Legal Landscape of Renewable Energy: Navigating Opportunities and Challenges

Legal Landscape of Renewable Energy: Navigating Opportunities and Challenges

Energy Law

Renewable energy is one of the fastest growing industries in Australia, with significant potential for economic, social and environmental benefits. Australia has vast solar, wind, and land resources that give it a strong competitive advantage in transitioning to renewable energy.1 The renewable energy workforce is projected to grow significantly, with up to 193,900 workers required by 2050 across solar, wind, storage, hydrogen generation, and transmission infrastructure.3 This represents an increase of around 167,900 new workers needed compared to 2020 levels. Wind power is poised for rapid expansion, with projected revenue growth of 52.6% in 2023/2024 after nearly a five-fold increase over the past decade.4

However, the legal landscape of renewable energy is complex and dynamic, with various opportunities and challenges for businesses and investors. This article aims to provide an overview of the key legal issues and considerations for the renewable energy sector in Australia, including the regulatory framework, the market mechanisms, the contractual arrangements, the environmental and planning approvals, and the dispute resolution options. Each renewable energy project is unique and this article does not cover all legal and regulatory considerations.

Regulatory Framework

The renewable energy sector in Australia is regulated by a combination of federal, state and territory laws and policies, as well as industry codes and standards. The main federal legislation governing the sector is the Renewable Energy (Electricity) Act 2000 (Cth), which establishes the Renewable Energy Target (RET) scheme. The RET scheme is designed to encourage the generation of electricity from renewable sources and reduce greenhouse gas emissions. The scheme consists of two parts: the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES). The LRET creates a market for renewable energy certificates (RECs) that are issued to accredited large-scale renewable energy power stations, such as wind farms, solar farms and hydroelectric plants. The SRES provides financial incentives for the installation of small-scale renewable energy systems, such as rooftop solar panels. The RECs can be traded and sold to liable entities, such as electricity retailers and large energy users, who are required to surrender a certain number of RECs each year to meet their obligations under the RET scheme.

In addition to the federal legislation, each state and territory has its own laws and policies that affect the renewable energy sector. For example, some states and territories have set their own renewable energy targets, feed-in tariffs, grants, loans and subsidies for renewable energy projects and consumers. Some states and territories also have specific legislation and regulations for certain types of renewable energy, such as wind energy, solar energy and bioenergy. Therefore, it is important for businesses and investors to be aware of the different legal requirements and incentives that apply in each jurisdiction where they operate or intend to operate.

Market Mechanisms

The renewable energy sector in Australia operates within the National Electricity Market (NEM), which is the wholesale market for electricity supply and demand in the eastern and southern states and territories. The NEM is governed by the National Electricity Law and the National Electricity Rules, which are administered by the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO). The NEM operates as a spot market, where the price of electricity is determined by the interaction of supply and demand every five minutes. The NEM also has a number of ancillary services and mechanisms, such as frequency control, network support, reliability and emergency reserve, and demand response, that are essential for maintaining the security and stability of the power system.

The renewable energy sector also participates in the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC), which are two independent federal agencies that support the development and deployment of renewable energy technologies and projects in Australia. ARENA provides funding, knowledge and networks for renewable energy innovation, research, demonstration and commercialisation. CEFC provides finance, expertise and co-investment for renewable energy projects, businesses and programs that have positive environmental and economic outcomes. Both ARENA and CEFC work closely with the renewable energy industry, government, research institutions and other stakeholders to accelerate the transition to a low-carbon economy.

Contractual Arrangements

The renewable energy sector in Australia involves a range of contractual arrangements between different parties, such as developers, owners, operators, contractors, suppliers, off-takers, financiers, insurers and regulators. These contracts cover various aspects of the renewable energy project lifecycle, such as development, construction, operation, maintenance, connection, dispatch, sale, purchase, financing and insurance. Some of the common types of contracts in the renewable energy sector are:

  • Power purchase agreements (PPAs): These are long-term contracts between renewable energy generators and electricity buyers, such as retailers, large energy users or government agencies, that specify the terms and conditions for the sale and purchase of electricity and RECs. PPAs provide a stable and predictable revenue stream for renewable energy projects, as well as a hedge against price volatility and regulatory uncertainty. PPAs can be structured in different ways, such as fixed-price, indexed-price, hybrid-price, contract-for-difference, or synthetic PPAs, depending on the risk appetite and preferences of the parties.
  • Engineering, procurement and construction (EPC) contracts: These are contracts between renewable energy project developers or owners and EPC contractors, who are responsible for designing, building, commissioning and handing over the project to the owner. EPC contracts typically include provisions for the scope of work, the project schedule, the contract price, the performance guarantees, the liquidated damages, the variations, the defects liability, the warranties, the indemnities and the dispute resolution.
  • Operation and maintenance (O&M) contracts: These are contracts between renewable energy project owners and O&M contractors, who are responsible for operating, maintaining, repairing and replacing the project assets and equipment. O&M contracts usually include provisions for the scope of services, the service fees, the performance standards, the availability guarantees, the spare parts, the reporting, the health and safety, the environmental compliance and the dispute resolution.
  • Connection agreements: These are contracts between renewable energy project owners and network service providers, who are responsible for connecting the project to the electricity grid and providing network services, such as transmission, distribution and ancillary services. Connection agreements typically include provisions for the connection process, the connection assets, the connection charges, the technical standards, the network access, the network performance, the network augmentation, the curtailment, the metering and the dispute resolution.

These contracts are usually interrelated and interdependent, and require careful drafting, negotiation and management to ensure the successful delivery and operation of the renewable energy project. They also need to comply with the relevant laws and regulations, as well as the industry best practices and standards, that apply to the renewable energy sector.

Environmental and Planning Approvals

The renewable energy sector in Australia is subject to various environmental and planning approvals at the federal, state and territory, and local levels. These approvals are required to ensure that the renewable energy projects are consistent with the environmental objectives and planning policies of the relevant jurisdictions, and that they minimise and mitigate any potential adverse impacts on the environment, the community and the heritage. Some of the common types of environmental and planning approvals for the renewable energy sector are:

  • Environmental impact assessment (EIA): This is a process of identifying, assessing and managing the environmental impacts of a proposed renewable energy project, and obtaining the necessary environmental approvals from the relevant authorities. The EIA process may involve different stages, such as screening, scoping, preparation, review, decision, implementation and monitoring, depending on the nature, scale and location of the project. The EIA process may also require public consultation and participation, as well as the consideration of alternative options and mitigation measures.
  • Planning permission: This is a process of obtaining the necessary planning approvals from the relevant authorities for the use and development of land for a proposed renewable energy project. The planning permission process may involve different steps, such as pre-application consultation, application submission, application assessment, public notification, public submissions, public hearing, decision, appeal and compliance, depending on the planning scheme and the planning regulations that apply to the project. The planning permission process may also require the consideration of various planning criteria and objectives, such as the zoning, the overlay, the development plan, the design and the amenity.
  • Environmental licences and permits: These are specific authorisations that are required for certain activities or aspects of a renewable energy project that may have environmental implications, such as the generation, transmission, distribution, storage, disposal or emission of electricity, water, waste, noise, air, flora, fauna or chemicals. The environmental licences and permits are issued by the relevant authorities, and may include conditions, limitations, obligations and reporting requirements for the project owner or operator.

