Exempt Sellers: the Requirement to hold an Electricity Retail Authorisation or exemption

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By Anne Wardell and Connor James, Compliance Quarter.

A variety of businesses are involved in the sale of energy. These businesses include caravan parks, building managers, shopping centres, office buildings, airports, industrial parks and solar power providers. Below we look at when an electricity retail authorisation is required and when a person or business can operate under an exemption.

Energy sellers in the Eastern States of Australia must either operate under licence or an exemption. The sale of energy, under the Retail Law, includes the sale of energy at cost, i.e. without profit. Our previous articles look at some of the changes proposed in this area.

National Energy Consumer Framework

The Eastern States (except Victoria) are governed by the National Energy Retail Rules (‘Retail Rules’) and National Energy Retail Law (‘Retail Law’), implemented as part of the National Energy Consumer Framework.

Obtaining an electricity retail authorisation is a complex and time-consuming process. Broadly, it requires that an applicant prove to the Australian Energy Regulator (‘AER’) that it can meet financial, operational, and technical requirements.

An alternative to selling electricity under a full retail authorisation is the sale of energy under an exemption. It is not possible to operate under both an authorisation and exemption.

Policy background

The National Electricity Objective, as stated in the National Electricity Law, is:

to promote efficient investment in, and efficient operation and use of, electricity services for the long-term interests of consumers of electricity with respect to – price, quality, safety, reliability, and security of supply of electricity; and the reliability, safety and security of the national electricity system.

Newer models for the sale of electricity have the potential to provide consumers with lower cost energy and to increase the reliability of supply to consumers. These models also present risk in terms of consumer protection and the security of the grid.

The Australian Energy Regulator, via the exempt selling framework, regulates the various models with reference to these potential benefits and risks.

Retail Exemption vs an Electricity Retail Authorisation

The Retail Rules provide for three types of exemption:

  • deemed exemptions;
  • registrable exemptions; and
  • individual exemptions.

An exemption will not always be appropriate: If energy selling is your main business, you are selling to large numbers of customers or selling in a number of states and territories; you will probably need a retailer authorisation.

You are likely to be able to operate under an exemption if you are planning to sell energy:

  • ‘incidentally’ to your main business;
  • as a community service or at cost; or
  • to a defined group of customers at one site.

An exemption allows a person or business to sell energy but the selling activity will be restricted to a defined class or classes of customers usually at a specific site. The restrictions will be set out in the exemption document.

There are also core conditions, relating to customer protections, which must be met by an exempt seller which may vary depending on the type of operations being conducted. The conditions are contained in Appendices A-2 and A-3 of the AER Exempt Selling Guideline March 2016 (‘Exempt Guide’).

Deemed exemptions

The Exempt Guide sets out categories of energy sale that are deemed to be exempt from the requirement to obtain an electricity retail authorisation. Generally, these are categories which carry less risk for consumers.

Registerable exemptions

The purpose of registerable exemptions is to allow the AER to monitor energy selling activities which are larger than for a usual deemed exemption and therefore require additional regulatory oversight. A registerable exemption will apply to certain classes of energy sellers however the actual exemption will apply to a specific individual or business for a specific site. This type of exemption is also subject to conditions.

Individual exemptions

An individual exemption is available to sellers whose selling activity is not covered by a deemed or registerable class exemption. The seller will need to make application for an individual exemption. The exemption, if granted, will normally apply to the sale of energy to a specific site and/or for a specific customer.

Individual exemptions are used for more unusual or one-off activities and allow the AER to tailor conditions for the specific activity being undertaken.

In contrast to deemed and registrable exemptions, the AER must approve individual exemptions. The decision of the AER will be delivered in writing to the applicant. If the application is successful, the notification will also contain the relevant conditions which will attach to that exemption. It is important to monitor correspondence from the AER as the individual exemption will not come in to force until the applicant accepts the conditions in writing. If the applicant does not accept the conditions within the relevant time period then the AER will consider the application to have been refused.

Contact us today if you have any questions on the exemptions framework or would like us to look at an electricity retail authorisation application.

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