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. 

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.

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.

New Reporting Obligations Proposed for Energy Retailers

New Reporting Obligations Proposed for Energy Retailers

AU Energy Compliance

By Alex Silcock, Compliance Quarter

Energy Consumers Australia (ECA) has requested amendments to the National Electricity Rules and National Energy Retail Rules to improve retail market transparency. The proposed rule change would require retailers to report of average prices, costs, revenues and margins to the Australian Energy Market Commission (AEMC).

Reasoning

The rationale for the proposed reporting obligations is to provide the AEMC with a complete picture of the margins of retailers participating in the market and this would assist in the delivery of its annual Retail Energy Competition Review.

ECA cite comments made by the AEMC in its 2019 Retail Energy Competition review, along with recommendation 40 of the Australian Competition and Consumer Commission’s (ACCC) Retail Electricity Price Inquiry (REPI) in support of the rule change request.

The AEMC has previously noted that it would benefit from more information and transparency provided by retailers and recommendation 40 of the REPI was that:

Retail price monitoring should be streamlined, strengthened and appropriately funded to ensure greater transparency in the market, reduced costs, and allow governments to more effectively respond to emerging market issues. This should be done by:

  • COAG Energy Council agreeing to streamline price monitoring and reporting to the AER and the
  • AER receiving all the necessary powers to obtain information from retailers
  • COAG Energy Council agreeing to extend price reporting for retail electricity services to small to medium business customers
    state governments agreeing to close their own price reporting and monitoring schemes in favour of an expanded and strengthened NEM-wide regime

A NEM-wide price reporting and monitoring framework be implemented which includes a combination of price monitoring with full EBITDA data (including standardised costs to serve, attract and retain consumers, and margins), and consumer expenditure surveys. This reporting should be done on a regular basis and include customer expenditure data, based on representative customer surveys and retailer billing and offer data, and be reflective of demographic information.

In response to this recommendation, Federal Parliament legislated for the ACCC to undertake the role of Price Monitor for the next seven years. The ACCC has the power to compel information from retailers to assist it in its price monitoring function. However, ECA notes that “The utilization of ad hoc information gathering powers is the costliest way to acquire information.” It prefers the approach of uniform reporting across the industry (excepting some small and new-entrant retailers) bi-annually.

What will be reported?

Broadly, the reporting information will include financial information and customer pricing summaries. Retailers will be required to disclose:

  • Retail Revenue;
  • Retail Cost of Goods Sold;
  • Cost of Fed in electricity;
  • Retail Gross Margin;
  • Cost to Serve;
  • Cost to Maintain;
  • Cost to Compete;
  • Cost to Acquire;
  • Cost to Retain;
  • Depreciation, Interest and Tax;
  • Net assets.

The ACCC already broad powers to obtain this data, as do some jurisdictional regulators. However, there is a sunset date on those powers and the disclosures set out above are intended to be effective over the long-term. Furthermore, the ECA is also proposing that the AEMC make the data available on request to the AER, AEMO, ACCC, Energy Security Board, as well as ECA itself.

AEMC as the Proposed Information Gatherer

It is interesting that ECA have nominated the AEMC as the body to receive the reporting data given one of its primary functions is the rule-making body. In making a determination on the rule-change request, the AEMC will effectively be deciding whether it should have access to more financial information from retailers.

Aside from minor, or non-material rule changes, the AEMC is not permitted to initiate a rule change request itself. Therefore, despite the AEMC hinting in some of its publications that more information on retailer pricing and margins would be useful, it has not been in a position implement a rule to ensure it gains access to that information.

The AEMC’s rule-making powers are very broad, so given the rule change was requested by ECA, the AEMC is unlikely to be prevented from making the requested change. This is despite the fact that it may have a direct interest in the outcome.

Frequently Asked Questions on the Energy Consumer Data Right (Client Update)

Frequently Asked Questions on the Energy Consumer Data Right (Client Update)

AU Energy Compliance

The Australian Competition and Consumer Commission (ACCC) and the Treasury have been progressing policy work on the implementation of the Consumer Data Right (CDR) in the energy sector. In this update we respond to some frequently asked questions relating to the energy CDR.

  1. What is the CDR?

The CDR gives individuals and businesses a right to access specified data in relation to them held by businesses; and to authorise accredited third parties to access this data. The CDR is being rolled out sector by sector, beginning with the banking sector, then progressing to the energy and telecommunications sectors. For more general information on the CDR click here and here.

