networks. Currently, many of these retailers’ obligations are unclear, or highly impractical or impossible to follow. The changes include the addition of a definition for ‘off-market’ retailer, extending the definition of designated retailer to apply to authorised on-sellers and permitted alterations to the model terms. This will provide much needed clarity for these retailers and places them in an advantageous position as compared to their on-selling counterparts that currently operate under exemptions. Nevertheless, authorised on-sellers will still need to make certain adjustments to their compliance programs, particularly in relation to the network component of their businesses.

We will be sending a detailed update on the effect of the Report for our retainer clients who are authorised retailers. We will also provide the more detailed update for a fee on request.

Summary of Impact on Legacy Embedded Networks

The Report focused primarily on the framework for new embedded network. Nevertheless, it provided some suggested changes to the framework for existing embedded networks and also presented some questions for consideration by stakeholders and invited submissions on this issue.

The primary changes for existing embedded networks include greater compliance and enforcement powers by the AER, an expansion of the Embedded Network Manager role to encompass billing functions, the registration of child connection points and making it easier for exemption holders to surrender their exemptions.

Before the framework for legacy embedded networks is properly developed the AEMC has asked for feedback from stakeholders on the following issues:

  • the costs and benefits of transitioning legacy embedded networks to the new framework;
  • appropriate criteria for determining which legacy embedded networks should transition to the new framework;
  • potential impediments to legacy embedded networks transitioning to the new framework;
  • the appropriate timeframes for transitioning legacy embedded networks.

We will be sending a detailed update on the effect of the Report for our retainer clients who are exempt sellers and network service providers. We will also provide the more detailed update for a fee on request.

Conclusion

The updated framework will impact exempt and authorised on-sellers, exempt embedded network service providers and Embedded Network Managers. Business involved in any of the above activities should consider making submissions to the AEMC on the proposed changes and start to prepare for the updated framework from a strategic, operational and compliance standpoint. Please contact us if you would like a detailed outline of how the changes will impact your business, or would like assistance in drafting a submission to the AEMC.

The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018: Weaknesses in the Energy Sector’s ‘Big Stick’

The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018: Weaknesses in the Energy Sector’s ‘Big Stick’

AU Energy Compliance

In December 2018 the federal government introduced the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018 (‘Bill’) to Parliament. Presumably drafted under the ‘corporations power’ in s 51(xx) of the Constitution, if passed the Bill would amend the Competition and Consumer Act to prevent corporations from engaging in certain ‘prohibited conduct’.  We look at the proposed prohibitions are set out below.

By Alex Silcock, Compliance Quarter. 

The prohibitions do not affect transmission and distribution businesses, but relate to retail pricing, financial contract market liquidity and wholesale market conduct. The Bill confers several enforcement powers on the Australian Competition and Consumer Commission (‘ACCC’), the Treasurer and the courts to ensure compliance with the prohibitions.

Financial contract market liquidity

This prohibition is aimed at ‘gentailers’ – retailers that own significant generation assets – and is designed to ensure that these vertically integrated retailers ‘do not unreasonably refuse to offer financial contracts for anti-competitive purposes’. In its June 2018 report, the ACCC found that the ‘level of liquidity and the advantages enjoyed by vertically integrated retailers make it difficult for new entrants and smaller retailers to compete effectively in the retail market’. This prohibition is an attempt to temper that disadvantage.

Under this section, a corporation that generates electricity will be in contravention if it limits, restricts or fails to offer electricity financial contracts and does so for the purpose of substantially lessening competition in any electricity market.

It may prove difficult to show that a gentailer is restricting its electricity financial contracts, let alone that it is doing so to substantially lessen market competition. It will likely be even harder to prove when a generator ‘offers to enter into electricity financial contracts in a way that has, or on terms that have, the effect or likely effect of preventing, limiting or restricting acceptance of those offers’.

While the hedging contract market is a recognisable barrier for small retailers, this section appears a rushed and imperfect solution. It is worth noting that a rule change request has been initiated with the Australian Electricity Market Commission (‘AEMC’) directed at the same mischief and proposes a tender for voluntary market making services overseen by the Australian Energy Regulator. The AEMC’s consultation paper on the request was published on 20 December 2018.

