Victoria’s energy system is rapidly transitioning as Victoria pursues its legislated 2050 net-zero target. To support physical changes to the existing electricity network, regulatory reform is needed to accommodate new technologies.
The Energy Legislation Amendment Bill 2021 (Omnibus Bill) amends the Electricity Industry Act 2000 (Victoria) (EIA), the Gas Industry Act 2001 (Vic) (GIA), the National Electricity (Victoria) Act 2005 (Vic) (NEVA), the National Gas (Victoria) Act 2008 (Vic) (NGVA), the Victorian Energy Efficiency Target Act 2007 (Vic) (VEET Act) and the Essential Services Commission Act 2001 (Vic) to support the energy transition in a number of ways which are summarised below.
Following recommendations made by the Independent Review into the Future Security of the National Electricity Market, and a review by the Australian Energy Market Commission (AEMC), the Energy Council of the Council of Australian Governments endorsed the development of a national regulatory sandboxing framework to facilitate trialling in relation to the supply of, or demand for, electricity and gas, respectively in Australia’s market (National Sandboxing Framework).
The principle behind a sandboxing framework can be found in its name - it provides a safe playground (like a sandbox) for innovators to experiment and test new technologies which are not or are only partially compatible with the existing legal and regulatory framework. As such, it allows regulators to adapt the regulatory environment to accommodate these new technologies. Regulatory sandboxing has previously been used in other sectors such as banking and healthcare, however the use of a sand-box like approach is relatively new in the energy sector, with only the Netherlands and England having gained specific experience with this type of approach.
In order for the National Sandboxing Framework to apply directly to Victoria’s energy retail market, new provisions will be added to the EIA and GIA to provide for a regulatory sandboxing framework in Victoria which is closely aligned with the proposed national energy law arrangements. It does this by providing the Essential Services Commission with a new power to exempt trial projects from Victorian regulatory obligations arising out of existing rules or registration requirements which is analogous to the Australian Energy Regulator’s regulatory waiver power, and by adopting (with necessary modifications) key aspects of the proposed national sandboxing framework, including the innovative trial principles and a five year time limit on trial waivers.
In her Second Reading Speech, the Minister for Energy, Environment and Climate Change and Minister for Solar Homes Ms D’Ambrosio told Parliament that trials may involve creating “new models for how consumers buy and sell electricity into the grid, [testing] how resources such as batteries can be shared between neighbours and how a customer’s demand flexibility can be used to reduce their energy bills”.[1]
Stand-alone power systems (SAPS) are off-the-grid electricity systems which can provide power to an individual property or a community. They include their own generation capability and in some cases, they also contain a battery storage capability. The Omnibus Bill will amend NEVA to enable regulations to be made for or with respect to specified SAPS that are owned or operated by licensed electricity distributors, in particular to enable SAPS to be declared as being part of the national electricity system, thus permitting the generation, distribution, supply and sale of electricity by means of SAPS. These new regulation-making powers support the implementation in Victoria of the regulatory framework for SAPS contained in the Statutes Amendment (National Energy Laws) (Stand-Alone Power Systems) Act 2021 (SA) and are modelled on section 6B of the National Electricity Law.
The national gas regulatory framework, applied in Victoria by the NGVA, does not currently contemplate any artificially mixed gas, meaning the regulation of renewable gas blended into the natural gas supply is uncertain under the current arrangements. The Omnibus Bill introduces a new power into the NGVA which enables the Minister to declare that a mixture of natural gas, and another gas, as “natural gas”. As an example, the new framework would allow hydrogen, or any other gas blended with natural gas to fall within the definition of ‘natural gas’ and consequently fall within the ambit of the national gas regulatory framework. In her Second Reading Speech, the Minister also noted that this is an interim step until the national gas regulatory framework reforms with respect to renewable gases are developed and implemented.
Last year the COVID-19 pandemic inhibited the implementation of the Victorian Energy Upgrades program (Program) target for 2022 to 2025. The Program works by setting a state-wide target for energy savings that aims to provide a range of energy-efficient products and services to be made available to households and businesses at a discount. Large energy retailers are also required to acquire and surrender Victorian energy efficiency certificates to meet the annual target set in VEET Act. The amendments will enable the continued operation of the Victorian Energy Upgrades program, clarify the timing requirements for the making of regulations and Ministerial Orders fixing greenhouse gas reduction rates in the preceding year to the year that the rate takes effect and more broadly, aim to provide a more flexible process.
The Statutes Amendment (National Energy Laws) (Penalties and Enforcement) Act 2020 (Cth) recently amended the National Energy Laws to provide the AER with new enforcement powers and created a three tiered structure for civil penalties, with the highest tier enabling the issuance of civil penalties of up to $10 million. Due to historic amendments to the NEVA, these changes in relation to electricity did not automatically apply in Victoria. The Omnibus Bill amends the NEVA to ensure that the full range of civil penalties for contraventions of gas and electricity rules established by the national framework apply in Victoria.
The NEVA was amended in 2020 to create a power to expedite transmission projects. This power was used to establish the Victorian Big Battery and the associated System Integrity Protection Scheme set up to provide the ability to import electricity from New South Wales during days of peak demand over summer. The Omnibus Bill proposes to provide the Minister with the power to apply to the Victorian Supreme Court for an injunction to enforce provisions of a Ministerial Order made under section 16Y of the NEVA. Ministerial Orders under section 16Y are intended to facilitate or expedite specified transmission system augmentations or services to improve the reliability of electricity supply in Victoria. The new enforcement provision section 16ZDA of the NEVA enables the Minister to seek enforcement of a Ministerial Order made under 16Y, ensuring that, where necessary, Ministerial Orders can be enforced expeditiously. By operation of section 16ZDA, the NEVA will preserve the AER’s role as the responsible regulator for the Ministerial Orders.
[1] Ibid.
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