Victoria, other Eastern States and New Zealand: What are the different processes for becoming an Electricity Retailer?

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Here at Compliance Quarter, a key focus of ours is supporting Australian energy retailers with licensing, authorisation and general compliance processes.[1] However, we also offer compliance support for energy retailers in other countries and jurisdictions such as California[2] and New Zealand.[3]  For any Australian retailers who are considering expanding into another state or into New Zealand, it is essential to understand the similarities and differences in retail regulation across jurisdictions. In today’s article, we look at the different retail regulatory regimes and application processes across Victoria, the other southern and eastern states and New Zealand.

By Dr Drew Donnnelly, Compliance Quarter 
  1. Electricity Retailers in the Eastern and Southern States (sans Victoria)

A unified electricity retail authorisation process applies across New South Wales (NSW), South Australia (SA), Queensland, Tasmania and the Australian Capital Territory (ACT). This process is administered by the Australian Energy Regulator (AER). The requirements of this authorisation process are summarised in the AER Retail Authorisation Guideline.[4]

This Guideline prescribes that applicant retailers must:

  • have the necessary organisational and technical capacity to operate as a retailer;
  • have the financial resources, or access to resources, to operate as a retailer;
  • be a suitable person to hold a retailer authorisation.

This Guideline also emphasises that an applicant retailer must be familiar with, and adhere to a host of legislation, regulations and rules including:

  • National Energy Retail Law;
  • National Energy Retail Regulations;
  • National Energy Retail Rules;
  • relevant provisions of the National Electricity Law;
  • relevant Provisions of the National Electricity Rules.

While there are differences between the applicable regulatory provisions in NSW, SA, Queensland, Tasmania and the ACT (‘jurisdictional derogations’), in collectively committing to the provisions noted above, these jurisdictions adhere to the ‘National Energy Customer Framework’.[5]

This framework also includes an exemption regime for some suppliers of electricity (common for operators of embedded networks), with such suppliers being subject to the Retail Exempt Selling Guideline.[6] In addition, retailers must be members of their state or territory Ombudsman service for dealing with customer complaints.

Once an aspiring retailer has applied to the AER for authorisation, the AER aims to process completed applications within 12 weeks of receipt.  All such applications are subject to public consultation.

Any aspiring retailer that wishes to purchase energy from the wholesale market must also go through a separate registration process with the Australia Energy Market Operator (AEMO).

  1. Electricity Retailers in Victoria

Victoria has a separate retail regulatory regime from the other eastern and southern states. Many aspects of the application process are similar to what is set out for the other states above.[7] Aspiring retailers must provide key information in relation to their organisational, technical and financial capacity in their application. Applications (made to the Victorian Essential Services Commission rather than the AER) are subject to a public consultation period. Furthermore, Victorian customers have access to an Ombudsman service and retailers have access to an exemption framework.[8]

The reason that Victoria operates its own framework is because it has not yet fully implemented the National Energy Consumer Framework. The purpose of this separate regime is to preserve the enhanced consumer protections that exist for Victorian retail customers. In light of this, aspiring retailers in Victoria have extra obligations that they must be familiar with and commit themselves to. These obligations, set out primarily in the Energy Retail Code[9] include:

  • A prohibition on retailers imposing fees and charges for merchant service fees (e.g. credit card fees) to customers on standing offer contracts (clause 35B);
  • A requirement that retailers offer home energy audits and flexible options for the purchase of appliances in their hardship policies (see clause 71B(2)(g));
  • Special billing requirements with respect to smart metering (multiple clauses);
  • Extra protections prior to customer disconnection (multiple clauses);
  • Compensation for wrongful disconnection (see clause 113).

Perhaps as a result of the extra obligations retailers have to consumers in Victoria, aspiring retailers are also subject to increased information requirements when making their application, including information relating to:

  • The organisation’s capacity to operate a business;
  • Managing supplier contracts;
  • Managing customer contracts;
  • Customer account establishment and management;
  • Customer service provision;
  • Billing and collection;
  • Appropriate management systems.
  1. Electricity Retailers in New Zealand

We mentioned previously that New Zealand has taken a different approach to electricity retail regulation compared to Victoria or the other eastern and southern states. Overall, the framework is far less prescriptive than Australia’s and has been described as ‘light touch’.[10] Retailers have regulatory obligations which are primarily set out in the:

  • Electricity Industry Act 2010;
  • Electricity (Low Fixed Charge Tariff option for Domestic Consumers) Regulations 2004;
  • Electricity Participation Code; and,
  • general consumer law.

In addition, retailers are expected to comply with a range of guidelines including:

As in Australia, retailers are subject to a dispute resolution scheme in the form of ‘Utilities Disputes’ (formerly The Office of the Electricity and Gas Complaints Commissioner).[12]

Perhaps the biggest difference between New Zealand and the eastern and southern states is that New Zealand does not have a formal retail licensing or authorisation regime. However, all aspiring retailers are required to register as a participant with the Electricity Authority under section 9 of the Electricity Industry Act 2010. Furthermore, in virtue of that Act and the Electricity Distribution Code, retailers are subject to the monitoring, compliance and enforcement powers of the Electricity Authority.

If you think that you have a good business case for retailing in another jurisdiction, and you would like our help with compliance or application processes, please get in contact with us.

 

[1] For some guidance based on our recent experiences see https://www.compliancequarter.com.au/five-key-considerations-for-prospective-energy-retailers/.

[2] See https://www.compliancequarter.com.au/recovering-costs-in-the-california-retail-market-the-power-charge-indifference-adjustment/.

[3] See https://www.compliancequarter.com.au/expanding-into-the-new-zealand-electricity-retail-market-the-broad-contours-of-the-new-zealand-system/.

[4] See https://www.aer.gov.au/retail-markets/retail-guidelines-reviews/retailer-authorisation-guideline-december-2014.

[5] For more information see https://www.energy.gov.au/government-priorities/energy-markets/national-energy-customer-framework.

[6] See https://www.aer.gov.au/retail-markets/retail-guidelines-reviews/retail-exempt-selling-guideline-march-2018.

[7] See Guidance Notes for Applications for Electricity Licences and the Transfer of Existing Electricity Licences  at https://www.esc.vic.gov.au/document/energy/53143-guidance-notes-applications-electricity-licences-transfer-existing-electricity-licences-november-2006/.

[8] Governed by the General Exemption Order 2017 see http://www.gazette.vic.gov.au/gazette/Gazettes2017/GG2017S390.pdf.

[9] See https://www.esc.vic.gov.au/document/energy/27356-energy-retail-code-version-11-2/.

[10] See https://www.apec.org/-/media/APEC/Publications/2017/6/New-Zealand-Electricity-Retail-Services-Market-Reform/217_PSU_NZ-Electricity-Retail-Services_Final.pdf, p8.

[11] For more information see https://www.ea.govt.nz/operations/retail/retailers/retailer-obligations/.

[12] See Electricity Industry Act 2010, section 95.

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