ACCC and AER Update for NEM participants

The National Energy Market (NEM) is currently experiencing unprecedented conditions: the Australian Energy Market Operator (AEMO) recently suspended the spot market for the first time since the NEM began in 1998, responding to significant spikes in electricity and gas prices.

Against this extraordinary backdrop, the Australian Competition and Consumer Commission (ACCC) and the Australian Energy Regulator (AER) have come together to announce their combined focus will be squarely on retailer and generator compliance with the competition, consumer and energy law frameworks.

Treasury has also directed the ACCC to use its information gathering powers to bring transparency to the factors influencing electricity and gas prices and identify any need for regulatory change. This will only intensify the regulators' scrutiny of retailer and generator practices, which is already very high.

While AEMO has lifted the market suspension in all regions as of 24 June 2022, with spot prices returning, the NEM continues to face challenging circumstances. Retailers and generators will need to keep their key regulatory obligations front of mind in navigating the current energy climate. We summarise these below.

Further complicating matters, retailers and generators will now need to navigate the compensation process relating to AEMO's intervention in the NEM and how any payments will be paid or passed on to individual market participants (and ultimately customers).

Summary of key regulatory obligations

Legislation / instrument	Key obligations
Generators
"Big Stick" Energy Law- Part XICA of the Competition and Consumer Act 2010 (Cth) (Prohibiting Energy Market Misconduct)	Must not bid, re-bid or fail to bid/re-bid in the spot market: fraudulently, dishonestly or in bad faith; and/or for the purpose of distorting or manipulating prices in that electricity spot market.
Must not fail to offer, or offer in a restrictive manner, financial contracts for the purpose of substantially lessening competition.
National Electricity Rules	Must not by any act or omission, whether intentionally or recklessly, cause or significantly contribute to the circumstances causing AEMO to issue a direction to a Registered Participant to do any act or thing to maintain or re-establish power system security, without reasonable cause.
Must not make a dispatch offer, dispatch bid or rebid that is false, misleading or likely to mislead (which it will be taken to be if the party making it does not have a genuine intention to honour or reasonable grounds to make the representations made because of making the offer/bid).
Submit short-term PASA in trading interval resolution, which covers the next six trading days from the end of the trading day covered by the most recently published pre-dispatch schedule. AEMO must be notified of any changes to submitted information.
Submit medium-term PASA in Submit in daily resolution, which covers the next 24 or 36 months (as applicable) from the Sunday after the day of publication. AEMO must be notified of any changes to submitted information.
Retailers
National Energy Retail Law / Rules	Must present standing and market offer plan prices in accordance with the AER's Retail Pricing Information Guidelines, including: presenting standing and market offer plan prices prominently on the retailer's website; and linking to energy plan documents generated by Energy Made Easy (in relation to which a retailer is required to provide relevant plan data and information to the AER).
Must not transfer a customer or enter a customer into a market retail contract without the explicit informed consent of the customer (and must ensure appropriate records are generated).
Must comply with hardship obligations for customers experiencing financial payment difficulties, including: informing customers of the existence of the retailers hardship policy as soon as practicable after they are identified as a hardship customer; and offering payment plans, which are informed by having regard to the customer's capacity to pay.
Energy Retail Code of Practice (Victoria)	Must advise consumers whether they are on the retailer's "best offer" on the customer's bill (at least once every 3 months for electricity bills and every 4 months for gas bills).
Must not transfer a customer or enter a customer into a market retail contract without the explicit informed consent of the customer (and must ensure appropriate records are generated).
Must comply with hardship obligations for customers experiencing financial payment difficulties, including: making readily available the retailer's hardship policy; giving customers clear and unambiguous information about available assistance, and where they are entitled to receive assistance, providing that assistance in a timely manner; and taking into account all the circumstances of a customer and, having regard to these, acting fairly and reasonably (including with respect to payment plans).
"Big stick" and Australian Consumer Law	May only pass through legitimate cost increases to small customers. Must not mislead or deceive consumers or make false or misleading claims or statements in the energy market, particularly in relation to reason for, or extent of, price increases.
Electricity Retail Code- Industry Code - Electricity Retail Regulations 2019	Standing offer prices must be equal to or less than the Default Market Offer set by the AER / Victorian Essential Services Commission.
Must comply with requirements around how price information is communicated to small customers, including clearly and conspicuously stating: the difference between the unconditional price and the reference price (as a percentage of the reference price); the difference between the conditional price and unconditional price (as a percentage of the reference price); the lowest possible price of the offer (inclusive of all conditional discounts); and conditions for all conditional discounts.

The AER's newly announced Compliance & Enforcement Priorities 2022-23 reflect that retailers and generators meeting the above obligations will be crucial to avoiding enforcement action, with the AER prioritising its efforts on behaviours including:

• retailers effectively identifying customer's financial difficulty and offering appropriate payment plans; and
• registered generators compliance with offers, dispatch instructions, bidding obligations and the timely and accurate provision of information to AEMO.

The AER has published updated checklists for compliance for scheduled and semi-scheduled generators accordingly.

Nonetheless and whilst coordination amongst competitors in energy markets is generally antagonistic to competitive outcomes, the ACCC has also acknowledged that some contributors to the crisis may continue to persist and may be better dealt with in a coordinated manner. It has granted interim authorisation to enable market participants to coordinate to minimise the risk of outages through measures such as:

• coordinating outages;
• sharing essential personnel, parts and equipment; and
• sharing certain operational information.

It goes as far as to allow information about future performance of plant and input availability and pricing to be shared. However, the permission to do so is heavily caveated to ensure that it is legitimately and absolutely necessary. It will also be subject to AEMO and ACCC oversight.

Our team is available to provide further insights and assist retailers or generators in managing their positions, complying with their regulatory obligations or navigating the compensation payment process (or associated pass on) in these high-pressure and unprecedented circumstances.

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