Regulation Impact Statement Updates

Official website for publishing regulatory impact analysis information for regulatory decisions announced by the Australian Government, COAG and COAG Councils.

Prohibiting energy market misconduct

Aust Gov
7th December 2018

Regulation Impact Statement - Department of the Treasury

On 5 December 2018, the Government introduced the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018 to establish a legislative framework to address misconduct identified by the Australian Competition and Consumer Commission’s (ACCC) Electricity Price Monitoring Inquiry.

The legislative framework prohibits conduct by electricity corporations which is detrimental to competition or to consumer welfare.

The Bill establishes prohibitions on certain conduct in electricity retail, contract and wholesale markets. These prohibitions correspond to the three limbs of the ACCC’s ongoing Electricity Price Monitoring Inquiry.

Where the ACCC identifies prohibited conduct, the Bill makes available a graduated range of remedies, to be used in proportion to the conduct.

The ACCC will be able to issue a public warning notice or an infringement notice, or apply to the court for civil penalties of up to $10 million, or more, depending on the benefit obtained and the company’s turnover. The ACCC will also be able to accept a court-enforceable undertaking at any time.

For particularly egregious conduct, the ACCC will be able to make a recommendation that the Treasurer either make a contracting order (requiring a corporation to offer contracts to third parties) or apply to the Federal Court for a divestiture order. The Treasurer may only take these actions on the recommendation of the ACCC, following a notice and response process which gives the corporation an opportunity to respond.

The Treasurer may only make a contracting order, or apply for a divestiture order, where this is proportional and targeted to the conduct. In the case of divestiture orders, both the ACCC and Treasurer must be satisfied the order would result in a net public benefit, before the Treasurer may make an application to the Court.

The Office of Best Practice Regulation (OBPR) assessed the Regulation Impact Statement (RIS) prepared by the Treasury as compliant with the Government’s requirements but not best practice. The OBPR considers that the policy development process as described in the RIS departs from best practice as formal consultation, including on the RIS, was not broad-based and was for a period shorter than the Government’s minimum requirement of 30 days. The OBPR also considers that to achieve best practice the RIS should have included more evidence on how the preferred option delivers the highest net benefit to the community and more discussion on the views of stakeholders.

The RIS estimates the average annual regulatory cost of the proposal to be $0.79 million. The OBPR agreed that, as the costs were less than $2 million per annum, regulatory costs could be self-assessed by the Department of the Treasury.

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