The new rule proposal for exempt gas sellers

A consultation paper was released last week by the Australian Energy Market Commission (AEMC) on a proposal that exempt gas sellers in east and south-east coast states be allowed to purchase gas directly from the Australian Energy Market Operator’s ‘Gas Retail Markets’. These markets are the equivalent of the National Electricity Market for gas retailers.
We describe the proposal below and offer our take on it.

Photo by Fancycrave on Unsplash

By Dr Andrew Donnelly, Compliance Quarter.

1. Two Frameworks for Gas
As with electricity, there are two distinct regulatory frameworks for gas sellers in the eastern and south-eastern states:

• The National Energy Customer Framework (NECF) administered by the Australian Energy Regulator (AER). It is focused on customer protections and captured primarily in the National Energy Retail Law and the National Energy Retail Rules. Note, this does not apply in Victoria;
• The Gas Retail Market Participant Framework administered by the Australian Energy Market Operator (AEMO). It is focused on the physical operation and co-ordination of the Gas Retail Markets and captured primarily in the National Gas Law and National Gas Rules.

2. The Problem and Proposed Solution
Under NECF, sellers of gas need to hold a retail authorisation or be exempted from the requirement to do so by. Exemptions may be available for gas sellers who supply gas:
• ‘incidentally’ to their main business
• as a community service or at cost, or
• to a defined group of customers at one site.

Some exempt gas sellers wish to purchase gas from the Gas Retail Markets but are prohibited from doing so as they do not fit into any of the registrable categories currently permitted under the National Gas Rules.

It is proposed that exempt sellers would be able to register as either a:
• ‘self-contracting user’, if they sell only to a related business; or,
• ‘retailer’, where they sell gas to unrelated entities.

3. How does this affect you?
Many exempt gas sellers are ‘on-sellers’. This means they purchase gas from a gas retailer and on-sell that, often within an embedded network. If this applies to your business – nothing changes. The new change is only for an exempt seller that wishes to purchase gas directly from producers through the Gas Retail Markets.

However, this does create a strange regulatory situation. Businesses that are ‘exempt sellers’ for the purposes of the AER-administered regime would also be capable of being ‘retailers’ for the AEMO-administered regime. This could prove confusing for some end -customers who may mistakenly believe that their gas supplier is subject to the retailer obligations set out in the NECF.

Note also that the AEMC is currently separately considering how gas embedded networks may be brought within NECF. This raises the question whether the proposal to let some ‘exempt sellers’ also be ‘retailers’ is pre-empting a decision to bring exempt gas sellers into NECF.

Submissions on this consultation paper close on 4 April 2019.

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