Substantial increases in penalties for non-compliance in the energy sector

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Summary: As a result of recent reforms discussed below, non-compliant energy businesses in NECF now face penalties of up to 10 percent of their annual turnover or $10,000,000. Consequently, all energy businesses should seriously re-examine their compliance programs and regulatory controls.

On 20 March 2020 Energy Ministers in what was then the COAG Energy Council agreed to implement changes to the National Energy Laws (national Electricity Law, National Gas Law, and National Energy Retail Laws) to provide for substantial increases to the civil penalties for non-compliance by energy businesses.

The proposed changes were implemented by the Statutes Amendment (National Energy Laws) (Penalties and Enforcement) Act 2020 (Act), which was given Royal Assent on 22 October 2020 and the National Energy Regulations, came into force by Proclamation on 29 Jan 2021.

The new penalty regime provides the Australian Energy Regulator with substantially increased powers and a ‘flexible and sophisticated penalty regime, akin to that of the Australian Consumer Law.’

What this means for energy businesses operating in NECF jurisdictions is an increased need to focus on ensuring compliance. The penalties for non-compliance are now substantially higher.

There are now three tiers of classifications of civil penalties based on a range of factors summarised in the table below:

Under the new penalty regime a Type 1 breach (such as a failure to deal wtih a hardship customer) can result in a maximum penalty of:

a. $500,000 for a person;

b. For body corporate (i.e. company);

  • $10,000,000;
  • if a court can determine the value of any benefit reasonably attributable to the breach of the civil penalty provision that the body corporate, and any body corporate related to the body corporate, has obtained, directly or indirectly—3 times the value of
    that benefit;
  • if the Court cannot determine the value of the benefit—10% of the annual turnover of the body corporate during the 12-month period ending at the end of the month in which the body corporate breached, or began breaching, the civil penalty provision.

We will review the decision model and the application of this penalty regime in a future article. In the meantime, if you have any questions please get in touch.

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