Energy Regulation

NATIONAL ROLR SCHEME NOW APPLICABLE IN VICTORIA

On 30 July 2024, the National Energy Retail Law (Victoria) Act 2024 (Vic) and the National Energy Retail Law (Victoria) Regulations 2024 (Vic) commenced, applying the national ROLR scheme in Victoria.

Prior to this Victoria had its own ROLR scheme, under which the Essential Services Commission (ESC) was responsible for initiating and enforcing the ROLR process. This process automatically transfers customers from failed electricity retailers to specified Victorian retailers to ensure Victorians have a continued supply of essential electricity services.

From 30 July 2024, the national ROLR scheme applies in Victoria, shifting the responsibility for ensuring customers continue to receive electricity supply under the ROLR arrangements from the ESC to the AER. This change brings Victoria into line with other National Electricity Market (NEM) jurisdictions like Queensland and New South Wales, which are already subject to the national scheme implemented by the AER.

More information on the ROLR scheme is available here.

AER’s RRO GUIDANCE

On 23 August 2024, the AER published guidance to provide market participants with more clarity around their obligations under the RRO.

The RRO, operational since July 2019, aims to support reliability in the NEM by requiring retailers to eliminate forecast reliability gaps that are pre-emptively identified. Upon the AER making a reliability instrument, retailers are put on notice to enter into sufficient qualifying contracts with generators to ensure demand can be met, after which they must inform the AER of their net contract position (NCP).

1. The AER’s guidance focuses on the following 4 areas:
2. What entities are liable under the RRO
3. Timing, form, and content requirements for liable entities in submitting a compliant NCP report
4. How liable entities can submit an NCP adjustment application
5. How large energy users can opt-in to manage RRO obligations themselves

More information is available here.

AER’S RETAIL PERFORMANCE REPORTING GUIDANCE

On 28 August 2024, the AER updated its guidelines specifying how regulated entities need to submit information and data to the AER about their performance under the National Energy Retail Law and the National Energy Retail Rules. The guidelines take effect on 1 July 2025.

This information and data is used by the AER to monitor retail market outcomes in order to assist policy design, target compliance, and enforcement priorities. Such information also feeds into the AER’s strategic objectives and initiatives.

The AER made numerous changes to the guidelines aimed at better allowing it to collect data to effectively monitor outcomes in the retail market. The key changes include:

• introducing embedded network indicators which requires reporting of things such as types of contracts and customer payment difficulty metrics;
• introducing reporting on life support customers and registration/deregistration of life support within a specified time period;
• introducing reporting on how many customers are affected by family violence;
• refining indicators relating to debt, tariff and meter type, and customer service to improve definitional clarity and ensure retailers are reporting consistently, allowing for better comparability of retailers; and
• removing indicators that do not add value or where retailers do not have access to the required information, such as indicators relating to buy now pay later services.

More information is available here.

AEMC PUBLISHES FINAL RULE ON CER

On 15 August 2024, the AEMC made a final determination about the use and adoption of CER such as rooftop solar, batteries, and electric vehicles.  

Currently, large customers can only engage multiple energy service providers if they use the embedded network framework, or if they obtain a second National Metering Identifier by establishing two distribution network connection points. The determination seeks to allow large customers to trade with multiple energy service providers at their premises without needing to use an embedded network or establishing multiple connection points. It aims to have lower barriers to entry than the status quo and to minimise implementation costs.

To benefit small customers, the AEMC will allow small customers with CER devices to separate passive or flexible loads and choose how they participate in the market.

The AEMC has also proposed creating three new types of meters to enable settlement and billing using technology with in-built measurement capability, such as public lights and public electric vehicle chargers.  These new types of meters will have lower minimum specifications than the meters currently used, meaning they should support increased electric vehicle charger uptake for residential, business, and public customers.

This rule change is estimated to deliver up to $100 million in benefits over 20 years through reduced metering installation, maintenance, wholesale costs and smart streetlight emissions, and avoiding public electric vehicle charger metering costs.

The majority of the rules will be implemented by November 2026. More information and a copy of the Final Rule is available here.

AER 2023-24 COMPLIANCE AND ENFORCEMENT ANNUAL REPORT

The AER released its annual compliance and enforcement report on 26 July 2024, detailing the significant actions the AER has taken in its five priority areas for the previous 12 months.

We set out some key takeaways from the report below.

In 2023-24, the AER:

1. Imposed penalties totalling $9,989,000 in 3 court outcomes and 5 infringement notices
2. Accepted 4 enforceable undertakings
3. 4 civil proceedings in progress in the Federal Court
4. Released 11 compliance bulletins, consultations, and guidance notes

Improving outcomes for vulnerable customers

The report showed that the AER maintained its broad focus on consumer protection in the face of cost-of-living pressures in 2023-24, including by:

• conducting reviews of retailer hardship policies and approved 6 in the last year, with 6 policies still under review;
• conducting spot checks of retailer compliance with their hardship obligations by issuing compulsory notices and investigating potential breaches of hardship obligations by a number of retailers;
• taking action against retailers for alleged breaches of obligations relating to overcharging; and
• instituting proceedings against retailers for breaches of life support obligations.

The AER continues to focus on protecting vulnerable customers in its enforcement priorities for 2024-25.

Make it easier for consumers to understand their bills and energy plans

The AER undertook reviews of retailer compliance with the Better Bills Guideline, which became mandatory in September 2023. The review focused on the new requirement to have a ‘better offer’ listed on the first page of small customer bills.