Wholesale market conduct

In July 2018, the Grattan Institute published a report with findings that generators ‘game’ the market. The ACCC and AEMC have been more circumspect on this, noting that the effect on prices passed on to consumers is unclear. Nevertheless, ‘gaming’ is at least perceived to be a problem by some small retailers.

The Bill purports to address ‘gaming’ by creating an extremely broad prohibition which disallows spot market bids by a corporation where it has acted fraudulently, dishonestly, or in bad faith to manipulate or distort the spot market.

The Explanatory Memorandum (‘EM’) states that ‘[g]iven the complexity of the market, it is not possible to exhaustively prescribe the conduct which will and will not have the purpose of distorting manipulating prices. This depends on the specific facts of the case.’ While the EM goes into more detail about what will be considered prohibited conduct, the proposed legislative text remains too unclear.

Retail Pricing

While smaller retailers would likely welcome the objectives behind the other prohibitions, they are unlikely to be happy with the prohibition on retail pricing. The relevant section states that it prohibited for a retailer to fail to make reasonable adjustments to the pricing of their offers to supply electricity, ‘to reflect sustained and substantial reductions in its underlying cost of procuring electricity’.

Similar concerns about the uncertainty of the text are present here, as in the other prohibitions. For instance, what are ‘reasonable adjustments’? What is classified as a ‘sustained and substantial’ reduction in the cost of procurement? The plain text of the Bill should be clearer, particularly where penalties for non-compliance are substantial and would be difficult to challenge.

From a policy perspective, even if implemented correctly, it is unlikely that the prohibition will result in long-term benefits for consumers. It is desirable for retailers to invest in cost reduction strategies and strive for greater efficiency, but one questions whether they will do so if they are likely to receive little or no benefit. In such an innovative industry, there will be numerous opportunities to improve efficiency, but engaging in such strategies always carries a level of risk. The Bill removes some of the motivation for retailers to substantially reduce their costs and this could result in higher prices.

It is worth noting the Bill being drafted using the power in s 51(xx) of the Constitution may result in it having a broader than intended application. This prohibition is on corporations generally, regardless of whether or not they are licensed energy retailers under the applicable jurisdictional authorisation scheme. It applies when a ‘corporation offers to supply electricity, or supplies electricity, to small customers’. This appears to capture any corporation that sells electricity to customers, including for example, energy sellers holding an exemption under the Australian Energy Regulator (‘AER’) exempt selling guidelines. Making these ‘reasonable adjustments’ to price seems an unreasonable burden to place on caravan park operators or other exemption holders, who are often family-run businesses already struggling to contend with applicable Residential Parks legislation and various utility industry codes and guidelines. There has traditionally been a lack of consideration for embedded networks in regulation and law making, causing inconsistency, confusion and sometimes resulting in litigation. It is hoped that the sometimes unique situations of exempt-sellers and embedded networks generally are properly addressed by law and policy makers moving forward.

AER Amendments

The Bill also confers new compulsory information gathering powers on the AER and allows the AER to share information with other agencies and facilitates the conferral on the AER of functions related to the regulation of retail electricity prices.

These changes, particularly in relation to power to regulated pricing are in response to the ACCC’s recommendation of the introduction of a ‘Default Market Offer’ (‘DMO’) to replace the current standing offer regime. The AER has conducted only initial consultations up until now, primarily aimed at how the default price will be calculated, not how it will operate. The Bill contemplates the facilitation of DMO through a retail electricity industry code, which would include a provision that a retailer’s standing offer prices cannot exceed the amount determined by the AER.

The initiation of a new industry code would only add to the compliance burden of retailers who must already contend with the National Energy Retail Law, National Energy Retail Rules, jurisdictional derogations to those instruments, state and territory electricity supply acts and various other guidelines and codes implemented by the AER and state and territory regulators.

