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Australia – NECF Set To Finally Arrive In Queensland.

11 June, 2014

 

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

 

What You Need To Know

 

  • On 20 May 2014, the National Energy Retail Law (Queensland) Bill 2014 and the Electricity Competition and Protection Legislation Amendment Bill 2014, which will implement the National Energy Customer Framework in Queensland, were introduced to Parliament.
  • These bills have since been referred to the State Development, Infrastructure and Industry Committee for consideration and a report is due to be provided to Parliament by 28 August 2014. The Committee has invited written submissions on both bills from interested individuals and organisations. Submissions close on 30 June 2014.

 
What You Need To Do

 

  • The Queensland Government has indicated that it intends to implement the National Energy Customer Framework in 2014. Upon commencement, the National Energy Customer Framework will change energy retailing arrangements in Queensland and any entity who sells electricity or gas in Queensland will need to be prepared.
  • If you sell electricity or gas in Queensland in accordance with a special approval, generation authority or on-supplier exemption under the Electricity Act 1994 (Qld), and do not fit within the deemed or registrable exemption categories under the National Energy Customer Framework, you may make an application to the AER for an individual exemption. The AER is currently processing applications.
  • If the National Energy Customer Framework is likely to impact on your business, you should review the National Energy Retail Law (Queensland) Bill 2014 and Electricity Competition and Protection Legislation Amendment Bill 2014 and prepare any submissions by 30 June 2014.

 
Background

 
The National Energy Customer Framework (NECFestablishes a national framework governing the sale and supply of energy (electricity and natural gas) to customers and includes consumer protection provisions. NECF is established by the National Energy Retail Law (NERL) which is contained in the schedule to the South Australian National Energy Retail Law (South Australia) Act 2011 (NERL), and the National Energy Retail Rules (Retail Rules).

 
The purpose of NECF is to create a unified framework to regulate the sale of energy and enhance customer protection. To date, NECF has been adopted in the Australian Capital Territory, Tasmania, South Australia and New South Wales.

 
The Queensland Government announced its intention to apply NECF following an Interdepartmental Committee review of the Electricity Sector in Queensland. The review arose out of concerns regarding the cost effectiveness of electricity supply, the viability, sustainability and competitiveness of the electricity sector, and the financial sustainability of the uniform tariff arrangements for the Queensland Government.

 
The National Energy Retail Law (Queensland) Bill 2014 (NERL Qld Bill) will apply the NERL and the Retail Rules (with some modifications) as the law of Queensland. The NERL Qld Bill was introduced to Parliament on 20 May 2014 and was accompanied by the Electricity Competition and Protection Legislation Amendment Bill 2014 (Electricity Amendment Bill).

 

The purpose of the Electricity Amendment Bill is to amend the Electricity Act 1994 (Electricity Act) in order to facilitate the introduction of NECF and avoid the duplication of energy retailing requirements.

 
Additionally, the Electricity Amendment Bill also provides for the removal of retail price regulation in South East Queensland.

 
Both the NERL Qld Bill and Electricity Amendment Bill have been referred to the State Development, Infrastructure and Industry Committee (Committee) for consideration. The Committee must provide its report to Parliament by 28 August 2014.

 
The Queensland Government has not yet announced the date, although has previously indicated its intention to implement NECF in 2014.

 
Implementation Of NECF In Queensland

 
NECF governs the rights, obligations and consumer protections with respect to the retailer-customer relationship and distributor-customer relationship. It is implemented in each participating jurisdiction by an application of laws mechanism, the primary legislation being the NERL and Retail Rules. This update focuses on the changes to the retailer-customer relationship. While there are impacts that affect the customerdistributor relationship which are important to manage, they are not dealt with by this update.

 
Once commenced, the NERL and Retail Rules will apply in Queensland in substantially the same form as they have been applied in other States. However the NERL Qld Bill has made some modifications to the application of the NERL in order to:

 

  • ensure that regional electricity customers can continue to access retail services despite weak market competition and are provided services on a fair and reasonable basis (this is achieved through the terms and conditions of standard retail contracts and tailoring the application of the retailer of last resort scheme);
  • for electricity, restrict a retailer’s standing offer price for small customers to the notified prices (assuming notified prices continue to be made – the Electricity Amendment Bill proposes to deregulate retail electricity pricing in South East Queensland and move to a “price monitoring” regime, although these changes will not be implemented until the Queensland Government is satisfied certain preconditions have been met);
  • preserve the Queensland Government’s non-reversion policy for electricity customers to ensure that if a large customer accepts customer retail service from a retailer other than Ergon Energy Queensland, they and any subsequent large customer at the premises cannot return to Ergon Energy Queensland to receive customer retail services at the notified price; and
  • support the Queensland Government’s electricity industry reform priorities by providing additional customer protection and support to small customers following the removal of regulated prices in South East Queensland.

