Bill to regulate alternative electricity services in WA likely to be passed

The WA Government’s Electricity Industry Amendment (Alternative Electricity Services) Bill 2023 (WA) (Bill) was agreed to by the Legislative Council on 20 March 2024, subject to minor amendments, after having been passed by the Legislative Assembly in November last year. As such, we expect the Bill will be passed by WA’s parliament in the near future.

The Bill’s primary purpose is to establish a registration framework under the Electricity Industry Act 2004 (WA) (Act) for the regulation of alternative and emerging electricity business models and services, which will be “alternative electricity services” (AES or AESs) for the purposes of the Act. The Bill does not define what constitutes AESs. Instead, regulations to be made under the Act will prescribe the activities, and classes of activities, that are AESs.

The AES registration framework that will be established by the Bill (Framework) is intended to create a flexible approach that delivers enforceable protections to AES consumers, while at the same time providing a less-burdensome regulatory regime for AES providers as compared to the current licensing framework under the Act.

To achieve this, the Bill will establish heads of power under the Act to facilitate the operation of the Framework, but generally leaves the details for the operation of the Framework to be contained in regulations to be made under the Act.

The Bill is particularly important to owners and operators of embedded networks, as well as businesses that are providing, or considering providing, electricity supply through alternative models such as behind-the-meter or on-site generation.

In short, the key aspects of the Bill are:

• It will require AES providers to be registered.
• Penalties will be imposed on an AES provider if it is not registered or does not comply with the conditions applicable to its registration.
• An AES provider will need to comply with the mandatory and enforceable AES Code of Practice that will be developed by the Minister for Energy pursuant to the Framework.
• Small use customers of a registered AES provider will have access to the electricity ombudsman scheme established under the Act to resolve disputes with the AES provider.

Rationale

The current licensing and exemption framework under the Act was established when electricity supplies were usually centrally generated and then supplied, via transmission and distribution networks, to consumers by a retailer that was licensed and extensively regulated under the Act. However, the availability of exemptions to the licensing requirements under the Act means there is scope for electricity supply arrangements to be unlicensed.^[1]

As a consequence of technological developments such as small-scale energy storage/batteries as well as novel energy management models and financing arrangements, an increasing number of WA consumers are purchasing electricity or electricity-related services from suppliers who are unlicensed under the Act. This is either because the supplier is exempt (for example, under the electricity on-selling exemption) or its activities are entirely outside the scope of the Act.

This has been a concern of the WA Government and led to the introduction of the Bill, particularly because those unlicensed suppliers are often supplying all or a substantial portion of a small use customer’s electricity and those customers often assume they have the same protections as customers of licensed retailers.

The AES registration framework

As mentioned above, the activities, and classes of activities, to be regulated as AESs under the Framework will be prescribed in regulations that are yet to be published.

Nevertheless, guidance on the activities, or classes of activities, that may be prescribed as AESs is provided in the second reading speech for the Bill, which states that AESs may include “the on-selling of electricity within embedded networks, such as apartment buildings, shopping centres, retirement villages and long-stay residential parks, and the sale of electricity to customers through solar power purchase agreements”.

Further guidance on the activities, or classes of activities, that may be prescribed as AESs can be found in Energy Policy WA’s ‘Tailoring customer protections for alternative electricity services – a registration framework’.

^[2] That report indicates that AESs may include behind-the-meter generation and storage services, embedded network business models, micro-grids, electric vehicle charging stations, community energy products or peer-to-peer trading services.

Under the Framework, a provider of an AES will be required to be registered to provide that AES and must comply with the terms and conditions applicable to the registration.

In this regard, the Bill introduces into the Act the power for the WA Economic Regulation Authority (ERA) to impose terms and conditions on a registration, as well as a broad head of power allowing the regulations to prescribe terms and conditions that apply to a registration.

The Framework will allow regulations to be made exempting AES providers from the requirement to be registered.

It will be an offence for a person to provide an AES to a customer unless the person is registered to provide that AES (or exempted from the requirement to be registered). It will also be an offence for a registered AES provider to fail to comply with the terms and conditions that apply to its registration. A fine of $100,000, as well as a daily fine of $5,000, will apply to each such offence.

While the Framework is intended to protect small use customers, the Framework will also regulate AESs provided to large-use customers (being customers consuming more than 160MWh of electricity per annum). However, most of the substantive customer protections (such as the conduct obligations and access to the WA Energy and Water Ombudsman) will be limited to small-use customers.

The Bill will insert into the Act general requirements related to the registration of an AES provider, including the grant, renewal, amendment, transfer and surrender processes. The ERA will be responsible for administering those processes.

Pertinently, the ERA will generally not be permitted to grant a registration unless it has undertaken public consultation and is satisfied that the granting of the registration is not contrary to the public interest. The Framework sets out mandatory considerations that the ERA must take into account when determining whether granting a registration is in the public interest.

The Framework does, however, allow the regulations to prescribe the circumstances in which the ERA does not need to undertake public consultation and/or consider the public interest in granting a registration. This has been included in the Framework to allow for ‘fast track’ applications. It is envisaged that it will be determined whether an activity, or class of activities, is eligible for ‘fast track’ applications at the time that activity, or class of activities, is prescribed as an AES.

AES Code of Practice and Electricity Ombudsman Scheme

The Bill allows the Minister for Energy to make, amend and review an enforceable ‘AES Code of Practice’, which will be subsidiary legislation and set out customer protection requirements to be complied with by registered AES providers.

Each time a new activity, or class of activities, is prescribed as an AES, the AES Code of Practice will be amended to include any additional customer protection obligations that are deemed necessary for that activity or class of activities. The intent being that the requirements for providers of each AES will be tailored to the particular characteristics of that AES.

It will be a condition of an AES provider’s registration that it must comply with the provisions of the AES Code of Practice that are applicable to the AESs to which its registration relates.

It will also be a condition of an AES provider’s registration that it must not provide AESs to customers unless it is a member of the electricity ombudsman scheme established under the Act. The effect of this condition is that the WA Energy and Water Ombudsman will be able to resolve a small-use customer’s complaints related to, and disputes with, a registered AES provider.

Next steps

While we expect the Bill to be passed by WA’s Parliament in the near-future, AES providers and consumers alike will only be able to obtain a full understanding of the Framework once the regulations under the Act for the operation of the Framework have been published.

In this regard, Energy Policy WA is currently consulting with the public in relation to the initial regulations that will prescribe activities as an AES and the general regulations for the operation of the Framework. That consultation is seeking feedback on whether the supply and on-sale of electricity through embedded networks, and on-site power supply, should each be prescribed as an AES.

The consultation process closes at 5.00pm (AWST) on 19 April 2024 and information about the consultation can be accessed on the WA Government’s website, ‘Sharing the Power: have your say on AES reforms!’. Interested parties may wish to participate in the consultation process.

^[1] The exemptions are available under the Electricity Industry Exemption Order 2005 (WA), which is made under the Act.

^[2] Energy Policy WA, Tailoring customer protections for alternative electricity services – a registration framework (Final Recommendations Report) (5 November 2020). The legislative amendments in the Bill are based on the recommendations set out in this report.