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15 May 2009

NSW energy efficiency legislation introduced

On 13 May 2009 the NSW Climate Change Minister, Carmel Tebbutt, introduced the Electricity Supply Amendment (Energy Savings) Bill 2009 into the NSW Legislative Assembly.

The Energy Savings Bill will amend the Electricity Supply Act 1995 (NSW) to create an Energy Savings Scheme (Scheme). This Scheme is intended to create a financial incentive to reduce the consumption of electricity by encouraging energy saving activities and assist households and business to reduce their electricity consumption and costs. The Scheme will create tradeable certificates for a range of energy saving activities.

The main features of the Scheme contained in Energy Savings Bill are as follows:

  • the Scheme is due to commence on 1 July 2009 and will be administered by the Scheme Administrator (to be appointed by the Minister for Energy);
  • retail suppliers of electricity (as a licence condition), certain generators and other persons who supply electricity directly to a customer (direct suppliers) and market customers (ie. consumers of electricity whose electricity load is classified as a market load under the National Electricity Rules) will be required to participate in the Scheme (Scheme Participants);
  • each Scheme Participant will be required to meet an individual energy savings target (ES Target). The ES Target will be expressed in tonnes of carbon dioxide equivalent of greenhouse gas emissions;
  • the ES Target will be calculated by multiplying the total value of all liable acquisitions in a calendar year (ie. any purchase of electricity by the Scheme Participant where the electricity purchased is for consumption by, or on-sale to, end users in NSW or for use in NSW) by the energy savings scheme target for that year (which in 2009 will be 0.01). This result will then be multiplied by the energy conversion factor for that year (which in 2009 will be 1.01) to obtain the ES Target;
  • Scheme Participants will have to meet the ES Target by surrendering energy saving certificates (ES Certificates) on an annual basis to the Scheme Administrator. ES Certificates may be created for each whole tonne of carbon dioxide equivalent of greenhouse gas emissions attributable to energy savings arising from a recognised energy saving activity;
  • the ES Certificates represent the energy savings of the Scheme Participant. ES Certificates will be granted to accredited certificate providers in respect of activities that reduce the consumption of electricity in NSW. The Scheme rules, which are yet to be published, will provide further details of the types of activities for which ES Certificates will be granted. Each ES Certificate will have the value of 1 tonne of carbon dioxide equivalent of greenhouse gas emissions and will not have force or effect until registered by the Scheme Administrator;
  • ES Certificates once registered can be transferred on the ES Certificate register between Scheme Participants;
  • energy savings are calculated by multiplying the number of megawatt hours of energy savings (measured in the number of tonnes of carbon dioxide equivalent of greenhouse gas emissions) arising from the energy saving activity by the certificate conversion factor for the year in which the energy savings occurred (which in 2009 will be 1.06). The Scheme rules will provide the methodology for calculating the megawatt hours of energy savings arising from a recognised activity;
  • if a Scheme Participant fails to meet its ES Target, the Scheme Participant will be liable for an energy savings shortfall penalty. The penalty will be calculated by reference to the relevant base penalty rate (currently set at $24.50) multiplied by the penalty conversion factor (currently set at 0.94);
  • Scheme Participants will be permitted, subject to certain restrictions, to carry forward their energy savings shortfall (or part thereof) to the next. However, this shortfall must be remedied in the next year;
  • the Minister has the power to grant exemptions from the Scheme and Ms Tebutt has indicated that the NSW Government will exempt emission-intensive, trade exposed industries from the Scheme in line with the proposed Renewable Energy Target Scheme and the Carbon Pollution Reduction Scheme (CPRS). Ms Tebbutt has also stated that the NSW Government will list exempt activities for the 2009 period prior to the commencement of the CPRS;
  • Scheme Participants will be required to lodge annual energy saving statements, which will contain an assessment of the Scheme Participant's ES Target for the year and details of the ES Certificates proposed to be surrendered to meet that ES Target;
  • energy savings achieved in other jurisdictions may also be recognised under the Scheme if there is a corresponding approved energy savings scheme in place in the relevant jurisdiction.

Specifics such as eligible activities and the number of certificates to be created have not yet been released. However, the NSW Government has stated that these details will be contained in a regulation statement and draft rule which will made available by the NSW Department of Water and Energy in the near future.

Interaction with GGAS

The interaction with the Scheme and the energy savings already claimed under the Greenhouse Gas Abatement Scheme (GGAS) are contemplated by the Energy Savings Bill where:

  • ES certificates may not be created in relation to energy savings already claimed under GGAS;
  • persons accredited under GGAS in respect of activities that are recognised energy saving activities will be able to be accredited as certificate providers under the Scheme;
  • abatement certificates will not be able to be created under GGAS for recognised energy saving activities under the Scheme; and
  • activities covered by the Scheme are limited to those which reduce the consumption of electricity rather than the broader reduction of greenhouse emissions covered by the GGAS.

The Scheme will be reviewed every five years and will automatically terminate at the end of the year 2020 but may be terminated earlier if a national energy savings scheme is established.

Relationship to other state schemes

Ms Tebbutt stated that a national energy savings scheme would be preferable however, in the interim NSW would seek to harmonise its scheme with similar schemes operating in other jurisdictions. However, there are differences:

The NSW scheme differs from the South Australian Residential Energy Efficiency Scheme (REES) in that:

  • it has application to both households and businesses;
  • the credits are created in the name of the accredited service provider, not the retailer itself;
  • the credits are intended to be tradeable; and
  • there is to be a Register of ownership of the credits.

The scheme differs from the Victorian Energy Efficiency Target scheme in that:

  • it has application to both households and businesses; and
  • it applies only to electricity retailers (the Victorian scheme applies also to gas retailers).

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.