These environmental and planning approvals are essential for the lawful and responsible development and operation of the renewable energy project. They also involve significant time, cost and risk for the project owner or developer, and require extensive consultation and coordination with the relevant authorities, stakeholders and consultants.

Dispute Resolution

The renewable energy sector in Australia may encounter various disputes between different parties, such as developers, owners, operators, contractors, suppliers, off-takers, financiers, insurers, regulators and consumers. These disputes may arise from various sources, such as contractual breaches, performance failures, payment defaults, regulatory changes, environmental impacts, planning objections, technical faults, force majeure events or market fluctuations. These disputes may have significant financial, operational and reputational consequences for the parties involved, and may require effective and efficient resolution.

The renewable energy sector in Australia may adopt different methods of dispute resolution, such as negotiation, mediation, arbitration, litigation or hybrid processes, depending on the nature, complexity and urgency of the dispute, as well as the preferences and interests of the parties. These methods of dispute resolution may have different advantages and disadvantages, such as the cost, the time, the confidentiality, the flexibility, the enforceability and the finality of the outcome. The parties may also choose to include dispute resolution clauses in their contracts, or to refer to dispute resolution rules or institutions, that govern the procedure and the substance of the dispute resolution process.

Conclusion

The renewable energy sector in Australia is a dynamic and diverse industry that offers significant opportunities and challenges for businesses and investors. The legal landscape of renewable energy is complex and evolving, with various laws, policies, mechanisms, contracts, approvals and disputes that affect the sector. It is important for businesses and investors to understand and navigate the legal landscape of renewable energy, and to seek professional advice and assistance when necessary, to ensure the successful and sustainable development and operation of their renewable energy projects.

Legal considerations for the energy transition

Legal considerations for the energy transition

Commercial Law, Energy Law

The energy sector is changing. Driven by the need to lower greenhouse gas emissions, improve energy security and efficiency, and promote innovation and competitiveness. The transition involves a move from fossil fuel generation to renewable sources, such as solar, wind, hydro, and bioenergy, as well as the use of new technologies, such as smart grids, energy storage, electric vehicles, and digital platforms. The energy transition has important implications for the legal framework that regulates the sector, as it affects the rights and duties of various stakeholders, such as governments, regulators, investors, consumers, and communities. This article explores some of the main legal issues that emerge during the energy transition, and how they can be resolved to ensure a smooth and sustainable transition.

Legal drivers and challenges of the energy transition

The energy transition is influenced by a number of legal factors, such as international agreements, national policies, regulations, contracts, and litigation. Some of the legal drivers and challenges of the energy transition are:

  • The Paris Agreement (Accord de Paris) on climate change, which aims to limit the global temperature rise to well below 2°C above pre-industrial levels, and pursue efforts to limit it to 1.5°C, by requiring countries to submit nationally determined contributions (NDCs) to reduce their emissions and enhance their adaptation efforts. The Paris Agreement also provides a framework for cooperation, transparency, and accountability among parties, as well as mechanisms for financial, technical, and capacity-building support. The Paris Agreement creates a legal obligation for countries to implement their NDCs and to increase their ambition over time, which in turn requires them to adopt and enforce policies and measures to decarbonize their energy sector.
  • National policies and regulations, which set the goals, targets, and instruments for the energy transition, such as renewable energy mandates, carbon pricing, subsidies, feed-in tariffs, auctions, net metering, grid codes, standards, and licensing. National policies and regulations also define the roles and responsibilities of the actors involved in the energy sector, such as the government, the regulator, the utilities, the generators, the distributors, the retailers, and the consumers. National policies and regulations need to be coherent, consistent, and predictable, to provide a clear and stable framework for the energy transition, and to balance the interests and expectations of the different stakeholders.
  • Contracts, which govern the relationships and transactions among the stakeholders in the energy sector, such as power purchase agreements, interconnection agreements, grid access agreements, and service contracts. Contracts need to reflect the changing dynamics and risks of the energy transition, such as the variability and intermittency of renewable energy, the integration of distributed and decentralized generation, the emergence of new business models and services, and the potential for disputes and conflicts. Contracts need to be flexible, fair, and enforceable, to ensure the security and reliability of the energy supply, and to protect the rights and interests of the parties.
  • Litigation, which involves the use of judicial or quasi-judicial processes to resolve disputes or enforce rights and obligations related to the energy transition, such as lawsuits, arbitrations, mediations, and complaints. Litigation can arise from various sources, such as breaches of contracts, violations of regulations, infringements of intellectual property, damages to property or environment, human rights abuses, or public interest claims. Litigation can have positive or negative impacts on the energy transition, depending on the outcome and the precedent it sets. Litigation can also be costly, time-consuming, and uncertain, and can affect the reputation and credibility of the parties involved.

Legal implications and opportunities for the energy transition

The energy transition poses significant legal implications and opportunities for the various stakeholders in the energy sector, as it affects their rights, obligations, risks, and benefits. Some of the legal implications and opportunities for the energy transition are:

  • For governments, the energy transition requires them to design and implement effective and coherent policies and regulations that support the transition, while ensuring the public interest, the rule of law, and the respect for human rights. The energy transition also offers them the opportunity to enhance their international cooperation and leadership, to attract investments and innovation, and to foster social and economic development and inclusion.
  • For regulators, the energy transition requires them to adapt and update their regulatory framework and tools, to address the new challenges and opportunities of the transition, such as the integration of renewable energy, the management of the grid, the protection of the consumers, and the promotion of the competition and innovation. The energy transition also offers them the opportunity to engage and collaborate with the stakeholders, to improve their transparency and accountability, and to increase their efficiency and effectiveness.
  • For investors, the energy transition requires them to assess and manage the risks and returns of their investments, to diversify their portfolio and sources of finance, and to comply with the legal and regulatory requirements and standards. The energy transition also offers them the opportunity to access new and growing markets and technologies, to benefit from the incentives and support mechanisms, and to contribute to the environmental and social goals and values.
  • For consumers, the energy transition requires them to adapt and change their behavior and preferences, to pay for the costs and benefits of the transition, and to exercise their rights and responsibilities as energy users and prosumers. The energy transition also offers them the opportunity to participate and influence the energy sector, to access more affordable, reliable, and clean energy, and to enjoy a better quality of life and well-being.
  • For communities, the energy transition requires them to cope and adjust to the impacts and changes of the transition, such as the deployment of renewable energy projects, the closure of fossil fuel plants, the creation or loss of jobs, and the alteration of the landscape and the culture. The energy transition also offers them the opportunity to benefit and share from the transition, such as the ownership and management of energy resources and assets, the generation of income and revenues, and the enhancement of the social and environmental justice and equity.