In addition, the AER wrote to retailers in June 2024 to bring attention to their obligations to provide plan information consistently with the Retail Pricing Information Guideline, and has also written to retailers in relation to their obligations when notifying customers of variations to electricity tariffs and charges.

The AER continues its focus on making it easier for customers to understand their plans and bills in its enforcement priorities in 2024-25.

The full report is available here.

THE AEMC’S MARKET REVIEW OF ELECTRICITY PRICING

On 25 July 2024, the AEMC initiated a review into the role of electricity pricing in supporting consumer needs, including delivering the consumer energy resources (CER) which are necessary for the energy transition. The review will examine the ways markets can delivery products and services to match consumer needs and preferences. The AEMC has also published a draft Terms of Reference document, available here. 

The Review will focus on:

• Market arrangements that provide for consumer choice between a range of appropriate products, services, and associated prices that suit their needs and preferences.
• The role of distribution networks in enabling the right products, services and incentives for consumers, and the efficient cost and pricing outcomes that result.
• The role of retailers and energy service providers in effectively packaging and pricing electricity products and services to match consumer preferences.

AEMC DRAFT PAPER: INTEGRATING PRICE-RESPONSIVE RESOURCES INTO THE NEM

On 25 July 2024, the AEMC made a draft determination in response to a rule change request from the Australian Energy Market Operator (AEMO). The National Electricity Amendment (Integrating price-responsive resources into the NEM) Rule 2024 (Draft Rule) would allow aggregated consumer energy resources (CER) to be scheduled and dispatchable in the NEM.

The AEMC has said the Draft Rule responds to the increasing number and capacity of CER (e.g., batteries) available to consumers to respond to spot prices. The Draft Rule has close ties to the AEMC’s market review into electricity pricing, as it considers CER “a significant opportunity” for consumers to reduce their energy bills and lower emissions.

The Draft Rule proposes to:

1. Allow Virtual Power Plants to compete directly with large-scale generators in the market by fully integrating them in the planning and operation functions of the NEM.
2. Introduce monitoring and reporting functions to understand the forecasting challenges and errors from unscheduled price-responsive resources.
3. Introduce a voluntary ‘dispatch mode’ for unscheduled CERs to participate in dispatch including providing bids, receiving and following dispatch instructions, accessing regulation frequency control ancillary services (FCAS) and frequency performance payments, and involvement in setting the spot price.

The AEMC estimates the Draft Rule will provide a net benefit of approximately $805 million. Submissions on the Draft Rule close on 12 September 2024. More information and a copy of the Draft Rule are available here.

AEMC PUBLISHES DRAFT RULE CHANGE AND REVIEW PRIORITIES FOR 2023-2024

The AEMC has released its draft rule change and review priorities for FY2023-2024 for consultation.

The AEMC considers five key areas of reform should be prioritised in FY2023-2024:

1. Resilience – improve the resilience of the energy system and markets so that they can resist, absorb, accommodate to, and recover from the effects of disruptive events in a timely and efficient way.
2. Consumer energy resources (CER) – better integrate CER into the market to achieve the national energy objective (NEO) of promoting efficient investment in, and efficient operation and use of, energy services for the long-term interests of energy consumers.
3. Transmission reform – more transmission infrastructure and a more interconnected grid is needed to achieve net zero. Ensuring that the regulatory framework is fit for purpose is important to support this.
4. Emissions reduction – prioritising guidance to stakeholders on how new legislative changes to include an emission reduction objective in the NEO will be applied in the AEMC’s decision making and rule changes.
5. Reliability, system security and future wholesale market (post 2030) – the AEMC will consider key changes to reliability settings and system security and continue to work with stakeholders on issues relating to long-term wholesale market design.

The AEMC’s FY2023-2024 work program will prioritise rule changes and reviews seeking to address key issues within these areas of reform. 

The AEMC is currently seeking feedback on its proposed areas of priority and any issues it may be missing, and will publish its final priorities following stakeholder engagement in April and May 2023.

The draft rule changes and priorities can be accessed here.

PIPELINE INFORMATION DISCLOSURE GUIDELINES

AER releases issues paper to consult with stakeholders

On 6 April 2023, the AER published an issues paper seeking stakeholder feedback on key issues in the draft Pipeline Information Disclosure Guidelines (Guidelines).

The Guidelines are required under the new prescribed transparency information requirements that apply to all gas pipelines under Part 10 of the National Gas Rules. They are intended to improve transparency and the bargaining power of gas pipeline users.

The Guidelines must cover matters like what financial information a gas pipeline service provider is required to publish, the methods and inputs a service provider must use to calculate this information, and how information must be published on service providers’ websites.

The issues paper discusses options and sets out the AER’s position on these key issues.

Submissions can be made to AERgasreform@aer.gov.au until Tuesday 9 May 2023. The issues paper can be accessed here.

AEMC RELIABILITY PANEL REVISES FREQUENCY OPERATING STANDARD

On 6 April 2023, the AEMC Reliability Panel made a final determination to revise the energy sector’s frequency operating standard (FOS) for a more secure and resilient power system for customers in the future. 

According to the AEMC, maintaining stable frequency and operation in the power system is becoming increasingly important as variable inverter-based generation technologies such as batteries, wind and solar come online and thermal generators gradually leave the system. Power system equipment, including generators, may disconnect from the power system if system frequency becomes unstable and changes too quickly, or varies too far from 50Hz, which can lead to collapse of all or part of the power system.

The revised FOS will better define the operating range for the power system through various additions and amendments, including:

• confirming the allowable ranges for frequency during normal operation;
• clarifying that the target frequency in the National Energy Market (NEM) is 50Hz;
• introducing system limits for rate of change of frequency following contingency events which formalise the AEMO’s existing operational practices; and
• changing the limits and thresholds for contingency events.