Conclusion

While some of the Bill’s objectives are admirable, the core issues have not been properly considered and this has resulted in poor drafting. The Bill is currently under consideration by the Senate Economics Committee which is due to report in March. At this stage, it appears unlikely that it will be passed before the election, but pending the findings of the committee and given the AER’s work on the DMO to date, it is likely that some elements of the Bill will be introduced in 2019.

Webinar – The Keys to Regulation for Embedded Networks

Webinar – The Keys to Regulation for Embedded Networks

AU Energy Compliance

In this webinar, lawyer and regulatory energy expert Alex Silcock provides a review of regulatory arrangements for embedded networks titled “The Keys to Regulations for Embedded Networks” including key takeaways for Embedded Network Operators, Exempt Sellers and On-Market and Off-Market Retailers. The Keys to Regulations for Embedded Networks

The Compliance Quarter team is dedicated to providing excellent service to our clients across the energy sector and this includes insight into current and potential future regulation within the industry. If you have any questions about embedded networks or the sector in general, please do not hesitate to contact us.

Below you can view a video of the webinar along with the presentation slides and a full transcript.

Background and Current Regulatory Framework

  • Definition of Embedded Network
  • Consumer Protection
  • Benefits of Embedded Networks
  • The Power of Choice

Timeline of Regulatory Change

  • November 2012 – Power of Choice Review.
  • November 2017 – Final Report on Review of Regulatory Arrangements in Embedded Networks.
  • 2019-2020 – Recommendations from the Final Report implemented
  • December 2015 – Changes to the National Electricity Rules to implement the Power of choice.
  • December 2017 – Final Power of Choice Rules come into effect.

Elevation of Embedded Networks into the National Framework

Owning, controlling or operating a distribution system (NEL)

  • Register with AEMO as a network service provider
  • Exemption from registration as network service provider.

Selling energy (NERL)

  • Authorisation as a retailer from AER.
  • Exemption from authorisation as a retailer.

Owning, controlling or operating a distribution system (NEL)

  • Register with AEMO as a network service provider.
  • Registration with AEMO as a registered embedded network service provider.
  • Exemption from registration as network service provider – limited circumstance.

Selling energy (NERL)

  • Authorisation as a retailer from AER
  • Authorisation as an on-selling retailer from AER – additional flexibility.
  • Exemption from authorisation as a retailer – limited circumstances.

AEMC Review of regulatory arrangements for emebedded networks 2017

Changes for Sellers in new Embedded Networks

‘Any party who sells energy to a consumer in an embedded network to hold a retailer authorisation from the AER or be exempted by the AER from holding a retailer authorisation according to a narrow set of circumstances’.

Heightened consumer protection requirements and compliance obligations.

Metering responsibilities and compulsory Embedded Network Manager appointments.

Provision of information on costs, benefits and risks to Embedded Network customers prior to entry into retail contracts.

Changes for Network Operators in new Embedded Networks

‘the registration of embedded network service providers with AEMO should be required unless exempted by the AER according to a narrow set of circumstances’.

Heightened obligations focused on consumer protection.

Obligations to be under the Retail Rules and Retail Law.

Guaranteed Service Level Schemes.

Impact on current Authorised Retailers only engaged in on-selling.

Increased Regulatory Certainty

  • Authorised retailers are already well prepared
  • ‘Designated Retailer’ concept and the tripartite relationship
  • Risk of duel obligations.

Effect on Legacy Embedded Networks

AER Enforcement and ease of switching on-market.

Where there is an ENM appointment, child embedded network customer connections must be issued with National Metering Identifiers (NMIs), so they are discoverable by retailers.

AER to have specified role codified in legislation to monitor embedded network service provider and exempt selling behaviour.

Enforcement options for network exemption breaches, to be more closely aligned with powers for retail exemption breaches.

ENSP to charge the retailer no more than the equivalent external network charge that would have been charged by the LNSP if the customer had been directly connected to the LNSP’s network.

Going on Market and Network Charges

Keys to Regulation for Embedded Networks - Option 1

Keys to Regulation for Embedded Networks - Option 2

AEMC Review of regulatory arrangements for embedded networks 2017

The Keys to Regulation for Embedded Networks Presentation Slides

What are the rules for embedded networks in Western Australia?

