The Liberal National Government will introduce legislation which will provide a range of penalties and remedies for companies that engage in misconduct.
The legislation follows a review conducted by the Australian Competition and Consumer Commission (ACCC) which identified problems in the retail, wholesale and the contract market calling the situation “unacceptable and unsustainable.”
The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018 will amend the Competition and Consumer Act 2010 (CCA) to define the energy market misconduct to be prohibited and to provide a series of graduated and targeted remedies.
Prohibited misconduct in the electricity sector includes:
- A retail pricing prohibition focussed on conduct by retailers where they fail to reasonably pass through 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.
Where prohibited misconduct is found by the ACCC to have 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.
Under the legislation court ordered Divestiture Orders can only be made where the corporation’s conduct is fraudulent, dishonest or in bad faith, for the purpose of distorting or manipulating prices, and the Divestiture Order is proportionate and targeted to the conduct. The Treasurer can only make an application to the court where both the ACCC and Treasurer are satisfied the order would result in a net public benefit.
The legislation will apply to government owned enterprises. In such cases any divestiture may be made to another government owned energy company where the two entities genuinely compete with one another.
The legislation will sunset in 2025, at the conclusion of the ACCC monitoring inquiry. There will be a Government led review of the legislation in 2024.
The Government’s legislation as it applies to divestment is industry limited, sunsetted and requires a court order. It is consistent with similar laws in the United Kingdom which permit divestiture under the Enterprise Act and the United States which permits divestiture under the Sherman Anti-Trust Act.
Introducing legislation to hold energy companies to account for misconduct is part of our plan to deliver a more affordable and reliable energy system and a stronger economy.