Reliability Panel Chair Charles Popple says that the revised FOS is “fundamental to maintaining secure operation, which, in turn, means a reliable supply of electricity for customers and delivers reduced costs for customers in the longer-term”.

The revised FOS will come into effect on 9 October 2023 and the Panel has recommended a follow-up review be completed by no later than the end of 2027.

See here for more information.

ESC’s compliance and enforcement priorities

ESC releases its Victorian Energy Upgrades program compliance and enforcement priorities

On 14 March 2024, the ESC released its enduring and strategic priorities:

Enduring priorities 

1. Conduct that involves serious exploitation of consumer vulnerability
2. Conduct that could cause serious personal injury
3. Serious or misleading, deceptive or fraudulent conduct
4. Conduct that seriously compromises program integrity
5. Conduct that seriously compromises the program’s reputation

Strategic priorities for the remainder of 2023-24

1. Heat pump water heater installations: ensuring accredited persons provide accurate information about the type and number of products they’re replacing.
2. Baseline manipulation: ensuring accredited persons provide accurate information about the type and number of products they’re replacing.
3. Telemarketing and doorknocking: supporting industry to comply with the proposed telemarketing and doorknocking ban, and monitoring compliance and acting on non-compliance once the ban is in effect.

The ESC will review and share their 2024–25 strategic priorities for compliance and enforcement in the coming months. More information on the ESC’s compliance and enforcement priorities is available here.

ESC’s draft decision on 2024-25 Victorian default offer released for consultation

Victorian Default Offer set to decrease

On 19 March 2024, the ESC released its draft decision on the 2024-25 VDO for public consultation. The draft decision proposes to reduce the VDO by around $112 (6.4%) for residential customers and around $266 (7%) for small business customers from 1 July 2024. Lower futures contract prices for wholesale electricity are the primary reason for the reduction.

The VDO acts as a reference price so consumers can easily compare different deals in the market and represents the maximum amount that electricity retailers can charge Victorian customers in embedded networks. ESC’s Chair, Kate Symons, encouraged consumers to shop around as many retailers offer cheaper deals.

The draft decision on the VDO for 2024-25 is open for comment on Engage Victoria until 19 April 2024. The commission will hold a public forum on 28 March 2024, for which registration is now open on Engage Victoria. The final decision is expected to be released in late May 2024. 

AER reports on retail performance

Report shows increase in median market offer energy prices and energy debt

On 18 March 2024, the AER published a report into retail performance for October to December 2023.

The report shows median market offer prices for electricity and gas increased across most distribution zones from June to December 2023.

The report found that the number of residential consumers accessing a hardship plan with their energy retailer and residential energy debt has increased over the last 12 months. The report also found that there are indicators retailers are engaging earlier with customers experiencing payment difficulties, as customers are entering hardship programs with less debt and on average holding less debt while on a hardship program.

In an encouraging sign for market competition, the report shows that Tier 2 retailers continue to increase their market share in both electricity and gas markets.

The full report is available here. 

AER compliance procedures and guidelines released for consultation

AER is seeking stakeholder inputs on suggested changes to the Guidelines

The AER has started reviewing its Compliance procedures and guidelines (the Guidelines) by releasing a draft guideline (Draft Guideline) that proposes changes to the Guidelines.

The Guidelines set out the manner and form in which energy businesses in jurisdictions that have adopted the National Energy Retail Law (NERL) must submit compliance information and data to the AER, and conduct compliance audits.

The AER is seeking input on specific changes in the Draft Guideline, including:

• introducing a material breach reporting requirement that requires the reporting of any material breach of an obligation under the NERL or National Energy Retail Rules as soon as reasonably practicable;
• introducing new reporting requirements relating to family violence, presentation of standing offer prices, energisation, retailer and distributor re-energisation obligations; and
• proposing to reduce the frequency of some reporting requirements and the removal of other reporting requirements to ensure that compliance reporting is focussed on the highest risk obligations.

Submissions on the Draft Guideline close on 19 April 2024. More information is available here.

AER compliance and enforcement update

AER releases Compliance and Enforcement Update for July – December 2023

On 31 January 2024, the AER released its mid-year Compliance and Enforcement Update. This Update highlights key actions and outcomes delivered from July to December 2023 and includes:

1. $6.2m in penalties for alleged breaches of retail rules ($6m in court penalties, $203,400 of infringement notice penalties)
2. 2 publications released 
3. 5 court proceedings in progress
4. An overview of actions and outcomes under the AER’s compliance and enforcement priorities

The AER’s full Compliance and Enforcement Update is available here.

AER reminds retailers of hardship obligations

AER writes letter to energy retailers reminding them of their hardship obligations

On 17 January 2024, the AER wrote to energy retailers to remind them of their hardship obligations under the National Energy Retail Law (NERL) and National Energy Retail Rules (NERR).

The AER’s letter encourages retailers to undertake a proactive review of their customer hardship policies, noting its current compliance focus in this area.

In addition, the AER details its findings from its review into retailers’ compliance with hardship obligations under the NERL / NERR. The AER identified varying compliance rates, including the following areas of concern:

1. inadequate processes to effectively identify customers experiencing payment difficulties and inform them of the retailer’s customer hardship policy;
2. trends of retailers using non-hardship payment arrangements as a first response for customers despite hardship indicators being present; and
3. inadequate consideration of a customer’s capacity to pay when setting the parameters of payment arrangements.

The AER will also soon be repeating this review process, in line with its Compliance and Enforcement Priorities for 2023-2024 (here).