Conclusion

The energy transition is a complex and multifaceted process, that involves a wide range of legal considerations and challenges, as well as opportunities and benefits, for the various stakeholders in the energy sector. The legal framework that governs the energy sector needs to evolve and adapt to the changing realities and needs of the transition, while ensuring the security, reliability, and sustainability of the energy supply, and the protection and promotion of the rights and interests of the parties involved. The legal framework also needs to facilitate and enable the cooperation and collaboration among the stakeholders, to foster the innovation and competitiveness of the energy sector, and to support the achievement of the global and national goals and commitments on climate change and development.

Electricity – the Lifeblood of Modern Industry: Key Contract Considerations for Large Energy Consumers

Electricity – the Lifeblood of Modern Industry: Key Contract Considerations for Large Energy Consumers

Energy Law

Electricity – the lifeblood of modern industry. For large commercial and industrial operations, it’s often more than just a cost; it’s a strategic imperative. Securing a reliable and cost-effective supply forms the backbone of smooth operations, impacting everything from production costs to profitability. But navigating the complexities of Australia’s dynamic electricity market, particularly as a large energy consumer, can be daunting. This article acts as your guide, exploring the key considerations you must ponder before signing that dotted line on your electricity supply contract.

Large, But How Large? Defining the Category

The definition of a “large energy customer” in Australia depends on your specific jurisdiction. In New South Wales (NSW) for example, the threshold is 100MWh per annum. If your business uses in excess of this threshold, then you are a large energy customer. There are also circumstances where your consumption is determined by aggregation. If you need to determine if you are a large customer, get in touch.

Price Variability: The Dance with the Market

One of your most crucial decisions revolves around the pricing structure of your electricity supply contract. As a large energy consumer, understanding the nuances of these options is paramount:

Fixed Price Contracts: Think of these as insurance policies – your price per unit of electricity remains locked in, providing certainty for budgeting. However, you might forfeit potential savings if wholesale energy prices drop.

Variable Price Contracts: You’re directly exposed to the whims of the wholesale electricity market, where prices fluctuate based on real-time supply and demand. Potential for savings during low-price periods, but risk of exposure during spikes.

Hybrid Contracts: Striking a balance, these contracts blend elements of fixed and variable pricing. Customization is key, allowing for a degree of both predictability and market participation.

The right choice depends heavily on your company’s appetite for risk versus its need for cost certainty. Analyse your regional wholesale price history and internal risk tolerance before committing.

Termination Fees: The Cost of Changing Your Mind

Electricity contracts often include termination fees, those pesky charges for cutting your contract short. These exist to protect the supplier from lost revenue. Thoroughly understand the triggers for these fees and their associated costs. See if you can negotiate lower fees or exception clauses (like force majeure events or major changes to your operations) to grant you flexibility if circumstances change.

Consumption Envelopes: Staying Within the Lines

Many contracts work with consumption envelopes – a predicted range of your electricity usage over defined periods (think monthly, quarterly, or annually). Stray outside these envelopes, and you could face penalties like higher rates or added fees. Accurate forecasting is crucial here. Push for flexibility in your envelope if you anticipate potential fluctuations in your energy needs.

Limits on On-site Generation and Storage: Roadblocks to Self-Sufficiency

As solar, battery storage and other distributed energy sources gain traction, many large businesses want to reap their benefits. Unfortunately, some electricity contracts might try to hinder you with restrictions on these technologies. Look out for export limits, fees, or potential bans on on-site generation and storage. Fight for terms that support, not obstruct, your efforts to reduce grid reliance and potentially lower your overall energy costs.

Let There Be Light, and Let It Be Affordable

The journey toward a favourable electricity contract is paved with careful analysis and negotiation. By understanding these key considerations and the unique definitions of a “large customer” within your jurisdiction, you’ll be empowered to secure a supply solution that fuels your success, not your financial woes.

Powering Up: Power Purchase Agreements in Australia

Powering Up: Power Purchase Agreements in Australia

Energy Law

Power Purchase Agreements (PPAs) are becoming an increasingly popular means of financing renewable energy projects in Australia. These agreements enable businesses and organizations to secure a reliable and cost-effective source of clean energy, while also supporting the growth of the renewable energy industry. However, despite their benefits, PPAs can be complex and difficult to navigate, particularly for those who are unfamiliar with the legal and regulatory framework surrounding them. In this blog post, we will discuss the key concepts and considerations surrounding PPAs in Australia, and provide an overview of the legal and regulatory framework that governs them.

A Power Purchase Agreement (PPA) is a contract between an energy generator and an off-taker, such as a utility company or a large commercial and industrial consumer, that defines the terms of the sale of electricity generated by a renewable energy project. Under a PPA, the energy generator agrees to supply electricity to the off-taker at a fixed or variable price over a defined period of time, typically between 10 and 20 years. The off-taker, in turn, agrees to purchase the electricity at the agreed upon price, regardless of the prevailing market price.

One of the key benefits of PPAs is that they provide a predictable source of revenue for renewable energy developers. This, in turn, enables them to secure financing for their projects, as lenders and investors can rely on a steady stream of revenue to repay loans and earn a return on their investment. Additionally, PPAs can provide a hedge against rising energy prices, allowing businesses and organizations to lock in a fixed price for their electricity over the term of the agreement.

Another benefit of PPAs is that they can help to promote the growth of the renewable energy industry. By providing a reliable source of revenue, PPAs can attract investment and encourage the development of new renewable energy projects. Additionally, PPAs can help to increase the adoption of renewable energy by providing businesses and organizations with a means to access clean energy, regardless of the availability of renewable energy projects in their immediate area.

However, despite their benefits, PPAs can be complex and difficult to navigate. The legal and regulatory framework surrounding PPAs is complex, and the terms and conditions of PPAs can vary significantly depending on the specific project and the parties involved. Additionally, PPAs can be impacted by changes in government policies and regulations, which can add to the uncertainty surrounding them.

