Australia: Say watt? Changes to on-seller exemptions under the National Energy Customer Framework (NECF)

On 1 July 2015, the National Energy Customer Framework (NECF) and National Energy Retail Law (NERL) were introduced in Queensland under the National Energy Retail Law (Queensland) Act 2014 (Qld) (Act).

The aim of the NERL and NECF is to create a national framework for regulating the energy industry and to reduce red tape associated with generating, transmitting and selling electricity and gas.

Importantly to the property industry, the NERL, which is contained in the Schedule of the National Energy Retail Law (South Australia) Act 2011 (SA):

  1. removes the on-supplier retail authority exemption under the Electricity Act 1994 (Qld) ( Electricity Act); and
  2. will require on-sellers of electricity to consider their eligibility for the new exemption classes under the NECF.

The previous position

Before the introduction of the NECF, an entity was unable to sell electricity other than in accordance with a retail authority or a generation authority. However, an on-seller of electricity was not required to hold a retail authority where it qualified for an on-supplier exemption or held a special approval.

On-supplier exemption

An on-supplier, being a person who owned or occupied premises and sold or supplied electricity for use in that premises, was exempt from the requirement to hold a retail authority provided it complied with the requirements of the Electricity Act.

Special Approval

Additionally, an entity was authorised to sell electricity if it held a special approval which authorised that sale. A special approval was typically granted in special circumstances to enable entities to perform activities normally authorised by a generation or retail authority, without the relevant authority.

From 1 July 2015

Generation authorities and special approvals

The NERL amends the previous regime for on-sellers by phasing out the generation authority and special approval as a means of circumventing a retail authority over a one year transition period from the date the Act came into force. This approach is unique to Queensland. In other NERL jurisdictions the Australian Energy Regulator (AER) determines and transitions entities to the most appropriate new class of exemption introduced by the Act (see below).

From 1 July 2015, on-sellers who held a generation authority or special approval were automatically taken to hold a transitional exemption on the same terms as their existing authority or approval. By 1 July 2016, those entities on a transitional exemption must hold a retail authority or qualify for one of the new exemptions.

On-supply exemption

The NERL also removed the on-supplier retail authority exemption. Unlike generation authorities and special approvals, there is no transition period. As at 1 July 2015, those entities operating under an on-supply exemption must be holding an appropriate authority or approval or comply with the conditions imposed under the new categories of exemption outlined below.

Other on-supplier exemptions, such as the exemption from the requirement to hold a distribution authority, are not impacted by NERL.

The new exemptions

In place of the previous exemptions, the NERL introduces three new categories of exemption:

  • deemed exemption;
  • registrable exemption; and
  • individual exemption.

Deemed Exemption

In most cases, a deemed exemption applies to small-scale electricity selling arrangements where the costs of registering the exemption outweigh the benefits gained.

For example, entities such as landlords, owners and managers of office buildings, shopping centres and industrial parks that sell metered energy to fewer than ten small tenants within the limits of the site owned or managed, will generally be able to benefit from a deemed exemption.

Registrable exemption

A registrable exemption is likely to be required for larger scale activities that may have a greater impact on the market.

Entities that must apply to the AER for a registrable exemption include those selling energy to 10 or more small tenants or those selling energy to large customers (for the supply of electricity, those customers consuming more than 100 MWh of electricity per annum).

Applications for a registrable exemption can be made on the AER's website.

Individual exemption

If an entity is not eligible for a deemed or registrable exemption and does not hold a retailer authorisation, it must apply to the AER for an individual exemption.

An individual exemption, if granted, will be tailored to the specific needs of the entity and its customers.

Enforcement

The statutory regime provides the AER with a number of enforcement options if an entity on-sells electricity without an authority or exemption or where an entity fails to comply with the conditions of its authority or exemption. Such options include issuing infringement notices, accepting court enforceable undertakings and commencing proceedings.1

On-sellers should note that the sections of the NERL governing retail authorities and exemptions are civil penalty provisions which carry a maximum penalty for an individual of $20,000 and $2,000 for every day during which the breach continues, and for a body corporate $100,000 and $10,000 for every day during which the breach continues.

Additionally, if a corporation is in breach of the provision, each officer of the corporation is also taken to have been in breach if the officer knowingly authorised or permitted the contravention or breach.

Implications

Landlords, owners and managers should review current practices to ensure they hold a retail authorisation or retailer exemption for their arrangements.

In particular, previously exempt on-suppliers under the old regime under Part 6 of the Electricity Act must:

  • hold a retail authority;
  • hold a special approval or generation authority; or
  • consider whether they are able to benefit from one of the classes of deemed exemptions and, if not, whether they need to apply for a registrable exemption or individual exemption.

Before 1 July 2016, holders of a special approval or generation authority under the old regime will need to consider:

  • applying for a retail authority; or
  • whether they are able to benefit from one of the classes of deemed exemption and, if not, whether they need to apply for a registrable exemption

Please contact us for further information regarding the different types of classes of deemed and registrable exemptions.

Footnotes

1 See the AER's Compliance and Enforcement Statement of Approach for more information on enforcement options

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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