See the AER’s letter to retailers, including its detailed review findings here.

AEMC completes review of retailer reliability obligation

AEMC publishes Final Report following its review into the operation of the Retailer Reliability Obligation (RRO)

On 29 February 2024, the AEMC published its Final Report following its review of the RRO, together with twelve recommendations to improve the operation of the RRO.

The RRO is one of several measures to support reliability in the National Electricity Market (NEM). It commenced on 1 July 2019 and was designed to encourage new investment in dispatchable energy technologies, essential for the reliable operation of the energy system. It does this by requiring retailers to establish contractual agreements with third parties when AEMO foresees a potential shortfall in energy supply.

The AEMC considered stakeholder feedback and experiences from the recent South Australia T-1 Reliability Instrument (here) in preparing its recommendations. The recommendations are designed to improve the operational efficiency of the RRO by reducing regulatory burden for market participants and reducing costs for consumers.

Some of the key recommendations include:

1. Move the timeframes for when retailers must report their contracts to the AER, so it is closer to the time of the relevant reliability gap. This is intended to make it easier for retailers to determine the level of contracting required to comply with the RRO and will mean they can enter contracts with new projects that come online in the lead-up to a reliability gap.
2. Extend the timeframe for the Australian Energy Market Operator (AEMO) to request reliability instruments to cover forecast reliability gaps more effectively throughout the year.
3. Amend the Market Liquidity Obligation to ensure it continues to support market liquidity in South Australia.
4. Maintain the existing definitions for liable entities and opt-in and the AER's role in assessing reliability instrument gap requests.
5. Make changes to the National Electricity Law (NEL) and NER and review guidelines to address operational issues raised by stakeholders to reduce regulatory burden and deliver lower-cost opportunities for compliance.

More information on the AEMC’s review can be found here. The Final Report is available here.

AEMO publishes draft 2024 ISP

AEMO publishes draft 2024 ISP and invites public consultation

On 15 December 2023, AEMO published the draft 2024 Integrated System Plan (ISP) for the National Energy Market (NEM), in collaboration with over 1,300 stakeholders and 110 submissions from industry, consumer and community representatives and governments. The ISP provides a comprehensive roadmap for investment in energy generation, storage and transmission to meet homes and businesses’ energy needs as Australia transitions to a net-zero economy by 2050.

To ensure that Australians can continue to access secure, reliable and affordable energy, the ISP maps out urgent investment to:

• add almost 10,000km of new and upgraded transmission by 2050;
• triple grid-scale variable renewable generation by 2030 (57 GW) and increase it seven-fold by 2050 (126 GW);
• add almost four times the firming capacity from dispatchable storage, hydro and gas-powered generation by 2050; and
• support a four-fold increase in rooftop solar capacity by 2050 (72 GW)

Stakeholders are invited to participate in upcoming consultations on the draft 2024 ISP, and written submissions are due by 16 February 2024. AEMO will finalise the draft 2024 ISP by 28 June 2024.

More information on engagement opportunities can be found here.  The draft 2024 ISP is available here.

The Australian Energy Regulator’s (AER) transparency review report on the draft 2024 ISP can be found here.

AMEC publishes new draft rules

The AEMC proposes several new rules to support the energy transition

As part of its role in setting rules for the National Electricity Market (NEM), the AEMC engages with stakeholders and governments to consider proposed rule changes and improvements.  In December 2023, the AEMC published the following draft rules:

1. Updated proposals to support system security (14 Dec 2023)

The AEMC updated its proposals to support system security, including refining the transitional services framework and adjusting timings for procurement, requiring AEMO to publish an energy transition plan every two years and mandating the consideration of emissions reductions in contracting decisions.

More information can be found here.

2. Draft rules to support timely transmission investment and reduced network charges (14 Dec 2023)

The AEMC has proposed two new rules which would facilitate lower costs to consumers as well as faster delivery of critical transmission infrastructure needed for the energy transformation:

• The first proposed rule would allow the benefits of financing for transmission and distribution projects sourced through government programs to be passed back to consumers in the form of lower network charges.
• The second proposed rule would amend the National Electricity Rules to improve the ability of transmission network service providers to efficiently finance the timely delivery of major projects.

More information can be found here. 

3. Draft rules on enhancing reserve information (21 Dec 2023)

The AEMC proposes a more cost-effective and immediate approach to support reliability in the NEM as it undergoes transformation to net zero.  The draft rule seeks to enhance information on operating reserves (or ‘stand-by power sources’), requiring the publication of any energy constraints from either hydro, gas or coal for each region at the start of each trading day and for real-time updates to be disclosed on the combined state of charge for batteries.

The AEMC believes that by making more information available to the market, market participants can continue to make their own commercial and operational decisions which in turn will deliver reliability in a way that’s best for customers.

More information can be found here.

AER updates its ‘Energy Made Easy’ website

A simpler way to find an energy plan

On 14 December 2023, the AER announced that it had updated its free and independent comparison site, Energy Made Easy.

The updated service now provides customers with three easy ways to find and compare energy plans, either by:

• using their Using their National Meter Identifier number (found on their energy bill) for personalised plan comparison;
• choosing the 30-second Quick Compare journey; or
• manually inputting information from their energy bill if preferred.

More than 1.4 million Australians have visited Energy Made Easy since higher default market offer prices came into effect on 1 July 2023, and over 700,000 have completed an energy plan search to compare retailers’ offers.

The AER media release is available here, and the Energy Made Easy website can be found here. 

