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Australia – Carbon Tax Repeal: The Clock Starts Ticking.

22 July, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Environment 

 

What You Need To Know

 

  • The Clean Energy Legislation (Carbon Tax Repeal) Act 2014 received Royal Assent on 17 July 2014 after passing the Senate earlier that day.

 
What You Need To Do

 

  • Electricity and gas retailers, and importers/sellers of synthetic greenhouse gas should start preparing for the changes set out in this Act, including preparing the statements required to be provided to the ACCC and the information and documents required to substantiate those statements.
  • Relevant contracts should now also be reviewed to assess how carbon cost pass through can be unwound, and other commercial arrangements assessed to determine whether they could amount to carbon price exploitation.
  • Electricity generators need to have regard to the definition of “electricity retailer”, which includes “any other entity who produces electricity in Australia”, to determine whether they need to comply with the relevant obligations under the Competition and Consumer Act 2010 (Cth).

 
The Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Act) received Royal Assent on 17 July 2014 after passing the Senate earlier that day.  These provisions require:

 

  • electricity retailers that sell electricity to customers; 
  • natural gas retailers that sell natural gas to customers; and 
  • bulk SGG importers that sell synthetic greenhouse gas to SGG customers,

 
(together, the Relevant Entities), to provide statements to the ACCC and customers estimating cost savings flowing from the carbon tax repeal.

 
Importantly, the definition of “electricity retailer” is not just limited to entities that hold retail authorities under relevant State legislation. The definition includes “any other entity who produces electricity in Australia”, which would include generators. Accordingly, generators will need to consider if they are making a regulated supply under the Competition and Consumer Act 2010 (Cth) (CCA) and whether they need to comply with the relevant obligations under the CCA, as described in this Update.

 

As Royal Assent has now been received for this Act, the clock has started ticking for the provision of these statements to the ACCC.

 

Timeframes For Compliance

 
Relevant Entities need to start preparing statements to be provided to the ACCC and customers within the following timeframes:

 

Timing Action
Within 30 days of Royal Assent

 

ACCC must issue a “carbon tax removal substantiation notice”.

 

Relevant Entities must provide the ACCC with a “carbon tax removal substantiation statement” that:

 

  • estimates the cost savings (on an average annual percentage price basis or an average annual dollar price basis) that are attributable to the carbon tax repeal with corresponding evidence to substantiate the statement; and
  • states how those savings will be passed on to customers during the financial yearthat began on 1 July 2014.

 

Failure to comply is a strict liability offence that carries a maximum penalty of AUD 85k per contravention.

 

Within 21 days of receiving the carbon tax removal substantiation notice

 

 

This period for compliance can be extended by the ACCC for a maximum of 28 days

Relevant Entities will be required to provide the ACCC with:

 

  • a written statement explaining how the carbon tax repeal has affected the entity’s regulated supply input costs, and how any reductions to those input costs that are attributable to the carbon tax repeal are reflected in prices charged to consumers; and
  • information substantiating this explanation.

 

Failure to comply is a strict liability offence that carries a maximum penalty of AUD 34k.

 

Between 30 days and 60 days after Royal Assent

 

Electricity and gas retailers must ensure that the information contained in the carbon tax removal substantiation statement is communicated to each customer in the relevant class.

 

Failure to comply is a strict liability offence that carries a maximum penalty of AUD 68k.

 

 

Next Steps

 
Given the very short timeframes, Relevant Entities should start preparing the statements required to be provided to the ACCC and customers, as well as the information and documents required to substantiate those statements.

 
Suppliers of electricity, gas or synthetic greenhouse gas should assess how to pass through “all of the entity’s cost savings relating to the supply that are directly or indirectly attributable to the carbon tax repeal”. Relevant contracts should also be reviewed to assess how carbon cost pass through can be unwound, and other commercial arrangements assessed to determine whether they could amount to carbon price exploitation.

 
Electricity generators need to have regard to the definition of “electricity retailer”, which includes “any other entity who produces electricity in Australia” to determine whether they need to comply with the relevant obligations under the CCA.

 

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For further information, please contact:

 

Tony Hill, Partner, Ashurst
[email protected] 

Jeff Lynn, Partner, Ashurst
[email protected]

 

Paul Newman, Partner, Ashurst 
[email protected] 

John Briggs, Partner, Ashurst
[email protected]

 

James Bruining, Partner, Ashurst 
[email protected]

 

Natsuko Ogawa, Partner, Ashurst 
[email protected]

 

Peter Limbers, Partner, Ashurst 
[email protected]

 

Teresa Scott, Ashurst
[email protected]

 

Ashurst Environment Practice Profile in Australia 

             

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