The CDR is being implemented through a complex combination of legislation, rules, ministerial designations and data standards. The ACCC, the Treasury, the Office of the Australian Information Commissioner and the Data Standards Body (Data61) all have key roles in its development and implementation.

The ACCC recently released a position paper setting out in broad terms its proposal for implementing the CDR in the energy sector. In addition, the Treasury has just consulted on the types of data that are to be contained in the energy CDR. [1]

  1. How is it proposed that the CDR be applied to the energy sector?

After consulting on several models for applying the CDR to the energy sector, the ACCC has decided on the ‘AEMO gateway model’. This model provides that the Australian Energy Market Operator (AEMO) will have a gateway function, providing CDR data from data holders (which will include retailers and potentially distributors) to accredited data recipients (ADRs). AEMO may also be a data holder providing CDR data directly to ADRs.

Currently, only an energy CDR for electricity data is proposed (i.e. no gas at this stage). In addition, it is not currently proposed that the energy CDR be applied to embedded networks. Stakeholders should expect the CDR to be extended in those directions in future, however.

  1. Which data will be contained in the dataset?

The Treasury has proposed the following datasets:

  • National Metering Identifier (NMI) standing data fields. This is data currently held by AEMO which specifies the nature of a connection point and includes such fields as ‘Average Daily Load’(ADL), Network Tariff Codes and Metering installation types;
  • Metering data. This is the electricity consumption data that is processed through AEMO’s market systems;
  • Customer provided data. This is personal data relating to the customer held by the retailer such as a customer’s full name, email address, phone number and date of birth;
  • Billing data. Historical information on how much the customer has been charged over a period and their payment patterns;
  • Retail product data. This is information relating to the specific tariffs that customers are on and may include general and restricted plan data;
  • Distributed Energy Resource register data. This new register contains information relating to distributed energy devices including small scale battery storage systems, and rooftop solar PV.
  1. Who will be a data holder?

This is still not entirely clear. At this stage it looks as though only market retailers in the National Electricity Market jurisdictions (i.e. Queensland, NSW, ACT, Tasmania, SA and Victoria), the AEMO, and potentially distributors, will be ‘data holders’. This means that participation in the CDR will not be mandatory for authorised or licensed retailers that supply energy exclusively in embedded networks. Nor will be it be mandatory for a range of other energy suppliers such as exempt sellers, ‘behind-the-meter’ solar retailers and suppliers in micro-grids. Some of these parties may wish to become ADRs, however. See below.

  1. Who will be able to become an ADR?

A range of energy businesses may be interested in becoming an ADR. As well as retailers and distributors, exempt sellers, brokers, and metering co-ordinators, among others [2] may have an interest in accessing this data. The criteria for becoming an ADR will be set out in modified CDR rules yet to be established for the energy sector. However, we can look at those rules that have already been established for the banking sector to get some idea what the criteria for accreditation will be. It is likely to include satisfying requirements in relation to:

  • Being a ‘Fit and proper person’;
  • Information security;
  • Dispute Resolution processes; and
  • [3]
  1. What is the timeline for implementation?

Originally it was planned for the CDR to come into effect in the energy sector in the first half of 2020. However, with many aspects of the energy CDR still to be finalised, this has been pushed back. ACCC has committed to releasing an energy CDR implementation timetable to stakeholders later in 2019.

[1] See https://www.accc.gov.au/system/files/ACCC%20-%20CDR%20-%20energy%20-%20data%20access%20models%20position%20paper%20-%20August%202019.pdf and https://treasury.gov.au/sites/default/files/2019-08/c2019-t397812.pdf.

[2] Large Customers are permitted to appoint their own metering co-ordinators.

[3] See https://www.accc.gov.au/system/files/CDR%20draft%20accreditation%20guidelines.pdf.

Regional and Remote Communities Reliability Fund Microgrids 2019-20

Regional and Remote Communities Reliability Fund Microgrids 2019-20

AU Energy Compliance

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.

When are businesses allowed to collaborate to purchase electricity collectively? The latest ACCC decision

When are businesses allowed to collaborate to purchase electricity collectively? The latest ACCC decision

AU Energy Compliance

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.

  1. 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.

  1. 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.