New guidelines for Victorian Energy Upgrades code of conduct

As a practical resource to accompany the Victorian Energy Upgrades Program Code of Conduct, the ESC has published guidelines for the Code. These guidelines are designed to assist accredited persons and scheme participants to understand and comply with Code.

Find out more

AEMC publishes draft determination and rules incorporating emissions reduction considerations into the NER

On 26 October 2023, the AEMC published a draft determination and draft rules that seek to harmonise the NER with the new emissions reduction component in the national energy objectives (NEO).

The draft rules would support the incorporation of emissions reduction in the energy regulatory framework by:

1. Including emissions reduction as a class of market benefit for the Integrated System Plan (ISP) and Regulatory Investment Tests for Transmission and Distribution

2. Updating the ISP public policy clause and other wording in the NER to ensure emissions reduction policies are properly considered

3. Allowing network and pipeline operators to propose expenditure for activities that would contribute to achieving emissions reduction targets

The draft determination and rules follow rule change requests by the Ministerial Council on Energy in July 2023 and legislative changes in September 2023 to introduce an emissions reduction component into the NEO and harmonise the NER with that component.

Written submissions on the draft determination and rules are open until 7 December 2023.  The AEMC intends to publish its final determination and rules on 1 February 2024.

More information on the draft determination and rules, and how to make a written submission, can be found here.

Relatedly, on 12 October 2023 AEMC’s Reliability Panel announced that it will apply an emissions reduction objective in its day-to-day duties, including development of standards, guidelines, reports and recommendations for the energy market.  More information on the Reliability Panel’s announcement can be found here.

AER commences consultation on 2024-25 default market offer price determination

On 5 October 2023, the AER released its issues paper on the 2024-25 DMO price determination.  The DMO price is the maximum price a retailer can charge a standing offer customer in south-east Queensland, NSW and South Australia.

The AER is considering updates to its methodology for calculating the DMO to ensure it continues to meet the policy objectives.  These updates include:

• whether the approach to retail allowances remains appropriate
• whether and how to change the AER’s approach to the customer load profile used to model wholesale costs as the uptake of advanced meters increase and consumers continue to install solar PV systems
• whether to continue collecting confidential hedge contract data from all retailers and generators to assess the wholesale costs of retailers
• whether a different wholesale forecasting method is required for SA given the currently limited (and decreasing) contract liquidity levels in SA.

Written submissions on the issues paper have closed, however the AER’s draft determination will be released in early March 2024 for consultation, with a final determination to come into effect on 1 July 2024.  More information can be found here.

AEMO releases NEM Reform Implementation Roadmap

The AEMO has recently released the third version of its NEM Reform Implementation Roadmap, which aims to provide stakeholders with a holistic view of the reforms impacting Australia’s east coast electricity and gas markets.  The purpose of the Roadmap is to de-risk delivery, inform implementation timing and minimise implementation cost.

Notably, in preparing the latest version of the Roadmap, the AEMO and Reform Delivery Committee members:

1. Recognised the continued potential for congestion in 2025 resulting from the implementation of multiple reforms

2. Noted the uncertainty around progress, scope, timing and cost for some initiatives currently earmarked for 2025, including unlocking consumer energy resources benefits through flexible trading and integrating price responsive resources into the NEM

3. Noted a recent trend across reform initiatives towards a more simplified scope and implementation requirements

More information on the AEMO’s Roadmap can be found here.

The AER’s latest State of the Energy Market Report

The energy system in 2023 experienced fewer shocks and better outcomes than in 2022, however many of the vulnerabilities observed in 2022 remain

Find out more

AEMC applies new emissions reduction objective

On 21 September 2023, the South Australian Parliament passed the Emissions Reduction Objectives Bill 2023 (legislation) to add emissions reduction to the national energy objectives. The legislation allows the AEMC to consider the new emissions component alongside existing criteria for price, quality, safety, reliability and security in making and amending energy rules, undertaking reviews and advising energy ministers.

To support this change, on 22 September 2023, the AEMC released its guide on how it will apply the new objective. The AEMC also released a targets statement, which is a list of jurisdictional targets to be considered by the three market bodies, and others, when applying the national energy objectives.

These materials are intended to help stakeholders understand how the new emissions reduction objective will affect the rule-making process and review of projects. The AEMC has received two rule change requests from energy ministers to ‘harmonise’ the electricity and gas rules with the emissions objective. 

AEMC releases final recommendations to improve compliance with technical standards for CER

On 21 September 2023, the AEMC made final recommendations to improve compliance with technical standards for CER, such as solar PV, batteries, pool pumps and hot water heaters. The AEMC recommends:

• immediate action by industry, jurisdictions and market bodies under existing frameworks, including creating a new national technical body and expanding the role of the Australian Energy Regulator (AER) and the AEMC under the National Electricity Law; and
• that jurisdictions develop a new national regulatory framework for CER technical standards.

The final report recommends 10 immediate actions across the lifecycle of CER devices, with the intention to improve compliance by: 

1. simplifying the settings for devices manufactured in Australia

2. promoting compliant installation

3. supporting the ongoing compliance of devices connected to the power systems.

The aim is to improve compliance and, in turn, generate significant benefits for electricity consumers. More information can be found here. 

AEMO Final Determination to implement IESS into NEM

On 2 December 2021, the AEMC made a final determination to implement the National Electricity Amendment (Integrating energy storage systems into the National Electricity Market (NEM) Rule 2021), referred to as the ‘IESS Rule’. The IESS Rule seeks to better integrate storage and hybrid systems into the NEM, and deliver extensive changes to registration and classification, dispatch arrangements, non-energy cost recovery and participation of aggregated portfolios of small resources. A number of retailers made submissions.

