NSW Legislative Assembly Law and Safety Committee’s inquiry into embedded networks

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The NSW Legislative Assembly’s inquiry into embedded networks conducted a hearing on Friday, 12 August 2022, with witnesses representing consumer groups, industry and government.

It was evident that the Law and Safety Committee is deeply concerned by a number of the issues raised by individual and group submissions to the inquiry, and, as the chair noted, this is a unique situation where even industry is calling for greater regulation.

Potential outcomes

There are three potential outcomes from this inquiry. These are:

  1. NSW follows VIC in implementing regulations to stifle the growth of embedded networks;
  2. NSW amends s 132A of the Strata Schemes Management Act 2015 so that all embedded network agreements (as between operators and owners corporations) have a maximum term of 3 years; or
  3. NSW waits for the AER to complete its review of the authorisation and exemptions framework [see here].

Our submission

Compliance Quarter assisted the inquiry with a submission on behalf of the Local Energy Network Action Group [here]. Broadly, the submission called for the NSW Government to reconsider the recommendations of the Australian Energy Market Commission (AEMC) in its review of the regulatory framework in 2019.

The AEMC’s final report identifies and provides solutions to gaps in the current regulatory framework. Implementing the AEMC’s final law and rule package will benefit consumers and provide the industry with certainty.

If implemented, the AEMC’s recommendations will fundamentally change the regulatory framework for embedded networks in a way that will protect consumers from the harms discussed during the hearing.

The hearing

It was evident during the hearing that there is a low level of understanding of the regulatory framework of embedded networks. Government can only make decisions based on the information before it, and it will be challenging for the committee to review all of the evidence that has been given.

Some of those who gave evidence appeared to have the following understanding of the regulatory framework:

  1. Victoria is banning embedded networks: this is incorrect. Victoria is not banning embedded networks, as discussed [here];
  2. NSW should ‘go it alone’ and separate from NECF. This would result in significant additional costs and no consumer benefit whatsoever when compared to the adoption of the AEMC’s recommendations;
  3. There are no hardship protections for embedded network consumers. This is incorrect. It is a condition under the Retail Exempt Seller Guideline that exempt operators have and comply with a hardship policy, as discussed [here];
  4. There are no mandatory requirements for energy invoices for exempt customers. This is incorrect. Condition 3 of the Retail Exempt Seller Guideline contains a list of requirements for bills. There is a standard set of requirements that must be met. There are components of the Better Bills Guideline that cannot apply within embedded networks; and
  5. There is a benefit in an embedded network operator not registering an embedded network (that they escape regulation). Failing to register an embedded network would be a breach of s 11 of the National Electricity Law and leave the business open to civil penalties.

While the submissions of some of those who gave evidence may not have reflected the correct legal position, there is no doubt that they reflected the personal experience of those individuals, and that cannot be discounted. That experience is likely a result of non-compliance by certain operators.

The level of compliance by certain exempt operators has traditionally been very poor. The industry has called for a greater level of regulation, and such regulation needs to be nationally consistent and comprehensive.

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