What are the rules for embedded networks in Western Australia?

AU Energy Compliance

The regulatory landscape for embedded networks in Australia is complicated. There are four separate regulatory frameworks:

  1. New South Wales, South Australia, Australian Capital Territory, Queensland, Tasmania (National Energy Customer Framework jurisdictions);
  2. Victoria;
  3. Northern Territory; and
  4. Western Australia.

By Dr Drew Donnelly, Compliance Quarter.

Within each framework, there are significant jurisdictional variations (for example, strata legislation in NSW and Queensland impose different obligations on embedded networks). Furthermore, some frameworks overlap with the others (for example, a Victorian embedded network may require both a network exemption from the Australian Energy Regulator and a network activity exemption from the Essential Services Commission (Victoria)).

In today’s article, we look at the key features of the regulatory framework for embedded networks in Western Australia (WA).

What is an embedded network?

An electricity embedded network is a private electricity distribution system that is connected to the main electricity network or ‘grid’. Owners, operators or service providers in embedded networks may be required to hold licences, authorisations or exemptions to carry out distribution, selling or generation within that embedded network depending on the rules of the jurisdiction that they operate in. Similar arrangements apply in the case of private gas distribution systems (‘gas embedded networks’).

The exemption framework in Western Australia

The distribution or sale of electricity WA is only permitted under a licence or an exemption under sections 7 and 8 of the Electricity Industry Act 2004. Analogous rules for the distribution and supply of gas apply under sections 11G and 11H of the Energy Coordination Act 1994.

Exemption orders made by the Governor to-date are:

  • For residential and commercial electricity embedded networks, the Electricity Industry Exemption Order 2005;
  • For caravan parks, the Electricity Industry (Caravan Park Operators) Exemption Order 2005;
  • For residential and commercial gas embedded networks, the Energy Coordination Exemption Order 2009;
  • For Solar Power Purchase Agreement providers, the Electricity Industry (Solar Power Purchase Agreements) Exemption Order 2016.

The first three exemption orders contain ‘class exemptions’, which apply automatically to exemption-holders. The last exemption order applies to suppliers only by individual application to the Public Utilities Office.

Conditions contained in the Electricity Industry Exemption Order 2005 that apply to residential customers include:

  • where the on-seller buys electricity from Synergy or Horizon Power, the customer may not be charged more for electricity consumption than a residential customer of Synergy or Horizon Power would be charged;
  • where customers are within Synergy or Horizon Power’s licence area, the customer may not be charged more for the daily fixed supply charge than a residential customer of Synergy or Horizon Power would be charged;
  • If the on-seller generates its own electricity, the residential customer of the on-seller may not be charged more for the electricity than the cost the on-seller incurs in generating that electricity;
  • The supplier must make available to each resident of the relevant premises information that clearly sets out —

(a) the quantity of electricity supplied to the resident; and

(b) the fees and charges payable by the resident;

— (i) for electricity supplied; and

— (ii) for the provision of electricity services.[1]

Do embedded network customers in Western Australia have the right to go ‘on-market’?

The biggest reform to electricity embedded networks over the last few years has been the introduction of ‘power of choice’ to embedded network customers. Power of choice reforms include changes to metering requirements, distributor arrangements and the introduction of a new ‘Embedded Network Manager’ role to facilitate customers in embedded networks accepting an offer from a ‘market retailer’. These reforms have not been extended to Western Australia.

In addition, WA does not have ‘full retail contestability’. Only customers that consumer more than 50 megawatts hours of electricity per annum have a right to choose their retailer within most of WA (in the ‘South West Interconnected System’). This covers the overwhelming majority of residential and business customers in WA.[2]

While there is nothing in principle stopping an electricity embedded network customer going ‘on market’, limited retail competition (most customers must be sold energy by one of either Synergy or Horizon Power, depending on where they are located), and the absence of any entity being responsible for this to occur (e.g. an Embedded Network Manager), would make it difficult for a customer to do so.