 
What Are The Key Changes To The Existing Regulatory Framework?

 
The NERL Qld Bill proposes to make the following keychanges to Queensland’s existing energy retailrequirements (which will be facilitated by theamendments to the Electricity Act proposed under theElectricity Amendment Bill):

 

  • changes to the definition of “customers” to classify all residential customers, irrespective of their consumption amount, as small customers(businesses consuming less than 100 MWh of electricity or 1 TJ gas per annum will continue tobe classified as small customers);
  • revised model terms and conditions for standard retail contracts will apply and includes requirements around price, payment and billing, overcharging and undercharging, security deposits, what happens if a customer has difficulty paying their bill, when disconnections can occur, complaints and dispute resolution;
  • all retailers, including those who do not market to small customers, will be required to have a standard retail contract, standard offer prices and dispute resolution procedures for small customers that it publishes on its website;
  • impose minimum standards of service on retailers for customers (eg telephone call answer times and periods of time for responses to written enquiries) and the imposition of civil penalties for failure to comply with these standards;
  • a comprehensive “exempt seller” framework will be established in order to give small customers in on-supply situations (such as retirement villages) similar protections to others customers, including increased access to concessions similar to the exemption framework for network service providers under the National Electricity Law and National Electricity Rules; and
  • regulatory obligations will be placed on retailers to operate programs to help small customers experiencing financial difficulty due to hardship to manage their energy costs on an ongoing basis.

 
Transitional Arrangements For Retailers

 
Entities currently engaged in retail activities with customers will need to be aware of the transitional arrangements that will commence upon the start of the NERL in Queensland. In particular:

 

  • Entities who currently sell electricity or gas in accordance with Queensland licencing provisions will be transitioned to retailer authorisations and exemptions under the NERL. Notably, entities who sell electricity under a special approval or generation authority will automatically become exempt sellers under the NERL. The Australian Energy Regulator (AER) must determine the most appropriate class of exemption for each entity (either deemed, registrable or individual) in accordance with the classes of exemption prescribed under the AER’s Retail Exempt Selling Guidelines (available on the AER’s website hereand issue the relevant instrument of exemption.
  • Small customers currently on standard retail contracts will be transitioned to NERL regulated contracts. Relevantly:
    • small customers on standard retail contracts under either the Electricity Act or the Gas Supply Act 2003 (Qld) (Gas Supply Act) will migrate to the standard retail contracts under the NERL. This will capture a slightly broader range of customers following the amendments to the definition of small customer;
    • small customers currently on negotiated retail contracts will be taken to have NERL market retail contracts. Where the terms of an existing negotiated contract are inconsistent with the minimum terms and conditions of the NERL market retail contract, the minimum requirements of the NERL market retail contract will apply to the extent of the inconsistency; and
    • large customers with existing large customer standard retail contracts (but no access to notified prices) will keep the terms and conditions of the contracts they are on immediately before commencement of the NERL (but can negotiate variations under normal contractual arrangements).

 
If you currently sell electricity under the on-supplier exemptions in sections 20A to 20O of the Electricity Act, you will not be automatically transitioned to a retail exemption upon the commencement of NECF. On-suppliers will need to review the available exemption classes under the NERL and determine the most appropriate class of exemption for their activities. If you cannot comply with the conditions attached to either a deemed or registrable class of exemption, then you will need to apply to the AER for an individual exemption.

 
What You Need To Do

 
Energy retailers will need to ensure their contracts and processes in Queensland are ready for NECF’s implementation.

 
Additionally, if you sell electricity in Queensland in accordance with a special approval, generation authority or on-supplier exemption, and you do not fit
within, or cannot comply with the conditions of, the deemed or registrable exemption categories under the AER’s Retail Exempt Selling Guidelines, you may makean application to the AER for an individual exemption. The AER is currently processing applications. For on-suppliers who can meet a registrable exemption class, you must register your exemption with the AER.

 
If NECF is likely to adversely impact on your business, you should review both the NERL Qld Bill and the Electricity Amendment Bill and prepare written submissions by 30 June 2014.

 

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For further information, please contact:

 

Paul Newman, Partner, Ashurst
paul.newman@ashurst.com

 
Liza Carver, Partner, Ashurst
liza.carver@ashurst.com

 
Peter Limbers, Partner, Ashurst
peter.limbers@ashurst.com

 
Teresa Scott, Ashurst
teresa.scott@ashurst.com

 
Joy Hooker, Ashurst
joy.hooker@ashurst.com

 

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