The NT Utilities Commission releases Decision Paper on stage 2 of electricity licensing regime review

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In 2022, the Utilities Commission of the Northern Territory (the Commission) commenced a review of the Territory’s licensing regime which aims to clarify and enhance the operation of the licensing regime.  The review is being undertaken in three separate components (stages):

  • Stage 1: a review of the coverage, relevance and flexibility (scope and design) of the licensing regime
  • Stage 2: a review of the consistency, efficiency and effectiveness of the form and content of licences
  • Stage 3: a review of the efficiency and effectiveness of the Commission’s licensing and related reporting

The Decision Paper released in August 2023 marked the completion of Stage 1, focusing on refining the scope and design of the regime. This Decision Paper, released in January 2024, finalises stage 2, presenting the Commission’s decisions on new standard conditions for electricity supply licences. While existing conditions have generally been similar, inconsistencies and outdated references have been identified.

The key changes to existing licence conditions outlined in the stage 2 Decision Paper are outlined below:

General conditions to be included in all electricity supply licences

Information to the Commission: There are a number of standard conditions requiring licensees to provide information to the Commission which are a consolidation of existing conditions with the addition of specific timeframes for the provision of that information and inclusion of further detail to clarify requirements.

Annual returns: The requirement for an annual return is a condition of current licences and provides for the Commission to specify the information required and timeframe for provision of the information through written notice. The new standard condition now includes a standardised due date for annual returns (set for August 1 each year) and outlines the minimum information required. This ensures transparency regarding annual reporting requirements, particularly benefiting prospective licensees.

Change in circumstances: A licence must incorporate a provision concerning the licensee’s financial or other capability to sustain operations under the licence. However, this requirement has been amended from the current licenses, transforming it from a passive obligation (where information is sought only upon Commission request) to an active obligation. Now, the licensee must promptly notify the Commission in writing within 10 business days of any changes occurring, as opposed to the previous timeframe of 20 business days after receiving a request from the Commission.

Compliance with regulatory instruments: The current condition has been expanded to require a licensee to comply with ‘any guideline made under a code or the Utilities Commission Act’. Whilst current conditions have required a licensee to comply with “regulatory instruments”, “guidelines” have previously not explicitly been included.

Compliance processes: Some existing licences vary in their requirement to report “any breach” versus “any material breach” to the Commission. To standardise this process, all licensees are required to report “any breach” in line with the Compliance Framework and Reporting Guidelines. This ensures consistency and emphasises the importance of detecting and addressing any breaches promptly, regardless of their materiality. Additionally, the term “external audits” has been replaced with “independent audit” for clarity, and conditions regarding independent audits have been streamlined to remove redundancy. The scope and standards of independent audits must comply with Commission guidelines, or in their absence, be determined by the Commission. The Commission is also reviewing the efficiency and effectiveness of the Compliance Framework and Reporting Guidelines (including audit provisions) in the next stage of the licensing review.

Compliance reporting: The Commission revised the Compliance reporting condition to require licensees to report any material breach within 2 business days (rather than as soon as reasonably practicable), emphasising the seriousness of such breaches. Licensees must provide detailed information on the breach, including its circumstances, reasons, consequences, and remedial actions. A timeframe of 20 business days has also been set for the provision of a full report on the material breach, with flexibility for extensions depending on the complexity of the breach. Additionally, licensees must report all instances of non-compliance, regardless of their materiality, in their annual compliance report, as outlined in the Compliance Framework and Reporting Guidelines

Standard conditions for retail licensees

Publishing of customer standards and procedures: The Commission has reworked the “Customer related standards and procedures” condition for retail licences to ensure its broad applicability. Initially proposed in the Consultation Paper was a requirement for licensees to publish their standards and procedures before commencing operations, as opposed to the current condition which allows three months from the issue of the licence for publication. However, in this decision paper, the Commission has decided against the prerequisite for having these standards and procedures in place before operations begin, while stressing the ongoing obligation to adhere to them. Although certain standard terms and conditions must still be established before licence issuance, other policies, such as those addressing hardship or family violence, can now be developed post-licensure, subject to approval by the Commission.

Standard conditions for generation licencees

Safety management and mitigation plans (SMMP): Previously, generation and network licence holders were required to submit a SSMP within three months of receiving their license. Under the new Electrical Safety Act, SMMP approval shifts to the Electrical Safety Regulator and NT WorkSafe, with existing Commission-approved plans remaining valid for up to three years. Licensees should ensure compliance with all applicable laws, including the ES Act, and consult NT WorkSafe for guidance.

Third party operators: The condition concerning operating contractors has been relocated from general conditions to specific conditions for generators and network providers. It emphasises the licensee’s ultimate responsibility for ensuring contractor compliance with licence obligations. Licensees must include provisions in contracts with third-party operators to ensure compliance. Additionally, licensees must inform the Commission of any changes in contractor identity, ensuring transparency in major operational shifts. This requirement applies to situations where contractors play a significant role, reducing administrative burdens and focusing on critical operational aspects.

There were also some additional standard conditions relating to network licence holders however as at the time the decision paper was published the only holder of a network licence is Power and Water Corporation (PWC).

Form of electricity supply licences

The Commission has advised that it will also make a number of cosmetic changes to the form of licences which it has outlined in the Decision Paper.

Next steps

Following release of the Decision Paper the Commission will commence the process of writing to existing licensees proposing a variation of their licence based on the finalised standard conditions. This will ensure consistency in obligations placed on licensees and provide transparency on requirements for prospective industry participants so they can make informed decisions prior to entering the Territory’s electricity supply industry.

Notwithstanding this, there may be instances where the Commission imposes additional ‘non-standard’ conditions on a licensee specific to that licensee’s circumstances or operations and exemptions may also be considered based on specific circumstances or operations.

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