Membership of Ombudsman Scheme: A Mandatory Requirement for Exempt Operators

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The Australian Energy Regulator (AER) mandates that all exempt operators must be members of an energy ombudsman scheme for each jurisdiction where they sell energy to exempt customers. This requirement is not just a mere formality—it is a significant component of safeguarding customer rights and ensuring a fair and equitable energy market.

What are Exempt Operators?

Before diving into the significance of the ombudsman scheme, it’s important to understand who exempt operators are. In the energy sector, exempt operators are entities that sell energy to a specific site or to customers with whom they already have a relationship. They are covered under what is called a ‘retail exemption’. These exemptions apply to a range of energy selling activities, often seen in scenarios such as landlords recovering energy costs from their tenants or businesses selling energy to related businesses.

The Role of the Ombudsman Scheme

The ombudsman scheme plays a crucial role in ensuring that consumers have a voice and a course of action when disputes arise. It provides a free and independent service for resolving complaints about energy providers.

As stated by the AER, “an exempt seller must, if permitted by an energy ombudsman scheme, be a member of, or subject to, an energy ombudsman scheme for each jurisdiction where it sells energy to exempt customers, and comply with the requirements of that scheme.”1 This requirement is enshrined in Condition 17 of the AER’s core exemption conditions.

Embedded Networks

Often, exempt operators are owners and operators of embedded networks. An embedded network is a private electricity network serving multiple premises through a single connection point to the grid. Examples of where you might find embedded networks include shopping centres, retirement villages, and apartment buildings.

If you operate an embedded network, you are most likely selling energy to tenants or occupants. Therefore, you are an exempt seller and must be a member of the relevant ombudsman scheme.

Penalties for Non-Compliance

Non-compliance with the conditions of exemption can result in substantial penalties. Breaching an exemption condition is considered a breach of the Retail Law and can attract civil penalties. The AER is empowered to issue infringement notices, accept enforceable undertakings, and apply to the court for orders including injunctions and civil penalties of up to $10 million.

AER Enforcement Action

The AER recently announced that it had commenced legal proceedings against an exempt operator for allegedly failing to join the ombudsman scheme.

CAM Engineering, the developer of Cooranbong Gardens retirement village in NSW, holds an exemption to sell and supply electricity to residents through the embedded network located at the village. This exemption mandates compliance with the AER’s Retail Exempt Selling Guideline.

Although CAM Engineering obtained its retail exemption on 11 March 2021, it did not join EWON until 22 July 2022. During this 16-month period, energy customers of the village did not have access to the crucial dispute resolution service that EWON provides. This alleged failure to join the scheme, despite reminders and warnings, led to the current legal proceedings.

AER Board Member Mr Justin Oliver emphasized the importance of this matter, stating, “The AER’s Retail Exempt Selling Guideline sets out important conditions to ensure consumers in exempt networks are provided crucial protections otherwise only available to consumers of authorised retailers.”

The AER had previously issued CAM Engineering with an infringement notice for the alleged breach. However, CAM Engineering did not pay the penalty specified in the infringement notice, leading to the current legal proceedings.

In Conclusion

As an exempt operator, becoming a member of an ombudsman scheme is not just about compliance—it’s about ensuring your customers have access to fair dispute resolution processes. In the words of the AER, “the conditions vary according to the nature of the energy sale (including scale and scope) and the seller-customer relationship… [they] are designed to protect customers without being an unreasonable burden on exempt sellers.”2

Compliance Quarter can assist you in understanding your obligations as an exempt operator and ensuring your practices align with the AER’s requirements.


Footnotes

  1. Australian Energy Regulator, Retail Exempt Selling Guideline – version 6, July 2022 ↩
  2. Australian Energy Regulator, Retail Exempt Selling Guideline – version 6, July 2022 ↩

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