Law Quarter has drafted a significant number of PPAs in Australia. Our clients include some of the most innovative businesses globally. Watch a short testimonial below:

In Australia for those states that have adopted the National Energy Customer Framework, the legal and regulatory framework surrounding PPAs is governed by (inter alia) the National Electricity Law and the National Electricity Rules. These laws and rules set out the framework for the sale and purchase of electricity, and provide a framework for the negotiation and execution of PPAs.

One of the key considerations for businesses and organizations entering into PPAs is to thoroughly review the terms and conditions of the agreement. This includes understanding the pricing structure, the length of the agreement, and any termination provisions. Additionally, it is important to understand the roles and responsibilities of the parties involved and to ensure that the PPA is structured in a way that aligns with the business or organization’s goals and objectives.

Another important consideration is to understand the legal and regulatory environment, in order to ensure compliance with all applicable laws and regulations. This includes ensuring that the PPA is structured in a way that meets the requirements of the National Electricity Law and the National Electricity Rules.

Finally, It’s important to consider the potential impact of government policies and regulations on the PPA. This may include changes to the Renewable Energy Target (RET) or other government incentives for renewable energy, as well as future policy developments that could affect the economic viability of the project. It is important to understand how these factors may impact the PPA over its term, and to structure the agreement in a way that is flexible and resilient to changes in the regulatory environment.

In conclusion, Power Purchase Agreements (PPAs) can be a valuable tool for businesses and organizations looking to secure a reliable and cost-effective source of clean energy. They can also help to promote the growth of the renewable energy industry. However, despite their benefits, PPAs can be complex and difficult to navigate, particularly for those who are unfamiliar with the legal and regulatory framework surrounding them. It is important to work with experienced legal professionals who can guide you through the process and help you understand the key concepts and considerations surrounding PPAs in Australia. By understanding the legal, regulatory and policy environment and reviewing the terms and conditions of the agreement, businesses and organizations can enter into PPAs with confidence, knowing that they have a structured and sound agreement that aligns with their goals and objectives.

Contact us today to discuss further.

Managing the Risks of Modern Slavery in the Resources and Energy Sectors

Managing the Risks of Modern Slavery in the Resources and Energy Sectors

Energy Law

On 7 December 2021, the Australian Human Rights Commission (AHRC) released a new guide to assist stakeholders in the energy and resource sectors with their compliance obligations arising under the Modern Slavery Act 2018 (Cth.)

The Guide is the fourth in a series that are industry-specific. The AHRC has previously released three such guides for the construction and property industry, financial services industry, and the health services industry.

The Guide is a 49-page document and is a useful tool for energy/ resource compliance managers to assist them with their compliance obligations in relation to modern slavery. This article will provide a summary of the Guide. The full document can be found at:

https://humanrights.gov.au/sites/default/files/document/publication/ahrc_kpmg_modern_slavery_energy_2021.pdf

This article will summarise the following:

  • What is Modern Slavery:
  • What does the Modern Slavery Act 2018 (the Act) Require?
  • What are the Seven Mandatory Reporting Criteria?
  • What Risks are Identified in the Resources and Energy Sector?
  • What Risks are Identified (specifically) in the Resources Sector?
  • What Risks are Identified (specifically) in the Energy Sector?

What is Modern Slavery?

Modern slavery is a term is used to describe situations where coercion, threats or deception are used to exploit people and deprive people of their freedom. These violations are crimes in Australia.

Modern slavery includes trafficking in persons, slavery, servitude, forced marriage, forced labour, debt bondage, the worst forms of child labour and deceptive recruiting for labour or services. The Guide acknowledges that the economic and labour market shocks accompanying the COVID-19 pandemic have exacerbated the risks of modern slavery globally, especially for women, children and migrant workers

The Guide noted the changing ground in relation to the mining of fossil fuels and energy supply:

Relationships between the traditionally distinct sectors of mining, oil and gas, and power generators and retailers, are rapidly shifting with the global shift towards decarbonisation and sustainability. This has added complexity to the supply chains of companies in these sectors, creating new modern slavery risks that must be considered and addressed under the Modern Slavery Act 2018 (Cth.)

What does the Modern Slavery Act 2018 (the Act) Require?

The Act requires entities with a consolidated revenue of $100m or more to submit a modern slavery statement. The statement must disclose what the entity is doing to identify and manage modern slavery risks in both their operations and supply chains. The statement must be approved by the entities board and signed off by a director or a responsible member of the entity. The statement is then published on a central online Australian Government register.

NB: It is important to note that there are also state laws in this space. For example, NSW has the Modern Slavery Act 2018 (NSW) relating to entities with consolidated revenue of $50m or more. The penalties in the NSW Act include fines of up to $1.1m.

What are the Seven Mandatory Reporting Criteria?

There are seven mandatory criteria that your entity must respond to under the Modern Slavery Act 2018 (Cth.) requiring descriptions of:

1. The reporting entity.

2.  Your structure, operations and supply chains.

3. The risks of modern slavery practices in your operations and supply chains and any entities owned or controlled by a parent entity.

4. Actions taken to assess and address those risks, including modern slavery due diligence and remediation processes.

5. How your entity assesses the effectiveness of the actions taken.

6. The process of consultation with entities owned and/or controlled by you.

7. Any other information that you consider relevant.

What Risks are Identified in the Resources and Energy Sector?

The AHRC research shows that there are four key factors that elevate the risk of modern slavery: vulnerable populations, high-risk business models, high-risk procurement categories, and high-risk geographies. Where multiple high-risk factors co-exist, there is a greater likelihood that actual harm is being experienced, and additional controls are required to ensure that risk does not become harm.

The Guide highlighted the common modern slavery practices connected to the resources and energy sectors as human trafficking, bonded labour, forced or unpaid work and the worst forms of child labour. The reasons given for the resource and energy sectors being high risk included:

  • High-risk geographies in operations and supply chains such as the presence of militias, criminal organisations and corrupt governments in countries that are conflict affected or prone to instability;
  • Alleged forced labour in developing countries is a supply chain risk for several renewable energy technologies;
  • Demand for base-skill workers in construction of infrastructure; frequent outsourcing of labour to third party contractors; and
  • Low visibility over multi-tiered supply chains.

The key trends giving rise to these risks were identified as:

  • Profound shift towards decarbonisation means rapidly changing procurement strategies and increasingly complex supply chains;
  • Increase in scrutiny and reporting requirements from markets, exchanges, lenders and investors on environmental, social and governance (ESG) issues;
  • Increase in scrutiny and minimum supplier standards from downstream customers regarding ESG issues; and
  • Increase in scrutiny from civil society on ESG issues, including shareholder action.

What Risks are Identified (specifically) in the Resources Sector?