If you would like further information on the rules for setting up or operating an embedded network in Western Australia, please get in contact with us.

 

[1] See clause 6 of the Electricity Industry Exemption Order 2005.

[2] Read more at https://www.pv-magazine-australia.com/2018/03/12/report-full-retail-contestability-plans-for-wa-on-hold/.

Release of New AER Life Support Registration Guide

Release of New AER Life Support Registration Guide

AU Energy Compliance

AER has just released a new Life Support Registration Guide (the Guide) ahead of the commencement of the new Life Support National Energy Retail Rules (NERR) on the 1 February 2019. This update summaries the new registration guide and what retailers need to do to comply with it.

By Dr Drew Donnelly, Compliance Quarter. 

1.The New Life Support Rules

The new rules:

  • provide customers with life support protections from the time they inform their retailer or distributor that they rely on life support equipment until they are deregistered;
  • require the registration process owner (the retailer or distributor contacted by the customer) to:

* notify customers of their rights and obligations under the life support rules;

* follow a prescribed process for obtaining medical confirmation of customer eligibility to be on the life support register;

* follow a prescribed process for the removal of a customer from the register where medical confirmation is not provided;

* establish a clear process to enable either the retailer or distributor to deregister the premises if the customer advises that life support equipment is no longer required.

  1. The Guide

The Guide sets out the different steps that retailers and distributors must take at each stage of the process in accordance with the new rules, including the customer notification process, medical confirmation, de-registration and information sharing and record-keeping requirements. It also sets out the AER’s approach to compliance and enforcement with respect to the new life support rules. This includes that:

  • with the commencement of the new rules on 1 February 2019, businesses must have policies, systems and procedures in place for registering and deregistering premises requiring life support equipment. This includes maintaining accurate and up to date registers and ensuring deregistrations are carried out in accordance with the NERR;
  • a failure to meet life support obligations is a civil penalty provision under the NERR which means court-ordered penalties of up to $100 000 for a corporation and up to $20 000 for individuals per contravention. The AER also has the power to issue infringement notices;
  • the self-reporting compliance framework requires retailers and distributors to report possible breaches of the Retail Law and Retail Rules. The life support obligations are classified as immediate and must be reported within two business days of the business identifying them, given the potential for serious customer harm.
  1. What about Embedded Networks?

Authorised Retailers who supply to customers in embedded networks will be subject to the new life support rules just like any other authorised retailer. The new rules do not apply to embedded network operators operating solely under network and/or retail exemption

The life support obligations for exemption holders are provided in the AER Electricity NSP Registration Exemption Guideline (Network Guideline) and the AER Retail Exempt Selling Guideline (Exempt Selling Guideline), respectively. These include requirements not to disconnect customers who rely on life support equipment (without making alternative arrangements for the customers safety) and the requirement to ensure that parent and child connection point retailers are informed of customers with life support needs.

Next Steps

  • Ensure that internal processes are updated as recommended in the Registration Guide to manage registration processes;
  • Conduct a compliance risk assessment with respect to the new rules and submit to the organisations Board for consideration.

Read the Guide at https://www.aer.gov.au/system/files/1482_AER_Life%20Support%20Guide_FA_WEB%20%28002%29.pdf.

 

 

Webinar – Two New Codes for Banking and Lending

Consumer, Financial Services

In our recent webinar focusing on the finance industry, regulatory specialist Dr Drew Donnelly consider two new codes for banking and lending. This year has seen the finalisation of two distinct codes covering lending and banking businesses in Australia: The Banking Code of Conduct 2019 (Banking Code) and the Code of Lending Practice: AFIA Online Small Business Lenders (Lending Code).

This webinar forms part of our series looking at the role of fintech, financial services, and the regulatory and compliance environments that surround them. If you would like to know more about our work supporting companies in the fintech and financial services sector, please contact us by clicking here.

Below you can view a full transcription of the webinar along with the video.

