The ‘big stick’ is raised
The new Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Act 2019 (Cth), sometimes referred to as the government's "big stick" energy law will take effect on 10 June 2020.
The Act has not been well received in some quarters. Lawyers and businesses are unsettled by the level of potential government intervention and the imposition of strict, yet vague, conduct requirements on a discrete sector, rather than seeking to solve the structural and market settings that could organically facilitate the outcomes sought to be achieved. Moreover, many of the concepts duplicate prohibitions that already exist across the competition, consumer and energy law frameworks.
Nonetheless, the Act, which sunsets on 1 January 2026, achieved bi-partisan support because it enshrines what (is believed) will achieve better consumer outcomes in the near term.
ACCC focus on enforcement
The Australian Competition and Consumer Commission (ACCC) has identified the Act as a priority for 2020. It has published new guidelines (entitled “Guidelines on Part XICA - Prohibited conduct in the energy market”) (ACCC Guideline) about how it will go about interpreting the Act, judging conduct and enforcing it accordingly.
Our impression is that the ACCC is endeavouring to interpret the legislation in line with the explanatory memorandum to the Act and with necessary pragmatism, given the Act’s broad and somewhat vague terminology and application.
The ACCC has indicated that it will focus upon conduct in the NEM, having identified that limited concerns are likely to arise in WA and NT.
What you need to know
Below is our summary of the prohibitions and their practical impact.1
How to approach compliance
Whether or not one agrees with the policy rationale for its implementation, now is the time for companies to raise internal awareness and put in place the compliance structures necessary for when the Act becomes effective.
There are a variety of ways in which the issues may be approached. The ambiguity in the legislation allows organisations to devise a bespoke, principles-based internal framework that can be applied to decision making. In doing so, they should have regard to the principle that retailers and generators must not take advantage of the lack of transparency in supply chain costs, or in pricing structures, or any other part of the uniquely complex industry, in order to get customers to pay more for electricity.
Summary of the Changes
A cascading range of penalties / remedies are available to the ACCC to impose, seek from the Court or recommend to the Treasurer to impose in more serious cases. They are summarised below.
The ACCC can compel information and documents to assess compliance with the prohibitions. Ensure that internal materials and records are well maintained to assist any production exercise and that the rationale and methodology for any relevant decision is recorded.
Develop clear decision-making protocols, and provide training, to assist relevant personnel to avoid decisions likely to create risk.
In a time-pressured trading context in particular, this should be based on clear principles and examples, having regard to the operating profile and commercial objectives of the business.
Our competition and energy regulatory team is available to provide further insights and assist with devising protocols if it would assist.