17 Jun 2015

National Energy Customer Framework starts on 1 July in Queensland – are you ready?

Queensland energy retailers and on-suppliers need to prepare for the National Energy Customer Framework (NECF) which commences on 1 July 2015 – the final stage in the transition to national regulation of energy markets in Queensland.

All energy retailers and on-suppliers must ensure they comply with the NECF as they face significant fines for non-compliance. In particular, if you:

  • operate an embedded electricity network; and
  • on-sell electricity to customers in your network; and
  • are currently supplying under the Electricity Act on-supply provisions,

then you need the appropriate NECF Retail exemption.

What embedded networks already do under the current electricity laws

At present, the selling of electricity is governed principally in Queensland by the Electricity Act 1994 (Qld), the Electricity Regulation 2006 (Qld), and the Electricity Industry Code.

Typically, embedded network operators such as shopping centre owners, airports, mine sites, unit buildings and office buildings who are on-selling electricity in Queensland will either hold a Special Approval under the Electricity Act or be authorised under the on-supply provisions of the Electricity Act.

There are also existing laws that regulate the ownership and operation of embedded electricity networks. These laws require that an electricity network owner, operator and controller to be registered with the Australian Energy Market Operator as an electricity network service provider or to be exempt from the requirement under the National Electricity Rules.

Embedded network owners in Queensland should already hold a network exemption, which is either a deemed exemptions, a registrable exemptions or individual exemption.

How this will change from 1 July 2015 for embedded networks

The NECF will be implemented in Queensland by the National Energy Retail Law (Queensland) Act 2014 and mirrors the National Energy Retail Law, National Energy Retail Regulations and the National Energy Retail Rules from South Australia, although with some modifications.

The key NECF related provisions come into effect in Queensland on 1 July 2015.

As part of the changes the Electricity Act 1994 (Qld) is amended to remove the retail authorisations, including those for embedded network on-suppliers.

On-supply of electricity to embedded customers

From 1 July 2015, an entity that sells electricity in Queensland must hold a retail authority or retail exemption in order to comply with the National Energy Retail Law.

There are three types of retail exemptions available to embedded electricity network operators:

These retail exemptions following the same naming convention that applies for networks:

  • deemed exemptions;
  • registrable exemptions; and
  • individual exemptions.

Detailed information on the specific requirements for each class is set out in the AER's Electricity Network Service Provider Registration Exemption Guidelines. Which retail exemption you need will depend on whether your customers are classed as small or large, and whether the supply is metered or unmetered. In Queensland, a small customer consumes less than 100MWh per annum, anyone over that is classed as a large customer.

No application is required for a deemed exemption to apply. For example, a Deemed Exemption will apply to an entity selling metered energy to fewer than ten small commercial/retail customers at a site the entity operates (D1). The current list of deemed retail exemptions are available in the AER (Retail) Exempt Selling Guideline.

Registrable exemptions are not automatic and require an application to be made to the AER. For example, an embedded network operator selling metered electricity to large customers within the limits of site it owns can apply for an R5 exemption. The current list of registrable retail exemptions are available in the AER (Retail) Exempt Selling Guideline.

For situations that are more complex or do not fall within the deemed or registrable class criteria set out in the Exempt Selling Guidelines, then an Individual Exemption can be sought. For example, a mine site that owns a network and sells electricity to adjacent landowners may be a candidate for an Individual Exemption.

Exemption conditions for retail exemptions

Conditions apply to retail exemptions, and these will depend on the class of retail exemption. They include restrictions on maximum electricity prices that can be charged to customers, particularly on supply to small customers.

A failure to comply with the conditions can lead to cancellation of the retail exemption and fines of up to $100,000.

Deregulation of tariffs in South East Queensland

The Queensland Treasurer announced on 28 April 2015 that deregulation of tariffs for households and small businesses in South East Queensland would not commence on 1 July 2015, but would be held over until 1 July 2016. Further changes are expected to adjust this deregulation date and make other consequential amendments.

Limited time to transition to the new regime

There will be limited transitional relief available. Essentially only holders of a Special Approval or a Generation Authority will have one year until 30 June 2016 within which to make the necessary retail compliance arrangements.

What you should do

  • Check that there is a Network Exemption in place for any network activity.
  • Check whether a Retail Exemption is required for any on-sale of electricity.
  • Check AER Network guidelines and AER Retail Guidelines for the applicable category and class exemption.
  • Pre-register Retail exemptions before 1 July 2015.
  • Forms are available on the AER website for Network Exemptions and Retail Exemptions.
  • Comply with the exemption conditions, including checking the terms electricity supply, lease terms or services arrangements to ensure that they meet the NECF conditions.

How we can help

You should contact us for further information on:

  • applying for a network exemption;
  • applying for a retail exemption; and
  • ensuring your on-selling arrangement and processes are in place and comply with the NECF.

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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.