This article was written by Cheng Lim, Kendra Fouracre and Jonathan Beh.
The Consumer Data Right's (CDR) implementation in the energy sector is one step closer to becoming a reality.
In this alert, we describe the transformations the energy CDR will bring, identify the key takeaways from the latest development and explain why it is crucial that businesses get on top of the changes and embrace the potential opportunities that will emerge.
More information on the development of the energy CDR can be found in our previous alert here.
What is the CDR and what will it look like in the energy sector?
The CDR allows consumers to securely access and share data about them that is held by businesses (data holders) with trusted third parties (accredited data recipients, or ADRs). It is designed to improve consumer choice by increasing the ability of consumers to compare and switch products, or negotiate deals with their current providers.
The CDR was first rolled out in the banking sector (known as Open Banking), which will formally commence from 1 July 2020. The energy sector is next. The energy CDR will help consumers find and switch to the best energy deals, and over the long term will foster greater competition between electricity retailers and result in better and more innovative products. While consumers are already able to obtain some energy data through means such as Victorian Energy Compare, the CDR will grant consumers far more control over their data, including which third parties can have it and use it.
Draft designation instrument released
For the CDR to cover a sector, the Treasurer must designate the sector and the type of information that consumers can request. The designation instrument will be a key step towards formal commencement of the energy CDR.
Last week, Treasury released an exposure draft of the designation instrument that sets out the structure of the energy CDR, who the data holders will be, what information will be included and the earliest date that information being held will be subject to the CDR.
The exposure draft is open for consultation until 31 May 2020 and will be finalised by 30 June 2020.
Key takeaways from the exposure draft
Treasury has accepted the ACCC's preferred data access model for the energy CDR and is proposing to implement a 'gateway model'. The use of this data access model is the main difference between the proposed energy CDR and Open Banking.
For most data types, requests for CDR information will be made to the Australian Energy Market Operator (AEMO) instead of individual data holders. Once the request has been authenticated, the data will be shared by the data holders with the requesting ADRs via AEMO, acting as a gateway. AEMO will not be acting as a gateway for information held by data holders who are not retailers and for tailored product information where the retailer is a data holder.
In contrast, all CDR information is directly transferred between a data holder and an ADR (or a consumer) in the banking sector. The gateway model is particular suited to the energy sector because it streamlines the process of sharing information in a sector where a number of organisations might hold a consumer's energy data at any given time (as opposed to the banking sector, where the number of authorised deposit-taking institutions is considerably less).
Types of data holders
Electricity retailers will be the main data holders under the proposed energy CDR. However, AEMO will be the data holder for National Metering Identifier standing data, metering data and Distributed Energy Resource register information. The Australian Energy Regulator and the Department of State administered by the Minister of Victoria administering the National Electricity (Victoria) Act 2005 (Vic) will be the data holder for general (non-identifiable) product information about electricity and gas arrangements. Electricity distributors are not subject to the CDR.
Types of information subject to the CDR
Under the proposed energy CDR, in relation to electricity, a customer is defined not just as a person who purchases electricity for a premises under an arrangement (usually the primary account holder of a retail account), but also as a person to whom electricity is supplied in connection with the arrangement. This means that a customer for the purposes of the energy CDR could include persons who reside at a premises who are not the primary account holder under a contract for the supply of electricity to that premises.
This definition is important as the energy CDR will apply to specified information about customers and their associates which is held from 1 July 2018 onwards. This includes:
- information about the customer or associates, including identity information, eligibility information and contact details; and
- information about the sale or supply of electricity to the customer or associates, including NMI standing data, metering data, account information, billing information, account authorisations, payment or concessional arrangements and breakdowns of charges.
As is the case in Open Banking, "materially enhanced information", that is information that is wholly or partly derived through the application of insight or analysis to information concerning the sale or supply of electricity above, is excluded from the designation instrument. However, information that specifically falls within subsections 8(2) and (3) of the designation instrument (eg NMI standing data or billing or payment information) will always be subject to the CDR on the basis that it is "factual and based solely on observation" and therefore cannot be materially enhanced information.
The energy CDR will also apply to non-identified product information, including data about retail arrangements for both electricity and natural gas. This includes information about charges, tariffs, fees, discounts, rebates, eligibility criteria and terms and conditions.
What does this mean for the energy sector?
The release of the designation instrument represents the next step in the growth of Australia's emerging data economy. Once the designation instrument is finalised and registered, the energy sector will be formally subject to the CDR. The ACCC will then need to review and amend the CDR Rules to set the foundational framework for the practical operation of the energy CDR.
The CDR should not be viewed as an issue of compliance but as an opportunity for businesses to engage with customers differently and transform the way the energy sector operates. Getting on top of the CDR and embracing its potential opportunities will require input from not just legal compliance teams, but also product development, data strategy and backend technology teams. Now is the time to engage with the CDR in the energy sector and use it to innovate and succeed.