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New National Energy Retail Law – is your village or park compliant?

14 Sep 2015

Background

Last year Queensland passed laws to adopt the new national framework for regulation of retail energy supply, known as the National Energy Retail Law (NER). The NER has now been (or will be in the near future) adopted in all Australian jurisdictions, except Western Australia and the Northern Territory.

In this article we briefly consider some of the key issues with respect to the NER in relation to the on supply of energy (such as electricity or gas) in a retirement village or manufactured home park in Queensland. If you own or operate a retirement village or manufactured home park and on supply energy to your residents then urgent action may be required to ensure compliance with the NER.

NER and supply arrangements

The NER came into effect in Queensland on 1 July 2015 and applies to the supply of all retail energy (electricity and gas). That includes:

a. direct supply by larger retail suppliers (such as Energex, Ergon and Origin); and
b. on supply by the owners or operators of retirement villages, manufactured home parks, multi-unit buildings and shopping centres home parks who purchase the energy in bulk and then on supply to residents or other customers.

For the NER to apply it is not necessary for the supplier to be making a profit or margin on the supply – even if the energy is supplied to the consumer at cost it will still apply.

Authorisation and exemptions

Under the NER, the general rule is that a supplier of retail energy (whether direct or on supply) must hold an authorisation to do so, if the supply of energy is their core business or there is a large volume of energy being supplied.

The NER recognises that the requirement for obtaining and holding an authorisation is onerous for smaller suppliers, especially where the energy is only being supplied in manner which is incidental to the arrangement between the parties (e.g. in a community living environment).

As such the NER provides for three separate categories of exemptions from holding an authorisation which may apply to certain suppliers, depending on their circumstances.

The Australian Energy Regulator (AER) was set up under the NER as the national authority to regulate energy supply in Australia and is the authority responsible for administration of authorisations and exemptions.

Retail exemption categories

The retail exemption categories under the NER are outlined below:

a. Deemed exemptions

  • These exemptions will apply automatically due to the nature of the supplier and supply arrangement, provided the relevant criteria are met. No registration or application is required in these circumstances.
  • Typically will only be relevant for very small-scale operations such as short-term letting arrangements or multi-unit buildings in which there are 10 or less occupants. These exemptions will not usually apply to a retirement village or manufactured home park.

b. Registrable exemptions

  • These exemptions do not automatically apply – the supplier must register online with AER.
  • They apply to most retirement villages, manufactured home parks and larger multi-unit buildings where electricity is on-supplied to residents and are explored in more detail below.

c. Individual exemptions

  • If a supplier does not fall into the category for deemed or registrable exemptions they may apply to AER for an individual exemption.
  • These exemptions require an application to the AER and are assessed on a case by case basis.
  • May allow the supplier to vary the conditions relating to their supply arrangements that would otherwise apply under the other exemption categories.

Registrable exemptions

As mentioned above, registrable exemptions will be relevant to retirement villages and manufactured home parks where electricity is on-supplied to the residents. They will also apply to larger multi-unit buildings, however that is not covered in this article.

If a supplier is eligible for a registrable exemption an application to AER is not necessary, provided the online registration is completed. Once completed it will be a “registered exemption” and appear on the list available on the AER website. These registrations apply on a site by site basis, meaning that separate registrations are needed where the supplier owns or operates multiple villages or parks.

Conditions for registrable exemptions

Once registered, the supplier will need to comply with the relevant conditions which attach to the registration relating to the supply of energy. Those conditions are set out in the AER (Retail) Exempt Selling Guidelines as published by the AER (Exempt Selling Guidelines) and are designed to ensure consumer protection in a manner which is generally consistent with those which apply to authorised retail suppliers.

These conditions require the supplier to cover various matters relating to the energy arrangements, including:

  • obligations on the supplier to supply energy and availability of alternative supply;
  • details of the process for dealing with disputes between the supplier and resident relating to energy supply;
  • the availability of concessions and rebates (such as the Queensland Government electricity rebate);
  • details about the conditions which apply to the exemption;
  • certain billing and charging rules and information including maximum charges applicable (e.g. Tariff 11 for electricity in Queensland);
  • details regarding financial assistance and flexible payment options;
  • rules and obligations regarding disconnection and reconnection of energy supply; and
  • the process for termination of a supply agreement.

A full list of the conditions relating to registrable exemptions is contained in the Exempt Selling Guidelines. Different conditions will apply depending on the category of exemption for each village or site.

Any new energy agreements entered into should reflect the above conditions to ensure compliance in future. Importantly, suppliers must provide the above information to existing residents on or before 1 October 2015.

Consequences of non-compliance

Under the NER on suppliers in Queensland are required to hold either an authorisation or exemption from 1 July 2015.

If a supplier does not hold an authorisation or exemption then they may face significant fines or a court order to remedy a breach. The AER also has certain powers to take action against suppliers that do not comply with the NER.

Private networks

In many cases the owners or operators of retirement villages and manufactured home parks will also own the network (being the on-site electricity infrastructure) which delivers electricity to the residents’ homes. This is known as a private network.

To be lawful, a private network must be registered with Australian Energy Market Operator or the supplier must have an exemption for the network. The same exemption classes apply with the retail supply as discussed above and an application to AER can be made at the same time for an exemption for retail supply.

Conditions will apply to an exemption for a private network.

Further detail regarding private networks and conditions can be found in the Electricity Network Service Provider Registration Exemption Guideline (Network Guidelines) on the AER website, which is accessible here.

Next steps

Owners or operators of retirement villages and manufactured home parks should, to the extent they have not already done so:

  • apply to AER to register each site and private network for an exemption as soon as possible (this was due on 1 July 2015);
  • notify existing residents as to the exemption conditions by 1 October 2015;
  • review and update the following to ensure compliance with the exemption conditions and NER for current and future residents:
    • energy supply agreements;
    • residence contracts (including PIDs);
    • site agreements; and
    • policies and procedures.
  • ensure that any private networks comply with the relevant provisions of the NER and Network Guidelines.

We can assist you with all of the above to ensure compliance with the NER, for new or existing on supply arrangements.

Further information and advice

This article is only intended to highlight some of the issues you need to consider in relation to the application of the NER. The matters covered above are by no means an exhaustive list of issues to be considered and further advice should be sought before making any decisions in this respect.

For further information or advice on issues relating to the NER and how it may impact on your energy supply arrangements please contact Julie McStay on (07) 3193 0503 or James Horwood on (07) 3193 0506.