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Australia – Do You Supply Electricity To Another Person, Incidental To Your Core Business?

9 February, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance

 

AER releases draft revised Electricity Network Service Provider Registration Exemption Guideline

 

WHAT YOU NEED TO KNOW

 

  • On 31 January 2013, the AER released a draft of the revised Electricity Network Service Provider Registration Exemption Guideline (“NSP Exemption Guideline”). This version of the NSP Exemption Guideline will replace the version published in December 2011.
  • The draft revised NSP Exemption Guideline contains significant revisions to the classes of deemed and registrable exemptions from the requirement to register as a network service provider.
  • All persons who are currently eligible for a deemed exemption, or that hold a registrable exemption, will need to comply with the revised terms of their class of exemption.
  • Submissions are due to the Australian Energy Regulator (“AER”) by 15 February 2013, with the NSP Exemption Guideline expected to come into force at the end of February.

 

WHAT YOU NEED TO DO

 

  • You should review the draft of the revised NSP Exemption Guideline if you supply electricity to any other person (including a related body corporate) either for free or at a cost, by allowing that person to connect to your private network. This commonly occurs at:

    • mining operations;
    • shopping centres;
    • residential buildings;
    • commercial buildings;
    • industrial parks;
    • telecommunication and data service facilities;
    • retirement villages; and  train and rail networks.
  • Provide submissions to the AER by 15 February 2013.
  • Review the AER (Retail) Exempt Selling Guideline ("Exempt Selling Guideline") to determine whether an exemption is required, or whether the conditions attached to your previous exemption have changed.

 

Background

 

Anyone who supplies electricity to another person via a private network, regardless of the size of the network or the amount of the electricity supplied, is providing a network service.

 

Under the National Electricity Law (“NEL”), a person must not engage in the activity of owning, controlling or operating a distribution or transmission system that forms part of the interconnected national electricity system, unless the person is registered with the Australian Energy Market Operator ("AEMO") as a Network Service Provider ("NSP") or has been granted exemption from the requirement to be registered from the Australian Energy Regulator ("AER"). The Electricity Network Service Provider Registration Exemption Guideline (“NSP Exemption Guideline”) sets out the types of network services that are eligible to be exempt from the registration requirement and the conditions which must be met for an exemption to apply.

 

Under the NSP Exemption Guideline, there are three types of exemptions available:

 

a) a deemed exemption; 

b) a registrable exemption; and

c) individual exemptions.

 

Introduction

 

NSP Exemption Guideline

 

On 31 January 2013, the AER released a revised draft of the NSP Exemption Guideline, a copy of which can be found here (at the AER website). This version of the NSP Exemption Guideline will replace the version published in December 2011, which amended the previous version of the guideline to account for the introduction of the National Energy Retail Law.

 

The purpose of this alert is to provide a brief outline of the key changes made to the classes of deemed exemptions and registrable exemptions available under the draft of the revised NSP Exemption Guideline, expected to come into force in February 2013. All persons who are currently eligible for a deemed exemption, or that hold a registrable exemption, will need to comply with the revised terms of their class of exemption. Further, the changes to the NSP Exemption Guideline will result in additional classes of network services requiring an exemption from the AER from the requirement to register as an NSP with AEMO.

 

Exempt Selling Guideline

 

It will often be the case that a person supplying electricity to another person will be charging the person for the cost of that electricity. As such, it is often the case that a person requiring an exemption under the NSP Exemption Guideline will also require an exemption under the Exempt Selling Guideline. For this reason, a number of classes and conditions in the NSP Exemption Guideline are aligned with the Exemption Selling Guideline classes and conditions.

 

In November 2012, the AER released a revised draft of the AER (Retail) Exempt Selling Guideline ("Exempt Selling Guideline") for public consultation, a copy of which can be found here (at the AER website). The public consultation period for the Exempt Selling Guidelines closed on 11 January 2013. A final version of the revised Exempt Selling Guideline is not yet publically available, however, once it has been finalised, the NSP Exemption Guideline should be read in conjunction with the Exempt Selling Guideline.

 

Deemed exemption classes

 

Class overview

 

This exemption class deems a person to be exempt from the requirements under the NEL in respect of specified network services. While the person does not need to apply to the AER to be granted an exemption, the person will still be required to comply with the conditions set out in the NSP Exemption Guideline that apply to the relevant deemed exemption class.

 

Key changes

 

The following table provides a brief outline of the key changes to NSP Exemption Guideline:

 

       
Class Class description Change
2011 version 2013 version
ND1 Bodies corporate or owners’ corporations that pass on the cost of (metered or unmetered) energy for common areas through body corporate fees Metered energy selling to fewer than 10 small retail or commercial customers within the limits of a site owned, occupied or operated by the seller, where the relationship is a landlord/lessee relationship

 

Amended to:

 

(a) remove the reference to common area electricity costs; and

(b) amalgamate current ND2 and ND4, subject to the limitation that onselling by body corporates will only be deemed to be exempt if the energy is sold to fewer than 10 people.

 

Likely consequence: Bodies corporate that supply electricity to more than 10 people, that previously enjoyed a deemed exemption from the requirement to register with the AER, may be required to register with the AER under registrable exemption class NR2 as revised. The supply of common area electricity by bodies corporate will no longer be covered by the NSP Exemption Guideline, as it is not a supply of electricity to a third person.