In determining the resources sector as ‘high risk’, the AHRC cited the following reasons:

  • demand for migrant and base-skill workers;
  • the short-term and temporary nature of some work, such as construction;
  • high-risk business models, including labour hire and sourcing;
  • frequently operating in high-risk geographies; and
  • chartering and contracting sea transport, which is a known high-risk sector.

(As discussed above) in identifying the complex context-specific issues relating to certain countries, the AHRC cited the presence of militias, criminal organisations and corrupt governments in countries that are conflict-affected or prone to instability. The AHRC noted that these contextual factors, coupled with certain supply chain and operational complexities, increase modern slavery risk and require resource companies to proactively identify and manage that risk.

The Guide gave an example provided by Andrew ‘Twiggy’ Forrest who when investigating his corporations supply chain found an instance where workers were being forced to work after having their passports confiscated. He stated:

…it is now widely accepted that inaction, and hiding our head in the sand, are no longer options.

Resource companies are also exposed to risks associated with their corporate operations. These include risks relating to building management and other functional services, such as catering and cleaning, which have elevated risks of forced labour and trafficking practices.

What Risks are Identified (specifically) in the Energy Sector?

The AHRC clearly cite the procurement of goods in the construction of power infrastructure as the greatest source of risk for energy entities. This is largely due to the massive expansion of renewables in recent times. Traditional supply chains in the energy sector are as changed as the source of energy itself.  The procurement risks relate to:

  • Personal Protective Equipment (PPE) and uniforms;
  • Solar panels;
  • Electrical parts and electronic equipment, including metering equipment;
  • Mechanical parts; and
  • Processed metals.

The reasons that the AHRC give for risks in the procurement of goods in the energy sector include:

  • The high demand for migrant and base-skill workers in construction of infrastructure;
  • The supply chains that include high -risk geographies in the context of both manufacturing and resource extraction;
  • The short-term and temporary nature of some work, such as construction; and
  • The use of labour hire and outsourcing of construction and maintenance to third-party contractors.

Energy retailers are also increasingly purchasing renewable energy directly from third-party generators, such as wind and solar farms, to on-sell to customers. Adoption of PPAs has increased as companies offset their carbon emissions and even look to achieve neutrality. This exposes those energy companies purchasing renewable power to modern slavery risks in the manufacturing of renewable plant-sourced by generators from whom they purchase power.

Like resource companies, energy companies are also exposed to risks associated with their corporate operations. These include risks relating to building management and other functional services, such as catering and cleaning, which have elevated risks of forced labor and trafficking practices.

Summary:

The Guide gives a series of case studies and provides resource and energy sector entities with practical guidance in identifying risk, reporting of risk, and processes that assist with minimising risk. It is a clear indication of how serious the Commonwealth (and the States and Territories) consider the issue of modern slavery in relation to domestic industry.

As general investors are becoming more aware and increasingly concerned with unethical practices in supply chains generally, ensuring your entity’s compliance in this space is not just a matter of legal obligation it is a matter of financial survival. The carrot is being able to inform shareholders of the progress of this critical compliance obligation and the strident steps being taken to ensure that no one is harmed in the business itself and the associated supply chains. The stick is the turning away of ethical investors, the serious legal ramifications for failing in compliance and the reputational (and ultimately financial) damage for compliance failure in this space.

As the AHRC states in the Guide:“When companies fail to take their human rights responsibilities seriously, they expose people to harm and themselves to business risk”.

Energy Law Case Note: Miller v Lifestyle SA Pty Ltd [2021] SACAT 35 (7 April 2021)

Energy Law Case Note: Miller v Lifestyle SA Pty Ltd [2021] SACAT 35 (7 April 2021)

Energy Law

This case note concerns a decision of the South Australian Civil and Administrative Tribunal (the Tribunal).

The applicant in the matter, Mr Miller, entered into a residency agreement in March 2010 whereunder he resided in a retirement village in South Australia. Electricity supply within the village was initially managed by Lifestyle Utilities (LU), a related entity of the respondent.

The Tribunal decision notes that LU decided that it did not have the capacity to operate the embedded network at the village, as it was under the impression that it needed to demonstrate to the AER ‘experience as an electricity retailer, establishing business plans, putting into place customer service protocols, arranging for financial audits to be performed of the business and quarterly reports to be provided to the regulator.’ LU appears to have formed the view that it required a retail authorisation and that it was unable to operate under an exemption as energy selling was its main business activity.

LU thereafter appointed a private embedded network operator (ENO) at the Village pursuant to a contract commencing on 1 July 2015. The term of the contract was 5 years with an automatic renewal period of 5 years provided that there were no more than 5 complaints to the AER or state ombudsman scheme within the initial period. As there were no more than 5 such complaints, the renewal occurred and the contract will continue until July 2025. Pursuant to the contract with the ENO, LU agreed to either assign any existing agreements between LU and residents or to have new agreements signed between the ENO and residents.

The solar and usage tariffs

At the time of installing a solar PV system, Mr. Miller was paid for excess generation at between 34-36c per kwh. The ENO continued to pay that amount to Mr. Miller. The contract between Mr Miller and LU further provided for a 10 percent discount on energy tariffs (from the [sic] ‘SA Regulator approved energy tariffs’). The terms of supply from the ENO did not provide for the same discount and rather provided for:

  • a 10% pay on time discount for residents without solar power;
  • a 4% pay on time discount for residents who are ‘new solar users;’ or
  • no discount for ‘residents on the old solar tariff.’

Mr. Miller’s complaint was lodged against the village operator and was essentially that he was being financially disadvantaged and further had no ‘freedom of choice of provider’ having been informed that no other provider will take on the role of retailer unless they were also the operator of the embedded network.

The decision noted that in substance part of Mr Miller’s dispute arose by virtue of the contract between him and the ENO and that: ‘Under the RVA, the Tribunal only has power to deal with disputes between an Administering Authority and a resident. The Tribunal does not have the power to deal with disputes arising from contracts between a resident and any other entity – even if that entity is a related entity to the Administering Authority – and even if the dispute is about the provision of a service within the retirement village.’

The contract between the ENO and resident

The Tribunal then went on to review the ‘effectiveness of the contractual arrangement’ with the ENO finding that there was an effective contract between the ENO and LU. The Tribunal then went on to examine whether there was a contract between the ENO and Mr. Miller finding that:

  • The ENO wrote to Mr Miller on 10 August 2015 setting out the terms and conditions that would apply to his electricity supply and noting that if Mr Miller did not challenge those terms, then the ENO was entitled to assume that he consented to those terms.
  • In the terms and conditions within the letter, cl 3 allowed either party to terminate the arrangement on 20 days’ written notice.

