Restoring trust and confidence to our electricity markets

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The suspension of the entire National Electricity Market (NEM), the first of its kind by the market operator, and the continued volatility in the wholesale market, has not only added to increased pressures on both energy businesses and consumers, but it has also raised concerns within the community about the reliability of this essential service.

As the energy system transitions to net zero, consumer trust and confidence are more important than ever. But trust is earned, not a given.

People have a right to trust they can turn on the lights or the heater when they need to at an affordable price. Equally, people expect that all energy businesses are playing by the rules to provide such an important service.

The Australian Energy Regulator (AER) closely monitors both the wholesale and retail markets to ensure all market participants are complying with the law and the rules, and we act when we uncover misconduct.

Our market monitoring, reporting, compliance and enforcement work continues to be the cornerstone on which we work to build trust with the community.

Compliance with energy laws also ensures that important consumer protections are delivered, and rights are respected. It gives consumers and energy market participants confidence that the energy markets are working effectively and in their long-term interests. It allows them to participate in market opportunities as fully as possible and provides protection when they cannot do so.

This past month has seen a number of Federal Court judgments handed down against market participants for breaching various energy laws in the order of around $29 million.

Origin Energy has been fined a record $17 million.

Image: iseekplant

Just this week, a $17 million penalty, the largest ever imposed on a retailer in response to an action brought by the AER, was handed down for breaches of the energy laws for failing to comply with obligations to protect customers experiencing hardship and payment difficulties.

This penalty also included, for the first-time, conduct that occurred under the new penalty regime introduced to energy laws in January 2021. These reforms recognise the significance of the obligations contained in energy laws to energy security, functioning markets and consumer protection, and provide a significant scaling up of the penalties available to the courts and the AER.

The hardship case outcome eclipsed the previously held record of $12 million from only a few weeks ago for a retailer failing to comply with life support obligations for its customers who rely on life-saving health equipment.

These legal outcomes are examples of the AER’s ongoing willingness to take compliance and enforcement action where there have been serious issues impacting vulnerable consumers or the energy system more broadly. They build on outcomes achieved in 2020–21 where $4.6m in penalties were paid arising from five court proceedings and 48 infringement notices along with $1 million in customer debt waived.

In order to effectively marshal our enforcement and compliance resources, we undertake an annual exercise of identifying enforcement and compliance priorities.

Our 2022–23 compliance and enforcement priorities released today, reflect the importance of well-functioning markets and protections for consumers in vulnerable circumstances – both areas now more important than ever given the current circumstances.

Our key compliance and enforcement priority areas focus on effective identification of consumers in financial difficulty, and ensuring registered generators comply with offers, dispatch instructions, bidding rules, and provide accurate and timely information to our market operator.

In addition, improving outcomes for consumers in embedded networks (apartment blocks, caravan parks and retirement villages, commercial buildings, shopping centres), and the timely and accurate disclosure of gas information to ensure rigor and competition in all aspects of the energy market is vital to the availability and affordability of energy for households and businesses.

Laws passed last week will also provide the AER with greater powers to monitor wholesale gas markets, specifically ensuring shorter-term gas markets are operating competitively.

We expect these new laws and penalties will provide a greater incentive for businesses to comply with the rules designed to protect energy consumers.

As we continue the transformation of the energy system, it is more important than ever that energy businesses understand their obligations and that these are widely complied with in spirit and to the letter.

The AER will continue to focus on enforcing compliance with the energy laws and rules in the wholesale and retail sectors and take appropriate action in response when required. We are carefully considering the recent market events and their drivers and will take necessary action in relation to breaches of the law and rules identified.

It is not only what governments, industry and the community expect, but what they deserve.

Author: Clare Savage, chair, Australian Energy Regulator

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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