Increased Retailer Reporting and the CDR in NSW

AU Energy Compliance

At the end of December 2019, the Independent Pricing and Regulatory Tribunal NSW (IPART) released its final report on its Review of the Performance and Competitiveness of the NSW Retail Electricity Market for 2018-2019 (Report). We previously provided an update upon the release of the interim report here. The Report found that smaller retailers have continued to increase market share and that prices fell for those customers engaged in the market. IPART also made three recommendations to the Minister for implementation in NSW going forward. These recommendations are aligned with two significant changes in the energy sector in 2020: i) the Consumer Data Right; and ii) increased price regulation and financial reporting.

 

 

 

 

 

 

 

 

 

Recommendation 1: Interval meter data on comparison sites

IPART recommended that: “Energy Made Easy and NSW Energy Switch should allow customers to input interval meter data to make more accurate estimates of customers’ bills under different offers. This should be ready for the launch of the Consumer Data Right on 1 July 2020”.

The Report found that more than 65% of customers in the Ausgrid distribution area would benefit from moving to time of use tariffs, but noted that the current comparison websites could be more useful to customers with time of use meters. NSW Energy Switch is a NSW Government backed price comparator service which operates by analysing customer bills, while the AER’s Energy Made Easy website allows customers to input their own data.

Noting the introduction of the Consumer Data Right for the energy sector later this year, IPART was conscious of the shift towards consumers taking control of their data and it is logical that energy regulators are in step with the Consumer Data Right being introduced by the Australian Competition and Consumer Commission (ACCC).

Recommendation 2: Publication of Bill and Consumption Data

IPART recommended: “that the NSW Government publish more information on the distribution of consumption and bills for customers that have used the NSW Energy Switch website to help inform regulators on how prices actually paid by customers are changing over time. This should be broken down by network area, market vs standing offers and published each financial year to identify differences pre and post the implementation of the Default market Offer (DMO)”.

This suggestion aligns with the recent rule change proposal to require regular financial reporting by retailers to assist regulators – the Retail Market Transparency Rule discussed here. The general tenor from policymakers and regulatory agencies has been that they do not have enough information to accurately report on the state of the retail market. In IPART’s case, the information it could have regard to was limited by statute.

The rationale is that publishing this information would assist the national regulators in their annual reporting on energy markets. However, given the information will be limited to NSW and other jurisdictions will not necessarily have access to similar data, it may be of limited use to the AEMC, AER and ACCC.

Recommendation 3: Removal of Market Monitor

IPART stated that: “Market monitoring by multiple agencies increases costs for taxpayers, retailers and consumers. Rather than requiring IPART to duplicate annual market monitoring, a better use of resources would be for IPART to investigate or review NSW specific matters as required”.

The primary reason given for this change is the implementation of the ACCC’s market monitoring role for the electricity market as a whole. It will report every 6 months on the state of the market for 7 years and has similar information gathering powers to IPART, but is not limited to NSW only. ACCC reporting is in addition to the annual reports on the retail market developed by the AEMC and the Australian Energy Regulator. It was noted that “market monitoring by multiple agencies increases costs for taxpayers, retailers and consumers”.

Importantly, while the regular annual reporting function is set to be abolished, IPART will still be available to review or investigate special matters pertaining specifically to the NSW market as required. The last time this function was exercised was in respect of metering installation timeframes in 2018.

Important changes to Retail Pricing Information Guidelines

AU Energy Compliance

Retail Pricing Information Guidelines

By Anne Wardell, Compliance Quarter. 

The Australian Energy Regulator (AER) has released new Retail Pricing Information Guidelines (the new Guidelines) which commence on 31 August 2018.

Although the new Guidelines commence on 31 August 2018, not all of the new requirements will commence on that date. The AER is of the view that the changes will take time to implement and has therefore introduced a series of stages for implementation. The important dates for the stage implementation are:

Retail Pricing Information Guidelines

Source: new Guidelines at pp 5-6

A number of key changes have been introduced in the new Guidelines including the replacement of the Energy Price Fact Sheet.

The key changes to the Guidelines include:

  • replacing the requirement for retailers to provide an Energy Price Fact Sheet with a requirement that each energy plan have two separate documents – a Basic Plan Information Document and a Detailed Plan Information Document
  • changes relating to display of plan information on websites, in advertising and marketing material
  • new requirements for the use of clearer and simpler language, and
  • clarifying the definition of generally available plans.

Source: News item AER, AER releases final Retail Pricing Information Guidelines (version 5.0) and Notice of Final Instrument.

Plan information documents

Energy Price Fact Sheets will be replaced by Plan information documents which must be provided to the Energy Made Easy website. The plan documents will be automatically generated in the retailer secure area of Energy Made Easy after the relevant data and information have been submitted. The plans must be submitted within two business days of the plan being offered to customers.

Each plan will have a unique reference code or plan ID which is generated by Energy Made Easy. The Key Plan information which must be provided is contained in ss 31 to 64 and covers such information as price, discounts, incentives, fees and eligibility requirements.

There are two types of plan information documents which retailers must have; the first is the Basic Plan Information Document (BPID) and the second is the Detailed Plan Information Document (DPID). Retailers are required to have a BPID for every plan, including restricted plans (cl 79 of the new Guidelines).