On 18 September 2023, AEMO concluded its consultation on the Retail Market Procedures for the IESS Rule change. In addition to the IESS changes, the Final Determination also introduces two Issue Change Forms (ICFs), three new National Metering Identifier (NMI) Classification Codes, several amendments to existing NMI Classification Codes, and a large number of terminology changes. More information can be found here. 

AER publishes a new decision approving different energy bill relief messages

On 26 June 2023, the AER made a decision under section 37 of the Better Bills Guideline which required energy retailers to include on small customer bills, from 1 July 2023, the following wording:

The Australian Government and your State or Territory government are supporting customers to reduce bills. Check the understand your bill section to see whether you have received a rebate or concession. More information on rebates and concessions can be found on energy.gov.au.

Following this decision, the AER received feedback from stakeholders that the message was too lengthy and that the generic phrase ‘your state or territory government’ was likely to be unclear to customers.

In light of this feedback, on August 10 2023, the AER decided to revoke its previous decision and approve new energy bill relief messages, which vary depending on whether the customer lives in a state, the ACT, or are a customer of ActewAGL retail.

The final messages are:

AEMC releases final recommendations following its review of smart meters

On 30 August 2023, the AEMC released final recommendations following its review of smart meters. The independent review has determined that speeding up the rollout of smart meters to 100% of households by 2030 would provide net benefits to the value of $507 million for national electricity market regions, including NSW, QLD, the ACT and SA.

The AEMC’s final recommendations would see new obligations placed on retailers to provide customer friendly information prior to meter installations, adequate notice regarding any tariff changes, and a mandate on customer access to real-time data free of charge.

The recommendations also include the development of a communications strategy for the rollout to inform and assist consumers with their choices, and support for vulnerable customers with premises requiring remediation before a smart meter can be installed.

The AEMC is working with energy advocacy bodies on next steps in the rule change process.

More detail on the AEMC’s review and final report can be found here.

AEMO publishes supplementary report on market suspension payments and compensation for the 2022 NEM market suspension

On 24 August 2023, AEMO published a supplementary report on market suspension payments and compensation costs following the NEM spot market suspension in June 2022.

Part 2.1 of the report provides details on the compensation paid to each market suspension compensation claimant during the affected periods, which totalled approximately $94.8 million.

Part 2.2 of the report sets out the share of compensation costs payable by each market customer to AEMO as required under the NER. All market customers listed in Part 2.2 remain liable for their share of the compensation costs, regardless of their current registration status.

Proposed introduction of decision-making criteria for triggering the RRO in Victoria

On 1 August 2023, the Energy Legislation Amendment Bill 2023 (Vic) was introduced to the Victorian parliament. The Bill proposes to amend the National Electricity (Victoria) Act 2005 (Vic) to introduce decision-making criteria to be used if the Minister for Energy and Resources needs to trigger the retailer reliability obligation (RRO).

Under the proposed amendments, in deciding whether to trigger the RRO, the Minister may have regard to any matter he or she considers relevant, but must have regard to:

1. the liquidity of the market for Market Liquidity Obligation products in Victoria if the Minister were to trigger the RRO

2. the likelihood and consequence of multiple or critical generating units or transmission systems being available at any relevant time for generation, or transmission, of electricity

3. the impact on consumers if the Minister were to trigger the RRO

4. any matter that is prescribed.

The Minister must also consult both the Premier and Treasurer before triggering the RRO.

The Bill is currently being debated in the Legislative Council. 

AER no longer required to set electricity consumption benchmarks

With electricity consumption benchmarks no longer required on energy bills, the AEMC has decided to remove the AER’s obligation to develop and update those benchmarks. The AEMC considers that removing this prescriptive obligation will give the AER greater flexibility to focus on providing more relevant data to consumers and policy makers. 

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AER releases annual compliance and enforcement report for 2022-23

On 26 July 2023, the AER released its annual compliance and enforcement report for 2022-23.

In relation to enforcement, the report notes that the AER’s compliance and enforcement outcomes included over $1 million in penalties and the instituting of three civil proceedings in the Federal Court during the reporting period. The report notes that many of the outcomes focused on consumers experiencing vulnerability, for example, the AER instituting proceedings against energy retailers for failing to comply with their overcharging obligations.

The AER also remained focused on monitoring compliance to ensure a secure and reliable energy supply. This involved releasing findings of the AER’s investigation into market events that led to the suspension of the National Electricity Market last year.

The AER intends to deliver further compliance and enforcement outcomes focusing on hardship and payment plan protections, billing and pricing obligations, life support, wholesale electricity market obligations, critical infrastructure standards and monitoring of the new Gas Market Transparency Measures.

More details on the report and the AER’s compliance and enforcement priorities for 2023-24 (which we wrote about in our alert last month) can be found here.

AER’s review of its retail performance reporting procedures and guidelines

On 10 July 2023, the AER commenced review of its retail performance reporting procedures and guidelines. These procedures and guidelines set out the manner and form in which energy retailers must provide performance data to the AER.

The AER contends that improvements to the guidelines will allow them to better collect data to monitor retail market outcomes more effectively without imposing unnecessary costs on retailers.

The AER intends to complete this review by January 2024. More information can be found here.

AER’s guidance on National Energy Objectives and the AEMC’s consultation on emissions reduction in the Objectives

On 24 July 2023, the AER published draft guidance on applying the amended National Energy Objectives (NEOs). The draft guidance covers:

1. Matters the AER is likely to have regard to in considering whether to apply the amended NEOs to processes which are underway at the time the amendments take effect.

