The Morrison Government has today reintroduced the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019. The Bill was introduced into the previous Parliament, but lapsed with the proroguing of the Parliament for the 2019 Federal Election. The new law will ensure that energy firms that engage in misconduct 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 Government has introduced to put downward pressure on electricity prices and hold energy companies to account. This includes:
- 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.
Following the Election, the Government has undertaken further targeted consultation with key industry stakeholders. As a result of this consultation, the Government made a number of amendments to the Bill to provide additional certainty.
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.
A number of other minor amendments have been made in response to consultation, including to:
- Clarify that the retail pricing prohibition applies to market offers and not standing offers, recognising that the Government has already taken action to regulate excessive standing offers by implementing default market offers from 1 July 2019;
- Confirm that governments will not be required to privatise publicly-owned assets; and
- Clarify that junior employees of electricity businesses do not face personal liability.
The legislation 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 fairer, more affordable and reliable energy system and a stronger economy.