Overlooked Embedded Network Regulatory Obligations

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Embedded networks are privately owned electricity networks that serve multiple customers, typically, with a single connection point to the wider distribution network. The regulatory framework that applies to embedded networks is complex and it can be difficult for embedded network operators to understand and comply with their regulatory obligations.

Below we examine some of the regulatory obligations, in those jurisdictions that have adopted the National Energy Customer Framework, that are commonly ‘overlooked.’

Register all Parties

Each of the parties associated with an embedded network must register or be exempt. ‘This applies to the network owner or joint owners, a lease holder or legally appointed representatives if they have rights of control over the physical assets that comprise the electricity network.’ (Australian Energy Regulator, 2018b)

Embedded network operators will typically register for required exemptions for themselves but will not take any steps to ensure that the ‘owner’ of the embedded network is exempt. To comply with the Network Service Provider Registration Exemption Guideline, all parties should obtain appropriate exemptions.

Network Supply Terms

Most exempt operators understand that they need to have a contract in place with their embedded network customers. Few, however, understand the importance of having network use terms and condition and the benefit of having a contract in place to cover the use of the network.

Network supply terms and conditions critically cover the scenario of a customer opting out of an embedded network, where the customer is now supplied by a third-party retailer but continues to use the embedded network infrastructure.

Disclosure

Exempt operators must ensure that they comply with their disclosure obligations. These obligations are triggered at the start of an exempt customer’s tenancy/ electricity supply agreement (Australian Energy Regulator, 2018a, 2018b). In other words, exempt operators must monitor when new customers enter their embedded networks and ensure that appropriate disclosures are made.

There are, for those exempt operators who both supply and sell electricity at an embedded network, two disclosure statements that must be developed and used.

A single disclosure statement that complies with s 4.8.1 of the Network Service Provider Registration Exemption Guideline can be developed. Such a document will need to set out:

  • the customer’s right to purchase energy from a retailer of their choice and information on options for metering that would follow that choice;
  • the customer’s right to any dispute solution including access to the energy ombudsman schemes (if available), the right for the customer to lodge a complaint or to obtain free information and advice;
  • the exempt operator’s complaints and dispute resolution procedures;
  • a copy of or link to the conditions applicable to the exemption that the exempt operator is operating under and a printed copy under request;
  • unbundled details of the network tariffs and all associated fees and charges that will apply to the exempt customer in relation to the sale of energy; and
  • contact numbers in the event of an electricity fault or emergency, including the number for a 24–hour emergency contact line.

A single disclosure statement that complies with standard condition 2 of the AER (Retail) Exempt Selling Guideline can also be developed. This document will need to set out:

  • the legal name, trading name (if relevant) and contact details of the exempt seller;
  • any right of the exempt customer, under state or territory laws, to elect to purchase energy from a retailer of their choice and information on the options for metering that would allow this choice;
  • that the exempt person is not subject to all the obligations of an authorised retailer, and the exempt customer will not receive the same protections as it would if it were purchasing from an authorised retailer;
  • the exempt customer’s rights in relation to dispute resolution including:
    • any right the exempt customer has to access the energy ombudsman scheme (if applicable), including to lodge a complaint or for free independent information and advice, or any other relevant external dispute resolution body in the state or territory in which the exempt customer is located; and
    • the exempt person’s procedures for handling complaints and disputes.
  • the conditions applicable to the exemption that the exempt person is operating under
  • the availability of relevant government or non-government energy rebates, concessions and relief schemes;
  • the forms of assistance available if the exempt customer is unable to pay energy bills due to financial difficulty, as well as the process the exempt customer should follow to seek these forms of assistance;
  • the energy tariffs and all associated fees and charges that will apply to the exempt customer in relation to the sale of energy;
  • the flexible payment options that are available to the exempt customer in relation to the sale of energy, such as arrangements for payment by periodic instalments (bill smoothing); and
  • contact numbers in the event of a gas or electricity fault or emergency.

Exempt sellers should review whether they are complying with their disclosure obligations and if they are not should develop standard documents and processes to ensure compliance.

Compliance Quarter advises embedded network operators on their compliance obligations- simplifying the complexity. If you have any questions about your embedded network operations, please get in touch.

References:

Australian Energy Regulator (2018a) AER (Retail) Exempt Selling Guideline, Version 5. Available at: https://www.aer.gov.au/system/files/AER%20Retail%20Exempt%20Selling%20Guideline%20-%20version%205%20-%20March%202018.pdf (Accessed: February 23, 2022).

Australian Energy Regulator (2018b) Network service provider registration exemption guideline – March 2018, Version 6. Available at: https://www.aer.gov.au/networks-pipelines/guidelines-schemes-models-reviews/network-service-provider-registration-exemption-guideline-march-2018 (Accessed: February 22, 2022).

Bowyer, J., Bruce, A. and Passey, R.J. (2016) Regulatory and Retail Arrangements for Community-owned Embedded Networks. Available at: https://www.researchgate.net/publication/315312354.

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