2. How the AER may operationalise the amended electricity objective to network service providers for the 2024-29 regulatory determinations.

The AER is seeking submissions on the draft guidance by 18 August 2023. More details, including a copy of the guidance, can be found here.

Separately, the AEMC has begun consultation on applying emissions reduction in the NEOs and is seeking feedback on a draft framework. This follows steps taken by energy ministers to fast-track a plan to embed emissions targets in the NEOs that guide the AEMC’s work around electricity, retail energy and gas.

The AEMC will consider all feedback on its consultation paper before a final guide is delivered later this year. More information can be found here.

Draft gas pipeline information disclosure guidelines

On 26 July 2023, the AER published its draft gas pipeline information disclosure guidelines, price reporting guidelines and accompanying templates (Guidelines). The Guidelines are intended to improve transparency and the bargaining power of users of gas pipelines and stand-alone compression and storage facilities. They cover matters such as the financial information that gas pipeline service providers must publish and the methods and inputs service providers must use to calculate this information.

Interested stakeholders are invited to make submissions on the draft Guidelines by 23 August 2023.

More details about the guidelines can be found here.

Retail energy market performance update for Quarter 3, 2022-23

On 28 June 2023, the AER published its retail energy market performance report covering the January to March 2023 quarter (Q3 2022–23).

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AER’s default market offer 

On 25 May 2023 the AER released its final determination on the Default Market Offer (DMO) prices for 2023–24.

Depending on their region, residential customers on standard retail plans will see price increases of between 20.8% to 23.9% without controlled load, and between 19.6% to 24.9% with controlled load.

Small business customers will see price increases of 14.7% to 28.9% depending on their region.

The AER noted that the increase in the DMO price compared to the previous DMO was driven by several factors including: 

1. Increased wholesale costs as a result of factors such as reliability issues with coal-fired generation assets, more expensive electricity futures contracts that were traded before the temporary price caps came into place and other factors.

2. Changes in annual network costs, caused predominantly by higher than forecast inflation but also new and higher jurisdictional scheme costs and previously under-recovered distribution revenues in some regions.

3. A more representative sample of retail data reveals an increase in bad and doubtful debt costs for small business customers, leading to higher costs across all customer groups.

The new DMO price comes automatically into effect on 1 July 2023.

ESC’s Victorian default offer

On the same day, the ESC released its’ final decision paper on the Victorian Default Offer (VDO) prices for 2023–24.

• The 2023-24 VDO prices represent an annual increase of 25%
• Typical bills for residential customers will increase from $1,403 to $1,755 next financial year, and for small business customers from $3,039 to $3,791.

The ESC also recently announced that it is increasing the pay-on-time discount cap for customers on market retail contracts entered into on or after 1 July 2020 to 7.16% from 1 July 2023 to 30 June 2024.

Federal Government’s energy bill relief package

In its 2023 – 24 budget, the federal government has announced energy bill relief for some eligible households and small businesses.

Eligible households in:

• NSW, Queensland, South Australia or Tasmania can get $500 per eligible household.
• Victoria can get $250 per eligible household (plus the one off $250 direct payment through Victoria’s 2023 Power Saving Bonus Payment).
• The Northern Territory or Western Australia can get $350 per eligible household.
• The ACT can get $175 per eligible household (and ACT residents can expect lower bills due to the ACT’s Large-scale Feed-in Tariff Scheme which will lower the average bill by $152).

Eligible small businesses will be able to access a $650 rebate in most jurisdictions through co-contributions from the Federal and state / territory governments (however, eligible small businesses in Victoria will get a $325 rebate). Businesses in the ACT may receive a higher rebate than this due to the ACT Government’s Large-scale Feed-in Tariff Scheme.  

National Energy Retail Rules version 37

On 1 May 2023, the Australian Energy Market Commission published version 37 of the National Energy Retail Rules. See here.

Version 37 of the Rules incorporates new domestic violence policy requirements under Part 3 of the NERR, implementing Schedules 1, 2 and 3 of the National Energy Retail Amendment (Protecting customers affected by

family violence) Rule 2022 No. 1.

Review into the arrangements for failed retailers’ electricity and gas contracts

The AEMC is reviewing the arrangements for failed retailers’ electricity and gas contracts.

The AEMC is now consulting on further refined options to improve the electricity and gas Retailer of Last Resort (RoLR) scheme for retailer failures.

Stakeholder submissions close on 22 June 2023.

Find out more

AEMC publishes draft rule change and review priorities for 2023-2024

The AEMC has released its draft rule change and review priorities for FY2023-2024 for consultation.

The AEMC considers five key areas of reform should be prioritised in FY2023-2024:

1. Resilience – improve the resilience of the energy system and markets so that they can resist, absorb, accommodate to, and recover from the effects of disruptive events in a timely and efficient way.

2. Consumer energy resources (CER) – better integrate CER into the market to achieve the national energy objective (NEO) of promoting efficient investment in, and efficient operation and use of, energy services for the long-term interests of energy consumers.

3. Transmission reform – more transmission infrastructure and a more interconnected grid is needed to achieve net zero. Ensuring that the regulatory framework is fit for purpose is important to support this.

4. Emissions reduction – prioritising guidance to stakeholders on how new legislative changes to include an emission reduction objective in the NEO will be applied in the AEMC’s decision making and rule changes. 

5. Reliability, system security and future wholesale market (post 2030) – the AEMC will consider key changes to reliability settings and system security and continue to work with stakeholders on issues relating to long-term wholesale market design.

The AEMC’s FY2023-2024 work program will prioritise rule changes and reviews seeking to address key issues within these areas of reform.

