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Submissions

Energex Ring-Fencing Waiver: Submission in response to applications lodged 18 and 19 May 2016

Energy Consumers Australia (ECA) thanks the Australian Energy Regulator (AER) for the opportunity to provide comment on an application (in two parts) from Energex for a waiver of ring-fencing requirements. The application dated 18 May, 2016, is primarily for an educational facility (the Education application) and the application dated 19 May, 2016, is argued to be an experiment to understand the operation of large commercial storage systems (the Trial application).

Energex is applying for the waiver because under Queensland law they are prohibited from carrying out a “related business”, which is defined as “the business of producing, purchasing and selling electricity.”┬áIn making a waiver application the firm is seeking the exercise of regulatory discretion in its favour.

In any case where a party seeks exemption from regulation, the waiving of an obligation or regulatory forbearance, the onus of proof rests with the party making the application to demonstrate the benefit of the regulator using its discretion. The hurdle is not merely to demonstrate a benefit, but that the benefit cannot be achieved in any way other than through the application of that discretion.

It is notable that recent applications for waiver have not provided this evidence. In addition, the approach taken has been to presume that the regulator will exercise its discretion.

AER decisions on these applications have allowed this failure of the applicants to make their case to become the norm in a dynamic market where more such applications can be expected in future. For example, in approving the Ergon application of 28 October, 2015, the AER did not require Ergon to demonstrate that it had tested the market to determine whether the solution could be obtained as a service, rather than through capital expenditure by the network.

The AER’s approach in these applications has been framed on the assumption that a National Energy Market- (NEM) wide Electricity Distribution Ring Fencing Guideline (the Guideline) is being reviewed and that the decision made in the interim therefore has a reduced significance. ECA submits that this is poor regulatory practice. No matter how qualified a decision is, every regulatory decision has implied value as a precedent. This is particularly the case when it goes to the evidentiary base required for an application and the policy objective for the regulation is the long term interests of consumers.

As outlined in our recent submission to the Guideline, ECA has fundamental concerns about the ability of ring fencing arrangements to protect the long term interest of consumers by fostering competitive markets for new and emerging energy services. This concern is based on the experience in the markets for other essential services, especially telecommunications. Accordingly, ECA also has concerns about Energex?’s proposed applications and submits that, for the reasons outlined below, only the Education application should be approved.

The full submission can be read here.