Recent Developments in Banking & Fintech

  • Open Banking Reforms / Consumer Data Right
  • Fintech Lending Code
  • Banking Code
  • Extension of Fintech Sandbox
  • Royal Commission Interim Report

Independent Review:

Code of Banking Practice

The Code of Banking Practice (the Code) sets standards of good banking practice.
The original Code took effect on 1 November 1996. It was most recently reviewed in 2008 with amendments taking effect on 1 February 2014.
Takes into account both consultation and other reviews and reports.

Identified that:

  • A code is valuable
  • Lack of coverage for small business who need better information and enhanced protections with respect to credit
  • There is a need for better coverage for customers in financial difficulty
  • Improved Code Monitoring required.

New Banking Code of Conduct

  • The existing Banking Code of Conduct (2013 Code) updated for 2019 in line with outcomes of Independent Review.
  • Feedback from public and industry indicated the continued need for a code which exists over and above legal and regulatory obligations.
  • In contrast with 2013 Code, will be compulsory for all banks that are members of the ABA by July 2019

Key Changes – Part One

> Upfront principles governing the banking industry.
> A requirement for ‘plain English’ contracts.
> Increased transparency around fees and valuations.
> Restrictions on unsolicited credit card limit increase offers.
> Elevation into an ‘industry code’ approved by ASIC.

Key Changes – Part Two

> Increased assistance to vulnerable customers.
> Simplified small business loan contracts.
> New cooling off periods.
> Clarified role for compliance committee.
> All members of ABA to sign up by July 2019.

FinTech Lending Code

> Report recommending new code for Fintech small business lenders.
> New Code established. As of June, several have signed up.
> Voluntary for members of the Australian Finance Industry Association.
> From high-level principles to detailed duties.
> Emphasis on protection for vulnerable customers and clarity.

Specific Obligations

Disclosure and Pricing Comparison

> Full disclosure of cost and fees for disclosure and pricing comparison documents.

Communication and Dispute Resolution

> All communications to be in plain language.
> Before accepting a loan offer, customers will receive a summary document.
> Internal and external dispute resolution (including CCC)

Privacy

> Affirmation of obligations under the Privacy Act, Credit Reporting regulation and a requirement to have a Privacy Policy.

Advertising

> Advertising and other information about Lona Products must be clear, concise and accurate, be written in plain language; and (c) use terms from the Lending Code.

Key Differences between the two Codes

> The Banking Code applies to all banking services which includes bank accounts and term deposits, all lending, credit cards, payment services and foreign currency exchange. The Lending Code, by contrast, only applies to online lenders who loan to small business.

> The Banking Codes is compulsory, for members of the ABA while the Lending Code is voluntary for members of the AFIA.

> The Lending Code provides for a full external dispute resolution service, whereas the Banking Code expects this to be carried out by existing dispute resolution bodies (such as the financial services ombudsman).

Implications for Compliance Programs

> Consider interaction with legal and regulatory obligations, including Corporations Act 2001, AML/CTF Act, Privacy Act, Banking Act.
> Review disclosure and contractual terms and conditions.
> Review advertising and marketing.
> Staff Training.
> Incentive Structures.

If you have any questions or want further information or assistance please contact us at [email protected] OR [email protected]

Default Retail Price for Electricity to apply from 1 July 2019  

AU Energy Compliance

The Commonwealth Government has just directed that the Australian Energy Regulator (AER) begin work on developing a mechanism for introducing a default price for electricity.

What we know

The Commonwealth Government has asked that a default market offer and associated default market price be introduced for National Energy Customer Framework (NECF) jurisdictions, which means:

  • the default price will replace the standing offer price in NECF areas that currently do not have price regulation;
  • the price will be set by the AER on the basis of the costs incurred by the retailer as well as allowance for a reasonable margin.

The default price would come into effect on 1 July 2019 with publicly released by 30 April 2019.

In addition, the Commonwealth Government has requested that the AER begin work implementing:

  • A reference bill, based on benchmarks from which advertised discounts must be calculated (including win-back and retention offers), using the default price set by AER. This would apply to generally available offers marketed at both residential and small and medium enterprise (SME) customers.

Comment

The proposed default price will not apply in areas where there is currently price regulation, which covers ACT, regional Queensland and Tasmania.