 

ND2 Metered energy onselling by residential landlords or lessors operating under jurisdictional residential tenancy to less than 20 residences Metered energy selling to fewer than 10 residential customers by bodies corporate, residential landlords or lessors within the limits of a site that they own, occupy or operate, or where the relationship is a landlord/lessee relationship

 

Amended to:

 

(a) amalgamate current ND1 and ND7, subject to the limitation that onselling by residential landlords/lessors will only be deemed to be exempt if the energy is sold to fewer than 10 residential customers; and

(b) remove the reference to common area electricity costs.

 

Likely consequence: Lessors/Landlords that supply electricity to more than 10 people, who previously enjoyed a deemed exemption from the requirement to register with the AER, may be required to register with the AER under registrable exemption class NR1 as revised.

 

 

ND3 Metered energy onselling by residential landlords or lessors operating under jurisdictional residential tenancy to less than 20 residences Metered energy selling to fewer than 10 residential customers by bodies corporate, residential landlords or lessors within the limits of a site that they own, occupy or operate, or where the relationship is a landlord/lessee relationship

 

Amended to:

 

(a) amalgamate current ND1 and ND7, subject to the limitation that onselling by residential landlords/lessors will only be deemed to be exempt if the energy is sold to fewer than 10 residential customers; and

(b) remove the reference to common area electricity costs.

 

Likely consequence: Lessors/Landlords that supply electricity to more than 10 people, who previously enjoyed a deemed exemption from the requirement to register with the AER, may be required to register with the AE

 

ND3 Metered energy onselling to short term residents in holiday accommodation Metered energy onselling to short term residents in holiday accommodation within the limits of the site owned, occupied or operated by the seller

Limited to the supply of energy "within the limits of the site, owned occupied or operated by the seller".

 

Further, the exemption is only applicable to current onsellers and onsellers who commence operation prior to 1 January 2015. Previously, this class applied generally to current and future onsellers.

Likely consequence: exemption class will not be available for new developments where supply arrangements commence after 1 January 2015.

 

ND4 Metered energy onselling in residential situations not covered under jurisdictional residential tenancy legislation N/A

Deleted and incorporated into ND1.

Likely consequence : people that previously fell within this exemption class may be required to register with the AER under registrable exemption class NR2 as revised.

ND6 Unmetered electricity onselling in Queensland to small customers Unmetered electricity onselling in Queensland to small customers within the limits of a site owned, occupied or operated by the seller

 

Limited to the supply of energy "within the limits of the site, owned occupied or operated by the seller".

 

Further, the exemption is only applicable to current onsellers and onsellers who commence operation prior to 1 January 2015. Previously, this class applied generally to current and future onsellers.

 

Likely consequence: exemption class will not be available for new developments where supply arrangements will commence after 1 January 2015.

 

ND7 Landlords or lessors passing on common area energy costs to premises in commercial developments N/A

Deleted and incorporated into ND2.

 

Likely consequence: the supply of common area electricity will no longer be covered by the NSP Exemption Guideline.

NDO2 Sites broadcasting television or radio signals and/or mobile communications N/A

 

Amended to include a footnote to clarify that “data storage facilities, telecommunication and data equipment, PABX equipment and other similar facilities” are covered by this exemption class.

 

Likely consequence: exemption class will be extended to cover communication services.

 

 

Registrable exemption classes

 

Class overview

 

This exemption class requires that a person apply to the AER to be registered as exempt from the requirements under the NEL, in respect of specified network services.

 

Key changes

 

The amendments made to the existing classes of registrable exemptions in the current version of the NSP Exemption Guideline are minor. However, the draft NSP Exemption Guideline introduces two new classes of registrable exemptions:

 

a) NR6 – "Metered energy selling to small business customers at a site or premises adjacent to a site owned, occupied or operated by the seller"; and

b) NR7 – "Unmetered energy selling to small business customers at a site or premises adjacent to a site owned, occupied or operated by the seller, where the selling commenced prior to the commencement of the National Energy Retail Law in the jurisdiction".

 

The AER does not encourage unmetered selling arrangements and hence has noted in the NSP Exemption Guideline that class NR7 will not be widely available to applicants.

 

Individual exemption

 

Class overview

 

This exemption class allows a person:

 

a) undertaking an activity which is not eligible for a deemed or registrable exemption; or

b) who is not able to comply with the conditions applicable to the relevant deemed or registrable exemption class in respect of an activity,

 

to apply to the AER to be registered as exempt from the requirements under the NEL.

 

Key changes

 

There have been no changes to the requirements to obtain an individual exemption and all current individual exemptions registered with the AER will remain in force, unaffected by the changes to the NSP Exemption Guideline.

 

Conditions

 

There have been no material changes to the conditions which apply to the exemption classes included in the NSP Exemption Guideline, except that an additional exception to the requirement for individual meters has been introduced to align with new class NR7. The AER has also clarified that:

 

a) individual metering is not required where there is no charge is levied for electricity or recovery of supply costs from a tenant or co-tenant; and

b) while no additional network charge may be levied, external charges may be passed through as well as costs which are incurred to meet customer requirements.

 

Given some of the onerous conditions that currently apply to the exemption classes included in the NSP Exemption Guideline, however, we consider that this is an opportunity to outline to the AER which conditions are not suitable for the supply of electricity in certain industries and in certain circumstances. In particular, companies may wish to review the metering requirements and consider whether they are appropriate for their electricity supply arrangements.

  

For further information, please contact:

 

Paul Newman, Partner, Ashurst

paul.newman@ashurst.com

 

Teresa Scott, Ashurst

teresa.scott@ashurst.com

 

Joy Hooker, Ashurst

joy.hooker@ashurst.com

 

Denva Poyntz, Ashurst

denva.poyntz@ashurst.com

 

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