What has been happening in the electricity market?
Winter may have been marked by cold winds from the south but there is regulatory heat also, from many directions.
On 20 June 2022, the ACCC published its May 2022 Inquiry into the National Electricity Market report, including an addendum to reflect the substantial and unprecedented increase in electricity prices in May and June 2022.
At around the same time, the ACCC announced that it would work jointly with the Australian Energy Regulator to monitor the electricity and gas markets, take action against anticompetitive conduct, and assess the need for regulatory change (see our previous post here). This was prompted by the Federal Treasurer’s letter to the ACCC on 6 June 2022 directing the regulator to ensure factors influencing prices are made fully transparent and to investigate any concerns about anti-competitive or false and misleading conduct in the electricity and gas markets.
So far the ACCC has made a statement, issued guidance for consumers on minimising their energy bills, and the Australian Energy Regulator (AER) and ACCC have written to energy retailers to remind them of their competition and consumer law obligations and other energy-specific pricing.
According to a statement made by ACCC Chair Gina Cass-Gottlieb, the Federal and State and Territory Energy Ministers have requested that the ACCC report back its early views on the current situation in July 2022. Separately, the ACCC’s next Electricity market monitoring report to the Treasurer is due in December 2022. The ACCC has not indicated if a further report will be provided earlier.
The AER have also said in its Quarterly retail performance report released in June 2022 that it will also be ‘monitoring market share and the number of customers on market offers as retailers adjust their competitive strategies and pricing to deal with current conditions in the wholesale energy market’.
What and why?
In late June 2022 the Australian Energy Market Operator (AEMO) lodged an urgent application for interim authorisation of coordination between energy market competitors. On 1 July 2022, the ACCC granted interim authorisation allowing AEMO and industry participants to ‘minimise the risk of outages through measures that would otherwise raise competition concerns, including by sharing essential personnel, parts and equipment, as well as certain operational information’. This authorisation will continue until the ACCC has made a final determination.
ACCC Chair Gina Cass-Gottlieb said ‘[a] reliable and secure energy supply is essential both for industry and the community. Co-operation between the industry participants in the short term is appropriate at this time for building resilience in the gas and electricity supply systems and minimising the risk of load shedding and blackouts’. The ACCC will be ‘closely monitoring the conduct of the energy providers’.
In the last month we have also seen a number of Federal Court judgments handed down in relation to alleged contraventions of the National Energy Retail Law (NERL) and the National Energy Retail Rules (NERR) by a number of retailers. Additionally, certain enforceable undertakings have been entered into with the AER in relation to compliance with life support obligations under the NERL.
What will the ACCC be looking out for?
The ACCC has said that it is particularly concerned by ‘any conduct that attempts to take advantage of the current market conditions to mislead consumers about the need for, or extent of, any energy price increases or to achieve other financial gains’.
Electricity retailers and generators keep regulatory obligations front of mind and adapt their processes where needed. The ACCC has flagged to the market that it will be keeping a close eye on the conduct of generators and retailers, which may include monitoring the market for:
- In the case of generators:
- Energy market misconduct under ss 153F – 153K of Part XICA of the Competition and Consumer Act 2010 (Cth) by bidding/re-bidding or withholding supply in a way that manipulates prices in the spot market or is in bad faith, with the purpose of substantially lessening competition; and
- Breach of the National Electricity Rules, including by making offers and bids that are false or misleading under clause 3.8.22A.
- In the case of retailers:
- Noncompliance with the AER’s Retail Pricing Information Guidelines (Guidelines), including by presenting standing and market offer plan prices in accordance with the Guidelines;
- Compliance with explicit and informed customer consent (part 2) and hardship obligations (part 3) in accordance with the National Energy Retail Rules;
- Breach of the Australian Consumer Law by engaging in misleading or deceptive conduct in relation to electricity prices;
- Energy market misconduct under s 153E of Part XICA of the CCA by failing to make reasonable adjustments to prices if they have experienced a sustained and substantial reduction in the ‘underlying costs of procuring electricity’;
- Price offers that are not equal or less than Default Market Offer or by failing to communicate pricing to customers in accordance with Subdivision B of the Electricity Retail Code.
In addition, if energy retailers are arranging to transfer customers or contracts, they are urged to notify the ACCC first and engage in the ACCC’s authorisation process. By telling customers to leave for better deals/terms or transferring customers to larger retailers, energy retailers risk not only losing their licence but may also risk investigation for cartel conduct.
We will be monitoring the situation closely, so keep your eye out for additional posts as further developments come to light.