In Opposition, the Coalition pledged to repeal the Carbon Price Mechanism (CPM) as a matter of priority.1 The Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 (Bill) passed the House of Representatives on 21 November 2013. However, the Bill was only passed by the Senate on 17 July 2014.

As a condition of passage by the Senate, key Senators from the Palmer United Party demanded strict reporting requirements and heavy additional penalties for businesses which do not 'pass through' price reductions resulting from the repeal of the CPM, particularly power and gas providers. This article outlines the key changes made to the carbon pass through provisions under the new Clean Energy Legislation (Carbon Tax Repeal) Act 2014 (Act).

ACCC powers under the Bill

Prior to passage by the Senate, the Bill provided for the vesting of the ACCC with new powers, including:

  • price monitoring –power to monitor prices regarding to the CPM repeal in order to assess its effect2
  • false or misleading representations – organisations must not make false or misleading representations concerning the effect of the CPM repeal on prices for the supply of goods or services3
  • price exploitation – action can be taken against businesses believed to be engaged in CPM-related price exploitation by issuing written notices that specify the maximum amount that should be charged for the relevant supply. Organisations that breach the price exploitation prohibitions may be subject to pecuniary penalties up to $220,000 for individuals and approximately $1.1 million for corporations.4

Changes proposed by the Palmer United Party

The Palmer United Party (PUP) were successful in amending the Bill to include several additional provisions, including:

  • Penalties for suppliers of electricity, natural gas and bulk supplies of synthetic greenhouse gases who fail to pass on cost savings that are directly or indirectly attributable to the carbon tax repeal to their customers.  Such companies will be liable to pay a penalty of 250 percent of the value of the costs savings to the Commonwealth.
  • Provisions which require energy suppliers to provide a written statement to the ACCC (known as a ‘carbon tax removal substantiation statement’) outlining any costs savings resulting from the repeal of the tax, and how this is reflected in prices charged.  Failure to comply with these provisions is a strict liability offence and is punishable by 500 penalty units for corporations and 40 penalty units for individuals. 7
  • Requirements for energy companies to provide the same information to their customers. 8

CPM repeal price impacts

According to Environment Minister Greg Hunt, electricity prices will drop 'immediately' once the CPM has been repealed. The Coalition Government has previously estimated that electricity prices will decrease by nine percent, while gas prices will go down by seven percent. 

However, electricity and gas companies have indicated that it may take months for the effect of the CPM repeal to flow through to consumers and that price decreases could vary depending on the state or territory.  Energy retailers have further made it known that any price cuts would also be determined in accordance with network charges for the transmission of the power which represent a significant proportion of retail prices, as well as individual customer contracts. 10 

Accordingly, despite the powers vested in the ACCC to monitor and scrutinise prices following repeal of the CPM and despite the new obligations on energy providers, it is, unclear, whether and when consumers will see a drop in energy prices in the foreseeable future.