Guidelines will assist industry to comply with new laws

11 May 2020

New guidelines, published by the ACCC, will assist electricity retailers and generators to comply with laws aimed at protecting consumers and businesses from excessive electricity prices.

The laws prohibit electricity retailers from keeping consumer and small business prices unnecessarily high when costs fall, and prohibit generators from inflating wholesale prices or blocking access to critical contracts, which could increase retail prices. The laws will form part of the Competition and Consumer Act and come into effect on 10 June 2020.

The guidelines provide examples and information to help industry comply with the laws and were prepared after consultation with stakeholders.

“These new laws commence at a time when the affordability of energy is particularly pressing for so many Australian businesses and households, as communities are impacted by the COVID-19 pandemic. Our guidelines help electricity companies to comply with these laws aimed at achieving fairer prices for consumers,” ACCC Chair Rod Sims said.

“Wholesale prices have reduced significantly over the past couple of months, so retailers should be assessing their prices and ensuring that they are prepared when the new laws come into effect in June.”

The ACCC’s role is to enforce compliance with these laws. Competition and consumer issues in electricity are key compliance and enforcement priorities for the ACCC.

The ACCC will continue to closely monitor the behaviour of companies in the electricity markets and has a range of enforcement tools available, including public warning notices, infringement notices and commencing legal proceedings in the Federal Court alleging that companies have breached these laws.

“These new laws will enable us to take electricity companies to court if we have evidence that they are engaging in prohibited conduct in breach of these new provisions,” Mr Sims said.

The new laws prohibit the following conduct:

  • The ‘retail pricing prohibition’ prohibits electricity retailers from charging small customers prices which are not adjusted to reflect sustained and substantial cost reductions in their underlying costs.
  • The ‘electricity financial contract liquidity prohibition’ prohibits generators from restricting access to electricity hedging contracts for an anti-competitive purpose.
  • The ‘electricity spot market prohibitions’ prohibit bidding practices by generators which are engaged in fraudulently, dishonestly or in bad faith and/or for the purpose of distorting or manipulating prices in an electricity spot market.

The new guidelines are available at Guidelines on Part XICA - Prohibited conduct in the energy market.

Background

In July 2018, the ACCC released the final report for its inquiry into the supply of retail electricity and the competitiveness of retail electricity prices.

On 20 August 2018, the Treasurer directed the ACCC to hold a public inquiry into the prices, profits and margins in the supply of electricity in the National Electricity Market. The ACCC monitors and reports on these issues at least every six months.

On 25 November 2019, Parliament passed the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019, which introduces new prohibitions into the Competition and Consumer Act as a new Part XICA. These provisions come into effect on 10 June 2020.

The ACCC ran an initial round of consultation on the guidelines over December 2019 and January 2020. On 10 March 2020, the ACCC released draft guidelines for consultation. Submissions on the draft guidelines (and from the initial round of consultation) can be viewed at the ACCC Consultation Hub.

Release number: 
95/20
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