Recent amendments to the General Exemption Order (GEO) made under the Electricity Industry Act 2000 (Vic) (Act) will modify the regulatory framework to reflect market activity, including opening up opportunities for government agencies and community energy projects.
In 2015, the Victorian Government commenced a review of the GEO to examine whether the existing regulatory arrangements – which apply to the small-scale generation, distribution and resale of energy to customers within embedded networks – were adequate.
A key objective of this review was to identify how the GEO could better address alternative energy sellers, innovative purchasing arrangements and precinct scale projects. In its final position paper, the Department of Environment, Land, Water and Planning (Department) recommended that the GEO:
establish registrable categories of exemptions; and
separate deemed and registrable exemption categories into specific activities.
The GEO has been redrafted so that it now substantially aligns to the framework applied by the Australian Energy Regulator in other National Electricity Market states.
What does the new GEO contain?
On 15 November 2017, the new GEO was issued by Order in Council.
Section 16 of the Act requires a person who engages in the generation of electricity for supply or sale or the transmission, distribution supply or sale of electricity to hold a licence issued by the Essential Services Commission (ESC) unless otherwise exempt. A failure to comply with this requirement gives rise to significant financial penalties. Section 17 of the Act enables exemptions to be made from the licencing requirements.
Since 2002, the GEO has set out the permissible exemptions. In broad terms, under the revised GEO, the previous exemption of three kinds of activities will continue:
Small scale generation activities
Intermediary distribution and supply of electricity
Intermediary sale of electricity
Individual exemptions may still be obtained. Any entities wishing to operate under a registrable exemption will be required to register their activities on the ESC’s Register of Exempt Persons. This Register will be publically available on the ESC’s website free of charge.
Deemed and registrable exemption categories under the amended GEO
The amended GEO has tailored the deemed and registrable exemption categories into different classes based on specific activities.
Each of these categories are further divided into deemed or registrable exemptions as follows:
1. Retail exemption
The deemed exemptions apply to a number of retail activities, including:
selling metered energy electricity to fewer than 10 small commercial/retail customers within the limits of a site that they own, occupy or operate; and
selling metered electricity to occupants of holiday accommodation on a short-term basis.
2. Network exemption
Further deemed exemptions have been created for network activities, including:
supplying metered or unmetered electricity to fewer than 10 residential customers within the limits of a site that the supplier owns, occupies or operates;
supplying electricity via plug-in or rack mounted equipment in any premises where there is National Broadband Network equipment with an input current rating not exceeding 3 amps alternating current; and
supplying electricity on or within a person’s premises in relation to the provision of telecommunication services.
3. Generation exemption
A deemed exemption applies for any person generating electricity for supply or sale where the total output is less than 30 MW. This exemption is unchanged from the previous GEO.
4. Multiple activity exemption
The multiple activity exemption covers persons who generate or distribute electricity on premises not owned or occupied by the person and that person then supplies or sells that electricity to the owner or occupier of the premises or to the licensed retailer. Such activities must be registered. Specific examples listed in the GEO which may be covered by this exemption include solar power purchase agreements or community energy projects. To qualify under this category the nameplate or installed generating capacity must not exceed 5 MW.
Although a separate exemption was originally flagged for community-owned renewable energy projects, the consultation process found that most of these projects would fall into the current exemption that permitted power purchase agreements. The Department has flagged that they will monitor how the revised GEO operates in relation to community energy projects and may consider further regulation in this area.
One significant constraint on small scale solar PPAs and community energy is the requirement in paragraph 18 of the GEO that the price at which electricity and related services may be sold or supplied under the exemption must not exceed the relevant maximum price formulated by the ESC. This impacts on arrangements which charge a higher than market rate to enable earlier ownership transfer of a solar installation.
Finally, the previous constraint under this exemption that the exempt person must not own or occupy the premises from which generation takes place has been refined so that occupation of part of the premises (for example under a lease) is permitted.
Exemptions for Government agencies
Under the amended GEO, Government agencies are deemed exempt from the obligation to hold a licence in respect of the following activities:
Retail – government agencies selling metered electricity to non-residential customers
Network Services – government agencies supplying metered electricity to non-residential customers
The exemption only applies if the Government agency is providing the metered electricity for a purpose which is ancillary to its primary functions or objectives under the laws under which they are established.
The amended GEO provides that ‘Government agency’ includes:
a Commonwealth, State or Local Government department;
a statutory authority or government owned corporations established under a Commonwealth or State or Territory law; and
a university, but does not include a housing authority or a provider of student accommodation.
The Government agency exemption provides opportunities for agencies to explore small scale site-specific generation, particularly utilising solar or solar and battery technology. This may have particular relevance for Government agencies with high energy usage, such as water corporations.
As the cost of this technology decreases, this type of generation will become an increasingly important way for government agencies to reduce their electricity costs.
The revised GEO will come into operation on 1 April 2018.