Although the first emissions liability surrender period
is not until 15 June 2013, energy consumers and suppliers should be
taking steps now to ensure they're ready.
The start of the new year means we are now more than halfway
through the first year of the Federal Government's carbon
pricing mechanism (CPM).
Although the first emissions liability surrender period –
when liable entities will need to surrender eligible emissions
units for 75% of their emissions liability, or pay a unit shortfall
charge – is not until 15 June 2013, the price imposed on
carbon is beginning to be felt and passed through the Australian
economy (albeit in less sensational fashion than some
The lead-up to the introduction of the CPM saw a flurry of
contract negotiation and amendment as energy users and their
suppliers took action to be "carbon ready' before the 1
July 2012 scheme commencement date. With the ink now drying on
CPM-specific carbon clauses, it's a good time to consider the
key issues that energy suppliers and energy users will need to
address to ensure the first compliance period doesn't generate
any unnecessary headaches.
Aside from meeting the relevant administrative obligations under
the Clean Energy Act, carbon cost pass-through appears to be the
issue of primary importance. Whether you're an energy supplier,
energy consumer, or both, the question of transparency is central
to all associated discussions.
So what now for energy consumers with existing energy
Energy consumers with existing energy contracts should review
their carbon clauses, in light of any carbon cost component
included in energy bills they may have received from their
suppliers, in order to determine whether:
the correct "carbon costs" are being passed-through.
This should include, where relevant, an assessment of the emissions
intensity of energy supplied, and consideration of whether any
"direct" and "indirect" costs being passed
through fit within the negotiated terms of the contract; and
energy suppliers are maximising all opportunities to minimise
liability under the scheme (including technical measures as well as
exploring all options under Commonwealth Government programs and
initiatives), if that is indeed a requirement under the
And energy suppliers?
Energy suppliers with liabilities under the Clean Energy Act
should revisit their contractual position to consider whether they
settled on an appropriate formula for calculating the liability
of their customers to whom a carbon cost has or will be passed
all relevant paperwork and systems in place to ensure the full
"carbon cost" has been determined; and
where relevant, obtained the requisite number of free carbon
units to meet their emissions liability (or a portion thereof)
under the Jobs and Competitiveness Program, or from their customers
under any contractual arrangements for the transfer of carbon
15 June will arrive sooner than expected. Appropriate
consideration of these issues now will assist entities on both
sides of the energy fence to anticipate and hopefully avoid any
conflicts at the 11th hour.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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