The Commonwealth Government has also announced that, after introducing the default price changes, the Government intends updating consumer protections and abolishing  Standard Retail Contracts. It is not clear yet which of the protections current contained in Standard Retail Contracts will be carried through to default market offers.

It is unknown, whether and when a default market offer would be extended to Victoria. Note, however, that it was a recommendation of the ACCC Retail Pricing Inquiry that the Victorian regulatory framework be unified with the NECF.

For more information see https://www.aer.gov.au/system/files/Letter%20to%20the%20AER%20Chair%20-%20dafault%20pricing.pdf.

August Retail Pricing Update

August Retail Pricing Update

AU Energy Compliance

Retail prices have dominated the headlines over the past week, with ongoing discussion of some retailers posting record profits and resultant calls for a Royal Commission into Energy. At the same time there have been some significant changes relating to energy retail pricing which have either been announced or recently came into force. In light of this we provide a quick update on the National Energy Guarantee (NEG), electricity default prices and changes to the display of pricing information.

 

By Dr Drew Donnelly, Compliance Quarter.

1. Emissions obligation in the NEG – gone for now

Perhaps the most significant of the Commonwealth Government’s policies intended to reduce retail electricity prices was the National Energy Guarantee (NEG). On 20 August then Prime Minister, Malcolm Turnbull, announced that the emissions obligation component of the NEG has been dropped, for the time being, due to a perceived lack of support in the House of Representatives. However, the reliability component, for which Turnbull claimed there is a “crying need”, was to remain. This requirement would mean that retailers and generators need to contract for a certain amount of supply to guarantee reliability.

At the same press conference there was also an interesting aside bearing on the NEG. It was announced that Cabinet had agreed that the establishment of any emissions standard or variation thereof would require the confirmation from energy regulators and the ACCC that it would not increase electricity prices. This would be a significant barrier to any future attempt to bring in future emissions or renewables targets whatever form they may take.

While declaring the emissions component ‘dead’, the new PM has not ruled out the continuation of the reliability component of the NEG.

2. A default price across the National Electricity Market

Both the former PM and current PM also announced that, following the final report of the ACCC Retail Pricing Inquiry, there will be a default price for electricity set for each state by regulators. This will replace standing offer prices and will create an effective ‘ceiling’ on electricity prices.

Of course, as with the NEG, this too will need sufficient political support and we can expect strong opposition to a perceived re-introduction of electricity price controls.

3. New Retail Pricing Information Requirements

New requirements for the display of pricing information through ‘Energy Made Easy’ (EME) came into effect on the 31 August 2018 for all authorised retailers in National Energy Retail Law jurisdictions. This change replaced the existing Energy Price Fact Sheet with two documents a Basic Plan Information Document (BPID) and a Detailed Plan Information Document (DPID). While the new Guideline is being implemented in stages, the first stage requires that all plans currently in EME need to be updated to the new documents with corresponding updated cross-referencing in retailer contracts and marketing materials. While the documents will be automatically created by EME, it is the responsibility of the retailer to ensure that the necessary information has been provided to EME.
If you need any assistance with this, please don’t hesitate to get in contact.

Webinar – The Exemption Party is Over – bringing embedded networks into the national framework

Webinar – The Exemption Party is Over – bringing embedded networks into the national framework

AU Energy Compliance

In this Compliance Quarter free webinar, founder Connor James, is joined by Alex Silcock to look at the recent news developments that will mean the end of exemptions and what this means for embedded networks and the national framework.

We produce content for our clients in the form of webinars, online compliance training, news articles, and analysis. This is delivered through our custom compliance software, the Compliance HUB. In addition, the HUB is focused on helping our clients manage successful compliance programs and is supported by our regulatory expertise. If you would like to know more, please contact us by clicking here to access the contact form. We hope you enjoy the webinar.

I went through Compliance Quarter to get a privacy statement for my website. The process was very easy and the template that I received was customised to my needs.

Eve Barylka, Business Owner

Their communication was responsive and always clear. I would rate their service and quality of work higher if more than 5 stars was possible!

Steven Nelson, Business Manager