The Australian Government has introduced the (Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019) (the Big Stick Bill) into parliament.
The legislation will hold energy companies to account and help put downward pressure on power prices. The Big Stick Bill ensures energy companies play by the rules by requiring them to pass cost savings through to consumers, preventing them from distorting or manipulating wholesale electricity prices and stopping them from withholding electricity financial contracts for anti-competitive reasons.
To provide clarity around the operation of this significant new reform the government has prepared a guide on the operation of the Big Stick Bill, which can be accessed below.
The Big Stick Bill creates new prohibitions against certain misconduct in electricity retail, wholesale and contract markets, which is detrimental to competition or 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 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:
- Australian Competition and Consumer Commission (ACCC) issued warning notices and infringement notices
- 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
- on the recommendation of the ACCC, Treasurer-issued Contracting Orders requiring generators to offer up hedge contracts for sale to retailers
- on the recommendation of the ACCC, and following an application by the Treasurer, Federal Court-issued Divestiture Orders relating to aggravated breaches of the wholesale bidding and conduct prohibition
Taking action to lower power prices Treasurer and Minister for Energy and Emissions Reduction joint media release 18 September 2019
Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 Australian Government