The AEMC is currently seeking feedback on its proposed areas of priority and any issues it may be missing, and will publish its final priorities following stakeholder engagement in April and May 2023.

The draft rule changes and priorities can be accessed here.

Pipeline information disclosure guidelines

AER releases issues paper to consult with stakeholders

On 6 April 2023, the AER published an issues paper seeking stakeholder feedback on key issues in the draft Pipeline Information Disclosure Guidelines (Guidelines).

The Guidelines are required under the new prescribed transparency information requirements that apply to all gas pipelines under Part 10 of the National Gas Rules. They are intended to improve transparency and the bargaining power of gas pipeline users.

The Guidelines must cover matters like what financial information a gas pipeline service provider is required to publish, the methods and inputs a service provider must use to calculate this information, and how information must be published on service providers’ websites.

The issues paper discusses options and sets out the AER’s position on these key issues.

Submissions can be made to AERgasreform@aer.gov.au until Tuesday 9 May 2023. The issues paper can be accessed here.

AEMC reliability panel revises frequency operating standard

On 6 April 2023, the AEMC Reliability Panel made a final determination to revise the energy sector’s frequency operating standard (FOS) for a more secure and resilient power system for customers in the future.

According to the AEMC, maintaining stable frequency and operation in the power system is becoming increasingly important as variable inverter-based generation technologies such as batteries, wind and solar come online and thermal generators gradually leave the system. Power system equipment, including generators, may disconnect from the power system if system frequency becomes unstable and changes too quickly, or varies too far from 50Hz, which can lead to collapse of all or part of the power system.

The revised FOS will better define the operating range for the power system through various additions and amendments, including:

• confirming the allowable ranges for frequency during normal operation;
• clarifying that the target frequency in the National Energy Market (NEM) is 50Hz;
• introducing system limits for rate of change of frequency following contingency events which formalise the AEMO’s existing operational practices; and
• changing the limits and thresholds for contingency events.

Reliability Panel Chair Charles Popple says that the revised FOS is “fundamental to maintaining secure operation, which, in turn, means a reliable supply of electricity for customers and delivers reduced costs for customers in the longer-term”.

The revised FOS will come into effect on 9 October 2023 and the Panel has recommended a follow-up review be completed by no later than the end of 2027.

See here for more information.

Market Standalone Power Systems Resource Provider (MSRP) applications now open

The AEMO has begun accepting applications to register as an MSRP in the NEM. From 30 May 2023 onwards, a person must not sell electricity directly to the market at any connection point in a regulated Standalone Power Systems Resource unless they are registered by AEMO as an MSRP.

Find out more

VDO 2023-24 draft decision

On 15 March 2023 the ESC released its draft decision proposing price increases to the VDO. The draft decision is seeking consultation, with the final decision to be made by 24 May 2023 and to apply from 1 July 2023.

The draft decision proposes an increase of around $426 for residential customers and $1,738 for small business customers. These increases are mainly because of significant increase in wholesale electricity costs due to the energy market volatility in 2022.

Commissioner Chairperson Kate Symons said: “The proposed increases to the Victorian Default Offer reflect a year of price volatility in the energy market, which is making it more expensive for energy companies to buy and supply electricity across Australia. The dollar figure increases set out in the draft decision are in keeping with proposed default market offer increases announced in other jurisdictions today.”

Submissions can be made via the Engage Victoria website until 11 April 2023. The draft decision can be accessed here.

ESC’s Victorian Energy Market Report

On 28 March 2023, the ESC released its Energy Market Report, tracking energy retailer activity and consumer trends for October to December 2022.

The report covers a summary of:

1. Compliance and enforcement activity – e.g., over $125,000 in compensation paid to customers by retailers for wrongful disconnections. 
2. Customers experiencing payment difficulty - the latest data shows a 10% increase in customers accessing payment assistance for gas and a 3% increase for electricity.
3. Disconnections - the ESC is continuing to engage directly with retailers regarding their disconnection processes.
4. Market entry and exit – the ESC is increasing its scrutiny of retail licence applications in light of the record high prices in the wholesale energy markets in 2022 and several retailer exits, to ensure that new entrants are adequately resilient to endure wholesale market volatility.

The report can be accessed here.

DMO 2023-24 draft determination 

Like Victoria, on 15 March 2023 the AER released its draft determination of the DMO for 2023-24 – which applies to the NECF states of South Australia, NEW South Wales and south-east Queensland.

The draft determination outlines the AER’s intended approach to determine the final DMO price, which will be released in May 2023 and then apply from 1 July 2023. The draft is subject to consultation with stakeholder feedback factoring in the final decision.

AER Chair Clare Savage said: “Energy prices are not immune from the significant challenges in the global economy right now; that’s why it’s more important than ever that we strike a balance in setting the DMO to protect consumers as well as allowing retailers to continue to recover their costs and innovate.”

Submissions can be made to DMO@aer.gov.au until 6 April 2023. The draft determination can be accessed here.

AER’s consumer energy resources strategy

The AER has released its strategy on its approach to regulating market outcomes for consumer energy resources (e.g., solar panels, batteries and electric vehicles).

The strategy provides a snapshot of how the AER workstreams work together to achieve the goal of the AER’s consumer energy resources work program, which is to enable consumers to own and use energy resources.

The AER intends to update the strategy periodically given the evolving nature of market and regulators.

The strategy can be accessed here.

New versions of the National Electricity and Gas Rules

On March 15 and 16, the Australian Energy Market Commission published version 196 of the National Electricity Rules (here), version 101 of the National Electricity Rules (NT) (here) and version 68 of the National Gas Rules (here).