Insight,

They’re back. ‘Big stick’ electricity laws re-introduced

AU | EN
Current site :    AU   |   EN
Australia
Belgium
China
China Hong Kong SAR
Germany
Italy
Japan
Singapore
Spain
UAE
United Kingdom
United States
Global

This article was written by Simon Cooke.

On 18 September the Federal Government reintroduced Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 into Parliament. 

If passed, the Bill will introduce three new prohibitions aimed specifically at electricity market participants into the Competition and Consumer Act 2010 (Cth) (CCA), along with the so-called "big stick" remedies attaching to them.

The Bill was originally introduced in late 2018, but lapsed without passing before the 2019 federal election.  Passing these measures then became part of the Coalition's re-election platform.

The proposed amendments would see three new prohibitions introduced into the CCA which seek to regulate certain behaviour regarding:

  • the setting of retail electricity prices;
  • the way in which electricity financial contracts (i.e. hedges) are offered; and
  • the way in which a generator makes bids into an electricity spot market. 

What's changed?

Very little.  The revised Bill retains the three key prohibitions in almost identical form, subject to some changes which the Government says have been made following its post-election consultation with industry stakeholders.

The main changes to note are: 

'Transition' period before commencement

The Bill will now commence six months after receiving Royal Assent.  This is intended to provide a 'transition period' for the ACCC to develop guidelines and to signal its enforcement approach to the industry, as well as affording industry participants an opportunity to review and adjust their practices to comply with the new provisions.

Standing offers excluded

The revised Bill clarifies that the retail pricing prohibition will not apply to standing offer prices.  As such, retailers will only be required to pass on savings to 'small customers' in relation to market offers.  This change recognises that the new Default Market Offer rule, which was introduced with effect from 1 July 2019, already plays a role in regulating standing offers in the National Electricity Market.

Divestiture orders for state-owned entities

The Bill makes an important change to the remedies available in response to prohibited conduct.  Where divestiture orders are made in relation to government-owned entities, the assets must be transferred to another government entity.  This amendment reflects concerns from the original Bill – including those voiced by independent Federal MP Bob Katter – that divestiture orders might become a vehicle for court-ordered privatisation of public electricity assets.

Personal liability limited

The Bill clarifies that only company directors, secretaries and senior managers of electricity companies could face personal liability for pecuniary penalties in relation to prohibited conduct.  Orders cannot be made against other employees, regardless of the extent to which they may have been involved in a contravention by their employer company.  While this is a sensible outcome for junior employees, the fact that "senior managers" could still be caught by the laws is something that will need to be considered carefully.  

Where to next?

This Bill is one to watch as it progresses through Parliament, with the federal opposition yet to declare its position on the revised version. Given that Labor's stated reasons for opposing the previous Bill centred primarily on the issue of privatising state-owned assets, the revised Bill may receive a more favourable reception this time around. 

Alternatively, if Labor continues to oppose these measures, the Government will need the support of the Senate crossbench in order to pass the legislation.  

The Senate is expected to consider the Bill next month, at the earliest.

For more information on the Bill, please get in touch with us.


The Hon. Josh Frydenberg MP, Treasurer, Taking action to lower power prices, Joint Media Release with the Hon. Angus Taylor MP, Minister for Energy and Emissions Reduction, 18 September 2019.

Commonwealth, Parliamentary Debates, House of Representatives, 18 September 2019, 10 (The Hon. Josh Frydenberg MP, Treasurer).

LATEST THINKING
Insight
APRA has released its proposed new remuneration disclosure and reporting requirements for APRA-regulated entities for consultation. This article explores the key features of the new and enhanced disclosure requirements proposed by APRA.

12 August 2022

Insight
Offshore wind farms are one step closer in Australia following an announcement from the Federal Government on Friday.

11 August 2022

Insight
On 2 August 2022, the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022 was passed (Aged Care Bill), introducing important regulatory changes to Australia’s aged care sector. The Bill makes numerous legislative amendments, including to the Aged Care Act 1997 (Cth) (Aged Care Act) and the Aged Care (Transitional Provisions) Act 1997 (Cth) (Transitional Provisions Act), and responds to various recommendations made by the Royal Commission into Aged Care Quality and Safety (Royal Commission) Final Report (Report). The Report identified the provision of substandard aged care services and perceived systemic failures in the aged care sector.[1]

08 August 2022