The Tribunal found that ‘If Mr Miller did not want to continue with that arrangement, then he could have terminated it by providing 20 days’ notice.’  ENOs should not accept this finding as reflective of the current state of the law and should consult with a lawyer when determining how to contract with embedded network occupants.

The findings

The Tribunal then went on to consider whether the appointment of the ENO was:

  • in breach of the operator’s obligations under their residence agreement with Mr Miller;
  • in breach of the relevant provisions under the Retirement Villages Act 2016; or
  • harsh or unconscionable conduct within the meaning of the Retirement Villages Act 2016.

The Tribunal found that the respondent did not adequately consult on the proposed appointment of the ENO and was in breach of the regulations under the RVA 1987 (which is not technically a breach of the Act), and also in breach of an obligation under Mr Miller’s residence agreement because they have failed to comply with a term of the Code of Conduct. The Tribunal did not find that the appointment process was harsh or unconscionable conduct within the meaning of the Retirement Villages Act 2016.

The ultimate order of the Tribunal was as follows ‘The respondent (Lifestyle) will undertake appropriate consultation with residents prior to making any decision as to the appointment of an operator of the embedded power network in the Village, and such consultation will occur prior to the expiry of the current contract for that service.

Lessons for ENOs

Embedded Network Operators can take two lessons away from this decision. These are that:

  1. ENOs should have individual agreements with residents and comply with any obligations relating to contracting within the applicable exemption category or otherwise under applicable laws; and
  2. ENOs must consider not only requirements under energy laws when taking over a goldfield site but also those applicable to the particular type of customer, site, or development.
Pause on Construction until 30 July 2021: Implications for Energy Businesses

Pause on Construction until 30 July 2021: Implications for Energy Businesses

Energy Law

Yesterday, the NSW Government announced that all construction in Greater Sydney would be paused until 30 July 2021. The new measures were gazetted on 17 July 2021 in the 8th Public Health Order, the Public Health (COVID-19 Temporary Movement and Gathering Restrictions) Amendment (No 8) Order 2021, which has the effect of amending the prior Orders. The construction related measure is in response to delta variant cases that have emerged from construction sites.

Where does this leave those in the construction industry and those businesses who carry out ‘works’ such as the installation of solar panels?

This means that work will halt on a number of construction sites. Construction site means a place at which work, including related excavation, is being carried out to erect, demolish, extend or alter a building or structure but not work carried out in relation to a dwelling in which a person is residing.

The prohibition is set out in clause 24AB:

There are exceptions to the prohibition including where work is required to ensure the safety or security of a construction site and to maintain critical plant. This may encompass work carried out by solar installers required to ensure that panels are secure on site but would not cover the installation of new systems or new components.

The exception of ‘mainlining public utilities’ clearly covers work by entities such as Essential Energy. While the supply of electricity within embedded networks involves a private party carrying out some of the functions of a public utility supplier, works carried out by that entity are unlikely to be exempt unless they are required to ensure the continuity of supply or the safe operation of the embedded network.

What about residential premises?

Looking at the definition of construction site alone (which does not include …work carried out in relation to a dwelling in which a person is residing) may lead you to think that residential energy related works are not prohibited. That is not the case.

When it comes to visiting ‘places of residence’ i.e. going to a residential premises, clause 22A applies.

What this means is that unless work is urgently required, as set out in sub-clause (4B) your business is not able to visit residential sites.

Contractual implications

Many energy businesses are under contractual obligations to deliver and complete work over the next two weeks. Energy businesses need to consider what the contractual implications of the new measures will be. To do this, they should consult with their in-house legal team or external lawyers and should do so as soon as possible.

The Electricity Retail Code

The Electricity Retail Code

Energy Law

The Competition and Consumer (Industry Code—Electricity Retail) Regulations 2019 (the Code) applies to all electricity retailers that supply to small customers in the applicable distribution regions of New South Wales, South Australia and south-east Queensland.

The Code sets a cap on standing offer prices and specifies how prices and discounts must be advertised, published or offered.

I. Introduction

The Code is an instrument made under the Competition and Consumer Act 2010. The Code:

Places a cap on standing offer prices: standing offer prices must be set such that, were a small customer to be supplied in a financial year at those prices with the amount of electricity determined by the AER for the financial year under Part 3 (the model annual usage), the total amount the customer would have to pay for the supply would not exceed the price determined by the AER under that Part (the reference price) (see section 10); and

Regulates the advertising of offers by requiring prices to be compared to the reference price: small customers must be told how prices for supplying electricity compare with the reference price (see section 12); and

Regulates the advertising of discounts:  an advertisement for supplying electricity to small customers must not have a discount as its most conspicuous price‑related matter, and must state any conditions on discounts clearly (see section 14).

II. Operation alongside NECF

The Code, unlike the NERL and NERR, is a Commonwealth instrument. It is enforced by the ACCC rather than the AER and defines terms differently. In NECF jurisdictions, retail pricing is also regulated by the AER’s Retail Pricing Information Guidelines.

For example, a small customer is defined in the Code to be a customer with or without controlled load who uses electricity principally for personal, household or domestic use. A small customer is also defined to include a small business who uses less than 100 MWh per annum who is not charged a controlled load tariff or a flexible tariff.

The Code does not apply to embedded network customers, those with pre-paid meters or those whose supply includes a demand tariff. Further, solar Feed-in Tariffs are to be ignored for the purposes of calculations under the Code.

III. Subdivision A: Caps on Standing Offers

Where there is a reference price and model annual usage in force, a retailer must ensure that its standing offer is at or below that reference price.

The Code says that: ‘The standing offer prices comply with the price cap if the total amount a representative customer, who was a small customer of that type, would be charged for the supply of electricity in the region in the year at the standing offer prices would not exceed the reference price.’

IV. Subdivision B: Advertising 

There are two ‘options’ for advertising, publications and offers that are subject to the Code.

Option 1: Advertising, publications and offers that are subject to the Code must:

a. Include the difference between the reference price and the unconditional price as a percentage of the reference price;

b. For each proportional conditional discount mentioned in the advertisement, publication or offer, include the difference between the unconditional price and the conditional price for the discount as a percentage of the reference price; and

c. Include the lowest possible price.

Option 2: The alternative to Option 1 is for a retailer to ‘state the total amount the electricity retailer estimates the small customer would be charged for the supply of electricity in the region in the year, assuming that the conditions on all conditional discounts (if any) mentioned in the offer were met.’

V. Advertising Conditional Discounts

Additional requirements apply to the advertising of conditional discounts. These are that:

a. The conditional discount must not be the price‑related matter that is mentioned most conspicuously in the advertisement; and

b. The advertisement must state the conditions on the conditional discount clearly and conspicuously.

