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Prohibiting energy market misconduct

The Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Act 2019 (the Big Stick legislation) came into effect on 10 June 2020.

The new legislation forces energy companies to put the interest of their customers first, by requiring them to pass on savings to consumers when there is a sustained and substantial reduction in the costs it faces to supply electricity. The legislation also prevents energy companies from distorting or manipulating wholesale electricity prices and stops them from withholding electricity financial contracts for anti-competitive reasons.

To provide clarity around the operation of this significant reform the government has prepared a guide on how the legislation operates , which can be accessed below.

The legislation creates 3 new prohibitions against certain misconduct in electricity retail, wholesale and contract markets, which is detrimental to competition and consumers.

  • The retail pricing prohibition targets conduct by electricity retailers, when they fail to pass on savings to consumers due to lower supply chain costs over a substantial and sustained period.
  • The contract liquidity prohibition targets conduct by electricity generators when they refuse to offer contract to an electricity retailer for anti-competitive purposes.
  • The wholesale prohibition also targets conduct by generators when selling electricity into the wholesale market, preventing generators from acting in a way that is fraudulent, dishonest or in bad faith to distort or manipulate wholesale electricity prices.

Breaches of the prohibitions are backed by a graduated series of remedies, which can only be used if they are proportionate and targeted to the misconduct, including:

  • warning and infringement notices by the Australian Competition and Consumer Commission (ACCC)
  • court-ordered civil penalties up to the greatest of: $10 million; 3 times the value of the total benefit attributable to the conduct or 10% of the annual turnover of the corporation in the 12 months before the conduct occurred
  • Treasurer-issued contracting orders on the recommendation of the ACCC, requiring generators to offer contracts for sale to retailers
  • a Federal Court-issued divestiture order, following an application by the Treasurer, made on the recommendation of the ACCC

More information

New and stronger energy laws to put Australian families and small businesses - joint media release (10 June 2020) The Honourable Treasurer of the Commonwealth of Australia, Josh Frydenberg, and the Honourable Minister for Energy and Emissions Reduction, Angus Taylor   

Taking action to lower power prices - joint media release (18 September 2019) The Honourable Treasurer of the Commonwealth of Australia, Josh Frydenberg, and the Honourable Minister for Energy and Emissions Reduction, Angus Taylor   

Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Act 2019 Australian Government 

A Guide to the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 Australian Government

Guidelines on Part XICA – Prohibited conduct in the energy market Australian Competition and Consumer Commission