The Federal Government has introduced the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019, which will ensure that energy firms who engage in misconduct will face appropriate penalties.
The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 will amend the Competition and Consumer Act 2010 (CCA) to define three types of misconduct:
- A retail pricing prohibition, which will require electricity retailers to pass on sustained and substantial electricity supply chain cost savings to end consumers.
- A contract liquidity prohibition to prevent energy companies from withholding hedge contracts for the purpose of substantially lessening competition.
- A wholesale conduct prohibition to stop generators from manipulating the spot market, such as withholding supply.
The Bill introduces a graduated, proportionate penalty regime to apply if the ACCC finds that misconduct has occurred. The following remedies will be available:
- ACCC issued warning notices and infringement notices
- Court-ordered civil penalties up to the greatest of: $10 million; three times the value of the total benefit attributable to the conduct; or 10 per cent of the annual turnover of the corporation in the 12 months before the conduct occurred
- On the recommendation of the ACCC, Treasurer-issued Contracting Orders that will permit the Treasurer to require electricity companies to offer electricity financial contracts to third parties
- On the recommendation of the ACCC, and following an application by the Treasurer, Federal Court issued Divestiture Orders relating to misconduct in the wholesale market.
The measures in this Bill build on the significant reforms that the Federal Government has introduced to put downward pressure on electricity prices and hold energy companies to account.
These significant reforms include:
- Introduction of the Government’s Default Market Offer ‘price safety net’ on 1 July, leading to reductions in both standing offers and high-priced market offers.
- Reform of gas pipeline regulation led through the COAG Energy Council and extension of the ACCC gas inquiry to 2025.
- Extension of the Consumer Data Right to energy, to make it easier for consumers to switch energy providers to get a better deal.
- Progression of the Underwriting New Generation Investments program to improve competition and reduce wholesale prices.
The new law will now commence six months after Royal Assent. This will provide industry participants with a transitional period to review their practices and make adjustments if necessary to ensure compliance.