VI. Key Terms

To understand these obligations, it is necessary to review the definitions of key terms used in the Code:

conditional price for a proportional conditional discount means the total amount a representative customer would be charged for the supply of electricity in the financial year at the offered prices, assuming that the conditions on the discount were met and disregarding any other conditional discounts.

lowest possible price means the total amount a representative customer would be charged for the supply of electricity in the financial year at the offered prices, assuming that the conditions on all conditional discounts (if any) mentioned in the advertisement, publication or offer were met.

proportional conditional discount means a conditional discount that is calculated as a proportion of all or part of the amount a small customer is charged for the supply of electricity at the offered prices.

unconditional price means the total amount a representative customer would be charged for the supply of electricity in the financial year at the offered prices, disregarding any conditional discounts.

AEMC issue paper on the uptake of electric vehicles in Australia

AEMC issue paper on the uptake of electric vehicles in Australia

Energy Law

The Australian Energy Market Commission (AEMC) has published a new issues paper examining the impact of the uptake in electric vehicles in Australia on the energy market.

The issues paper examines a variety of aspects of the uptake including the potential for new electric vehicle products and services, charging stations and their impact on the grid, and the benefits provided by electric vehicles in promoting more efficient use of existing infrastructure.

The AEMC has recognised that: “if we get ahead of the curve, we can make sure this technology makes a positive contribution to our future power system and doesn’t become another cost driver.”

The Numbers

Between 2018 and 2019 the sales of electric vehicles increased by more than 200%. In 2009, 6700 electric vehicles were sold in Australia. There are currently over 1930 public vehicle charging stations in Australia. The primary driver of the uptake of electric vehicles has been cost.

Australia currently has 22 battery and plug-in hybrid electric vehicle models available and it is expected that that number will increase by at least nine during 2020. The AEMC notes that while the global uptake of electric vehicles is expected to continue to increase substantially over the coming decade, the actual rate of increase is uncertain.

Electric vehicle charging stations

The number of public charging stations in Australia increased by 143% between June 2018 in July 2019. There are three categories of recognised electric charging stations:

  • Level one being charging via an existing standard power point;
  • Level two being a dedicated electric vehicle charger: typically found in homes, shopping centres, hotels and workplaces; and
  • Level three being fast charging units: typically found in commercial premises or en-route highway locations.

Interestingly, the AEMC considers the application of s 88 of the National Energy Retail Law in the context of the sale of energy from an electric vehicle charging station. Section 88 provides that any person who sells energy to a person for premises in the NEM is required to have a retail authorisation or hold an exemption.

The AEMC notes that the Australian Energy Regulator considers that the sale of energy to a person for premises captures electric vehicle charges at home or at a small business but does not apply to commercial electric vehicle charging stations.

The Role of the Retailer

In its paper, the AEMC examines the role of an energy retailer with respect to the electric vehicle market. The AEMC notes that electric vehicle charging habits will be primarily shaped by convenience.

The electrification of Australia’s passenger vehicle fleet is expected to materially increase electricity consumption in Australia and will change markets underlying residential demand profile. The AEMC notes that this presents an opportunity for retailers to develop innovative products for electric vehicle consumers who are likely to have greater consumption than non-electric vehicle consumers.

One limitation of the existing market framework is that a consumer is only able to have a single financially responsible market participant (FRMP) at each connection point. This limitation is familiar to those market participants who are registered as small generation aggregators (SGAs). Should the limitation be removed, it may be possible, for example, for a single customer to engage with separate service providers with different responsibilities i.e. for air-conditioning load, hot water, pool pumps and electric vehicle charging.

The question of multiple FRMPs was examined in the 2015 review of a proposed AEMO rule change conducted by the Commission where it was found that it would be uneconomical to enable multiple FRMPs at the one connection point. The commission has recognised that this question warrants further examination given evolutions in the market.

Submissions on the issues paper are invited until 19 March 2020 using the AEMC’s website under the project reference code RPR0012.

Misleading and Deceptive Conduct by energy retailers

Misleading and Deceptive Conduct by energy retailers

Commercial Law, Energy Law

There have been a number of cases of energy retailers’ non-compliance with s 18 of Australian Consumer Law. These cases are useful for retailers looking to assess the adequacy of the controls that they have in place to reduce the risk of a contravention of s 18.

Australian Competition and Consumer Commission v EnergyAustralia [2015] FCA 274 is a case that was heard in the Federal Court of Australia with a decision handed down on 27 March 2015. This case concerned conduct by a company called Bright Choice Australia Pty Ltd who were engaged as a tele-sales agent of EnergyAustralia.

From 4 April 2012 until 23 April 2013, EnergyAustralia engaged Bright Choice under a Services Agreement to sell, by way of telemarketing, plans for electricity and gas in defined sales territories. The relevant sales territories included consumer premises located in New South Wales, Queensland, Victoria, South Australia and the ACT. Pursuant to the Services Agreement, EnergyAustralia agreed to pay Bright Choice on each occasion that a consumer contracted to enter into a new plan to purchase electricity or gas from EnergyAustralia as a result of Bright Choice’s marketing. Representatives from Bright Choice where remunerated on the basis of a wage plus commission.

Obligations to comply

Within the Services Agreements were a number of obligations on Bright Choice relating to compliance. These included an obligation to exercise the standard of care, skill and judgement that would be expected of a professional contract experience in the performance of services of a similar nature, to comply with all applicable laws and standards necessary to perform the services, and to ensure that its team members conducted outbound telemarketing calls in accordance with scripting approved by EnergyAustralia. Further, Bright Choice was required to establish, implement and maintain a quality assurance and control program that was subject to EnergyAustralia’s approval.

Bright Choice was required to implement a training program that utilised training materials developed by EnergyAustralia. The relevant training materials developed by EnergyAustralia outlined the requirements for compliance with the applicable laws and standards.

The Services Agreement made reference to the requirements to obtain explicit informed consent. Bright Choice was required to make call recordings of all outbound telemarketing calls and all telephone discussions with customers in which explicit informed consent was obtained and to retain such call recordings for a minimum of two years after the applicable call was made or for a longer period as may be required by any applicable law.

In addition, Bright Choice was required to listen and evaluate a sample of call recordings made for the purposes of recording explicit informed consent with an express obligation to listen to at least 2% of the total number of call recordings that were created every calendar month.

Following the appointment of Bright choice, EnergyAustralia conducted ‘train the trainer’ sessions for Bright Choice senior sales managers in March 2012 and provided training material in March 2012 and updated material in July 2012. The relevant training material covered legal and regulatory compliance topics relating to explicit informed consent and the law of misleading and deceptive conduct. The training material also included instructions in relation to sales techniques to be used, and to be avoided by sales representatives, including ensuring that customers had a full understanding of what they were agreeing to.

