The enforcement and penalty regime for energy sellers in Victoria

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Changes have recently been made to the enforcement and penalty regime for non-compliance with energy laws in Victoria. In this article we explain some of those key changes and their implications for energy sellers.

Energy Fairness Act

The Energy Legislation Amendment (Energy Fairness) Act 2021 is now in effect.  The Energy Fairness Act includes various provisions of importance for all energy retailers operating within Victoria including prohibitions on door-to-door sales, cold calling, and the use of save and win back customer retention strategies.

The Energy Fairness Act introduced criminal penalties for wrongful disconnection with fines of up to one million dollars (an increase from the previous maximum of $5,000.00).  There are two tiers to the wrongful disconnection criminal penalty regime.  The first is a retailer who knowingly or recklessly arranges for the supply of electricity or gas to be wrongfully disconnected.  Such a retailer will be guilty of an offence under Section 40SE of the Electricity Industry Act or Section 48DF of the Gas Industry Act.  The second is a retailer who disconnects or arranges the disconnection of a household in a way that endangers customers on life support equipment.  Such a retailer will be guilty of an offence under Section 40SF of the Electricity Industry Act or Section 48DH of the Gas Industry Act.

The Energy Fairness Act also introduced additional requirements in relation to life support.  Retailers must update their life support register, and notify the relevant distributor, within one business day of being advised that a customer requires life support equipment.  Non-compliance can attract fines of up to $110,000.00 per contravention.

The Energy Fairness Act also introduced penalties for the provision of false or misleading information to the Essential Services Commission.  Energy licensees who knowingly provide false or misleading information to the Essential Services Commission face a criminal penalty of up to one million dollars.

The reforms enacted within the Energy Fairness Act were in response to recommendations from the independent review of the electricity and gas retail markets in Victoria reports.

Compliance and Enforcement Powers Act

Changes to the overall penalty provisions were recently made as a result of the Essential Services Commission (Compliance and Enforcement Powers) Amendment Act.

By way of background, in the second reading speech to the Bill, The Minister for Regulatory Reform, Danny Pearson MP said:

It has become clear over recent years that this original framework is no longer effective to protect Victorian energy consumers. Reflecting this, prior to the last election, the Government committed in its Energy Fairness Plan to overhaul the current fines and penalties against energy retailers breaking the law, and to provide the ESC with improved information gathering and monitoring powers so it is able to crack down on bad behaviour by energy retailers. This Bill delivers on those promises, and also makes a range of other reforms to ensure the ongoing financial sustainability of the ESC.

Under the Essential Services Commission Act, a Court may now make an order for an energy licensee to pay a penalty equal to the greater of:

  • An amount equal to 60,000 penalty units with each penalty unit currently set at $181.74,
  • If the Court can determine the value of any monetary benefit acquired by, or accrued or accruing to, the energy licensee (or anybody corporate related to the energy licensee), as a result of the contravention, an amount that is three times the benefit of the monetary benefits, or
  • If the Court cannot determine the value of the monetary benefits, 10% of the annual turnover of the energy licensee during the 12-month period ending at the end of the month in which the energy licensee contravened the civil penalty requirement.

Additionally, civil penalties can be applied to officers of energy licensees.  Pursuant to Section 54B, an officer of an energy licensee can be fined an amount equal to 240 penalty units or if there is an amount provided for in contravention of the civil penalty requirement in accordance with Section 54E, that other amount.

In this article we have not set out the full extent of the powers of the Essential Services Commission, nor when those powers would be exercised.[1] However, the powers of the Essential Services Commission by virtue of the reforms to Energy Law are comparable, and in some instances, greater than those available to the Australian Energy Regulator.  In certain circumstances, officers of an energy retailer i.e. directors and other individuals who meet the definition of officer under the Corporations Act, can face significant penalties.

[1] In the second reading speech, the Minister stated: “Unlike the current situation where what is an obligation is unclear, the new civil penalty requirements will be clearly specified in a range of Acts, Codes of Practice and other instruments. The new provisions will specify when civil penalty requirements apply by clearly identifying what provisions are civil penalty provisions, what the maximum civil penalty is (subject to maximums in the Essential Services Commission Act 2001), whether it can be enforced by penalty notices, and what the penalty notice penalty is.” The Energy Retail Code of Practice does include a table of civil penalty provisions but does not identify what the maximum civil penalty for each provision is.

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