What are generally available plans?

One of the aims of the new Guidelines was to provide some clarity on the definition of generally available plans. The Glossary provides the following:

Generally available plan means any plan that is available to any customer in the relevant distribution zone unless it is classified as a restricted plan’.

Clearer and simpler language

Clauses 65 to 69 of the new Guidelines contain certain language requirements which include prohibited and required terms:

Retail Pricing Information Guidelines

Source: new Guidelines at pp 13-14

Display of plan information

There are different requirements for the display of the plan information depending upon whether it is a generally available plan ( cl 81-82) or a restricted plan ( cl 83-89). There are also requirements for online sign up (cl 90-92), in-person marketing activity (cl 93-94) and other marketing activities such as telemarketing or internet sales channels (cl 95-98).  The in-person marketing activity and other marketing requirements will apply whether the retailer conducts the marketing themselves or uses a third party vendor.

Other display requirements are:

  • publication requirements on mass media and social media (cl 100-102);
  • price comparison websites and third party agents (cl 103); and
  • a requirement to refer to plan ID in communication with customers (cl 104-105.

Clauses 106 to 110 deal with the requirements for describing discounts in advertising and marketing and provide the following example:

‘For example, these requirements would be satisfied with an electricity advertisement with the claim:

15% guaranteed discount off usage charges’ and, in fine print ‘Discount is off our standing offer plan charges. This information is available at www.sunenergy.com.au/standingplancharges’.

Further information is available on the AER website at Retail Pricing Information Guidelines 2018.

Should you wish to discuss any aspect of this article with the team, please click here.

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

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

AU Energy Compliance

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.

Embedded Networks Under the Spotlight

Embedded Networks Under the Spotlight

AU Energy Compliance

embedded-networks

By Connor James, Compliance Quarter.

The Australian Energy Market Commission (AEMC) is reviewing the regulatory arrangements for embedded networks.

Embedded networks operate in a unique space from the regulatory perspective. Common examples of embedded networks include shopping centres, retirement villages, apartment complexes and caravan parks. Embedded networks are also found in commercial buildings.

Below we discuss the AEMC review and the broad regulatory challenges with embedded networks.

What is an embedded network?

Embedded networks are private electricity networks connected to the distribution and transmission system of the national electricity market through a parent connection point (gate meter).

Consumers within embedded networks are typically individually metered and sold electricity from the ENO. ENOs own network infrastructure and on-sell electricity from the gate meter within the embedded network to the occupants.

There are significant potential benefits resulting from reduced network and connection costs. An ENO is able to purchase electricity at a reduced rate for the network as a whole and then on-sell it to customers. Those benefits can be (but are not always) passed on to consumers within an embedded network.

The AEMC notes that the number of embedded networks has grown significantly in recent years and that:

A range of business models to provide embedded network services are also emerging in the market and developments in technology, including distributed generation and energy storage also mean the configuration of, and arrangements within, embedded networks are increasingly complex.

Embedded network operators (ENOs) are not regulated in the same way as electricity retailers.  Many ENOs operate under an exemption and are not subject to the same obligations of a licensed electricity retailer.

Electricity retail licence and exemption framework

The eastern states (other than Victoria) are governed by the National Energy Retail Rules and National Energy Retail Law (Retail Law), implemented as part of the National Energy Consumer Framework.

Energy sellers in the eastern states of Australia must either operate under licence or an exemption. The sale of energy includes the sale of energy at cost, i.e. without profit.

ENOs usually operate under an exemption. The ownership, control or operation of a network brings in additional obligations for ENOs as a network operator. We will discuss the network obligations of an ENO in a later article.

The Regulatory Challenges

There are two broad regulatory challenges with embedded networks. These are:

  1. A lack of choice for embedded network consumers: As one ENO owns and operates the embedded network, a consumer within that network will purchase electricity from the ENO and may not know about, or may not be able to access, other energy sellers. This issue is being addressed by the Power of Choice reforms. We will discuss Power of Choice in a later article.
  2. Questions about what consumer protections should apply: As ENOs are not regulated in the same way as electricity retailers, ENO customers are not afforded the same level of protection. Yesterday, we looked at the AER’s review of the dispute resolution options available to exempt customers (including customers of embedded networks). The AEMC review also examines this area.

The AEMC Review

The AEMC review is a result of a request by the Council of Australian Government’s Energy Council to examine the regulatory arrangements for embedded networks under the National Energy Retail Law and the National Energy Retail Rules. The objective of the review is to ‘identify and assess issues for embedded network customers and identify appropriate solutions to any problems.’

The AEMC’s consultation paper sets out the scope of the review, with issues broken into four core questions for stakeholders:

  1. Is the regulatory framework for embedded networks fit for purpose?
  2. Can access to retail market offers be improved?
  3. What consumer protections should apply to embedded network customers?
  4. Are current regulatory arrangements for gas embedded networks appropriate?

Timeline

Submissions to the AEMC review have now closed. We will discuss the Australian Energy Regulator’s submission in a later article.

The AEMC’s draft report and recommendations are expected to be published by 15 September 2017.

 

If you require any assistance in reviewing your operations as an ENO please contact us.