EnergyAustralia provided Bright Choice with questionnaires that were designed to test the adequacy of Bright Choice’s training program and which were required to be successfully completed by personnel before they conducted any telemarketing.

The bonus commissions

On 28 March 2013, the Services Agreement was amended whereby EnergyAustralia agreed to pay an additional bonus fee to Bright Choice upon Bright Choice achieving 9,000 new sales per month for five months from 1 April 2013. The base fee for electricity sales, of $120, increased by $35.

Between August 2012 and May 2013, Bright Choice representatives contacted consumers in a number of states and did not obtain the consent of consumers to enter into an EnergyAustralia electricity or gas plan but did submit sale reports to EnergyAustralia for each consumer.

The actual misrepresentation centred on Bright Choice advising consumers that they would be sent an information pack or welcome pack and that they would be able to consider the information to decide whether or not to receive a supply of electricity and/or gas from EnergyAustralia. Consumers were told that if they wanted to accept the offer, they would need to contact EnergyAustralia and unless they did make contact, they would not be treated as having entered into a plan for the supply of electricity and/or gas.

These telephone representations were false, misleading and deceptive because following each telephone conversation, Bright Choice acted and EnergyAustralia dealt with each consumer as if they had agreed to enter into a plan with EnergyAustralia for the supply of electricity and/or gas, when in fact they had not.

Further specific instances of conduct were discussed in the case. For example, on around 18 February 2013, a representative of Bright Choice contacted a certain consumer by telephone and said words to the effect that they were calling because EnergyAustralia had a new offer of a discount of 13% off bills and that this offer was not offered by AGL. The consumer responded that the last time she had been signed up to EnergyAustralia and did not want to be with EnergyAustralia.

The investigation

On 7 December 2012, EnergyAustralia commenced an investigation into Bright Choice’s telemarketing practices. On 28 March 2013, EnergyAustralia received details of concerns with Bright Choice’s telemarketing practices including a failure to obtain explicit informed consent. In April and May 2013, EnergyAustralia identified an increased number of customer complaints and cancellations from telesales made by the Representative. EnergyAustralia commenced an investigation into Bright Choice’s conduct and the investigation included a review of sample call recordings. EnergyAustralia identified that representatives were not obtaining explicit informed consent from customers nor were they following the scripts provided to them.

On 23 September 2013, EnergyAustralia terminated the services agreement with effect from 23 October 2013. EnergyAustralia required that Bright Choice cease all marketing sales calls from 23 September 2013.

In accordance with section 274 of the National Energy Retail Law, EnergyAustralia reported the non-compliance to the Australian Energy Regulator. In or around November 2013, EnergyAustralia voluntarily implemented a consumer remedial program at its own cost of $958,085.00 under which EnergyAustralia sought to contact remaining customers of EnergyAustralia originating from Bright Choice.

EnergyAustralia also implemented a process to safeguard against new customers being transferred without explicit informed consent. This process involved EnergyAustralia sending an SMS or email to every new customer that is entered into a contract with EnergyAustralia following an unsolicited outbound telemarketing sales call. This correspondence included a mobile number or email address to confirm the customer had in fact requested the transfer to, and entered into a market retail contract with, EnergyAustralia.

The court noted that following the termination of the Services Agreement and reporting of the conduct subject to the proceedings, EnergyAustralia made significant improvements to its compliance program to align it with the principles of the Australian standard for compliance programs AS3806.

The improvements made by EnergyAustralia included:

  • undertaking a quarterly certification and risk assessment of explicit informed consent compliance across the business, including by, each quarter, reassessing the effectiveness of business practices and processes against the explicit informed consent obligations.
  • Providing regular, at least annually, practical training for directors, officers, employees, representatives and agents of EnergyAustralia whose duties could result in them being concerned with conduct that may contravene EnergyAustralia’s obligations to obtain explicit informed consent;
  • appointing a compliance officer with responsibility for ensuring compliance and for overseeing its compliance program;
  • establishing a monthly scorecard process to assess the performance of third-party vendors in relation to complaints, cancellations and compliance with EnergyAustralia’s ACL and NERL obligations; and
  • ensuring that all third-party telesales calls are recorded in their entirety with random telesales call recordings provided to EnergyAustralia for quality assurance review.

When considering sections 18 and 29(1) of Australian Consumer Law, his honour noted the well-defined applicable legal principles that conduct is likely to mislead or deceive if there is a real or remote chance that it will do so and that the conduct must be capable of leading a person into error and the error or misconception must result from the conduct.

EnergyAustralia and Bright Choice admitted that the representations that were made were made in trade or commerce and in connection with the supply or possible supply of electricity and/or gas. They further admitted that the conduct was misleading and deceptive or was likely to mislead and deceive in contravention of section 18 and that they were false and misleading representations concerning the existence, exclusion or effect of a condition or right in contravention of section 29(1)(m).

Section 38 of the National Energy Retail Law provides that a retailer must obtain the explicit informed consent of a small customer for certain transactions including the transfer of the customer to the retailer from another retailer and the entry by the customer into a market retail contract with the retailer. Section 39 of the National Energy Retail Law provides that explicit informed consent is given where the retailer, or a person acting on the retailer’s behalf, has clearly, fully and adequately disclosed all matters relevant to the consent of the customer, including the purpose or use of the consent, and the customer gives consent. Consent by the customer must be given in writing signed by the customer, verbally (provided that it is evidenced in such a way that can be verified), or by electronic communication generated by the customer.  

The penalty

In considering the appropriate penalties to be applied, the court considered the case of Ministry for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72. The relevant principles included that it is the responsibility of the court to determine the appropriate penalty to be imposed in respect of a contravention. Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts acknowledge that a particular figure cannot necessarily be said to be more appropriate than another.

After considering all of the applicable principles, the court ordered that EnergyAustralia pay a penalty of $1,000,000.

Where did EnergyAustralia fall short?

In examining where EnergyAustralia fell short, the court accepted the submissions of the Australian Competition and Consumer Commission and the Australian Energy Regulator that the presence of a significant financial incentive at least increased the risk of sales calls to consumers occurring without proper processes being observed.

The court noted that there was a flaw in EnergyAustralia’s internal processes in that even though the Services Agreement provided for an audit mechanism, EnergyAustralia did not, or did not adequately, exercise its audit powers. The court concluded that “given the size of the commissions being paid by EnergyAustralia and the number of telesales made by its agent, Bright Choice, EnergyAustralia’s internal procedures were deficient.”