Wednesday, 6 March 2024

National Energy Retail Law (Victoria) Bill 2024

Statement of compatibility

Lily D’AMBROSIO (Mill Park – Minister for Climate Action, Minister for Energy and Resources, Minister for the State Electricity Commission) (10:58): In accordance with the Charter of Human Rights and Responsibilities Act 2006, I table a statement of compatibility in relation to the National Energy Retail Law (Victoria) Bill 2024:

Opening paragraphs

In accordance with section 28 of the Charter of Human Rights and Responsibilities Act 2006, (the Charter), I make this Statement of Compatibility with respect to the National Energy Retail Law (Victoria) Bill 2024.

In my opinion, the National Energy Retail Law (Victoria) Bill 2024, as introduced to the Legislative Assembly, is compatible with human rights as set out in the Charter. I base my opinion on the reasons outlined in this statement.

Overview

The purpose of the Bill is to apply, with modifications, the retailer of last resort scheme in the National Energy Retail Law. The National Energy Retail Law is contained in the schedule to the National Energy Retail Law (South Australia) Act 2011.

The retailer of last resort scheme is the mechanism that facilitates the orderly transfer of customers from the failed retailer to a new retailer to prevent disruption of electricity or gas supply to those customers.

The Bill also revokes the existing retailer of last resort provisions in the Electricity Industry Act 2000 and the Gas Industry Act 2001, and makes other minor and technical amendments to those Acts.

Application of non-Victorian Law

Part 2 of the Bill applies in Victoria parts of the National Energy Retail Law contained in the schedule to the National Energy Retail Law (South Australia) Act 2011 and the regulations under the National Energy Retail Law. Clause 4 of the Bill provides that the applicable NERL provisions, as modified by regulations to be made under the Bill after its passage, apply as a law of Victoria and may be referred to as the National Energy Retail Law (Victoria), and apply as if they were part of Bill. Clause 5 applies the regulations made under the National Energy Retail Law as regulations in force in Victoria.

The ‘applicable NERL provisions’ are provisions of the National Energy Retail Law relating to the retailer of last resort scheme, and other provisions to give effect to that scheme.

As the Bill will apply parts of the National Energy Retail Law as Victorian law, the human rights impacts are addressed in this statement of compatibility.

Human Rights Issues

The Bill imposes obligations on energy retailers, regulators and other participants in the national energy framework. Section 6(1) of the Charter provides that only persons have human rights. A person is defined as a natural person. Although it is possible that an energy retailer, regulator or participant could be a natural person, in practice, energy retailers, regulators and other participants are corporate entities.

However, the retailer of last resort scheme has provisions impacting upon customers, which can include natural persons. The human rights issues identified below primarily relate to those persons.

The following human rights protected by the Charter are relevant for the Bill: the right to privacy, freedom of expression, property rights and rights in criminal proceedings.

The National Energy Retail Law (Victoria) Bill 2024 adopts parts of the National Energy Retail Law that engage these human rights under the Charter. The adopted parts will be referred to in this Statement of Compatibility as being the National Energy Retail Law (Victoria).

For the following reasons, I am satisfied that the Bill is compatible with the Charter and, if any rights are limited, those limitations are reasonable and demonstrably justified having regard to the factors in section 7(2) of the Charter.

Right to privacy

Section 13(a) of the Charter provides that a person has the right not to have their privacy, family, home or correspondence unlawfully or arbitrarily interfered with. An interference with privacy will be lawful if it is permitted by a law which is precise and appropriately circumscribed and will not be arbitrary provided it is reasonable in the circumstances and just and appropriate to the end sought.

Section 11 of the National Energy Retail Law (Victoria) Bill 2024 provides that regulations can be made to provide for the disclosure of information (including confidential and personal information) between regulators, where that information relates to a retailer of last resort event.

Section 149 of the National Energy Retail Law (Victoria) is an overarching provision stipulating that Division 7 (which pertains to providing of information) does not limit the information the Australian Energy Market Operator (AEMO) may require a failed retailer or insolvency official to provide to AEMO in relation to a retailer of last resort event, including customer details.

Sections 151–154 and 156 of the National Energy Retail Law (Victoria) permit the Australian Energy Regulator (AER) to issue a ‘retailer of last resort regulatory information notice’ to require a retailer to provide information about, amongst other matters, the customers of a failed retailer. This notice can be issued in connection with a retailer of last resort event, or with the exercise of the AER’s powers. The provisions provide that the information can include names, contact details, billing addresses, whether a customer is a life support customer and debit arrangements. The retailer may be required to provide this information to the Australian Energy Market Operator (AEMO), the AER, registered retailers of last resort or electricity distributors. It is intended that by amendments given effect by regulations, that the information can also be provided to the Essential Services Commission.

Section 157 of the National Energy Retail Law (Victoria) provides that the AER can share information it has received from a regulatory information notice with the AEMO, distributors of electricity, designated retailers of last resort and any other person that the AER considers necessary. It is intended that by amendment to this section given effect by regulations, that the AER will also be able to share this information with the Essential Services Commission.

Section 174 of the National Energy Retail Law (Victoria) also provides that, to the extent that information is personal information within the Privacy Act 1988 of the Commonwealth, sharing or use of that information in connection with the retailer of last resort scheme between the AER, AEMO, distributors and designated retailers of last resort is authorised. It is intended that by amendment to this section given effect by regulations, that information can also be shared by the Essential Services Commission and that reference will be made to the Privacy and Data Protection Act 2014.

Sections 206–214, 216 and 220 of the National Energy Retail Law (Victoria) empower the AER to require a person to provide information or documents, enable the disclosure of that information in certain circumstances and enable the AER to use information obtained under the Law or the National Energy Retail Rules to perform a function or power. Section 268 empowers the Australian Energy Market Commission to publish information received in relation to a proposed change to the National Energy Rules. Other sections of the National Energy Retail Law (Victoria) also relate to the collection and sharing of information that may include private information.

Accordingly, the right to privacy is engaged.

The collection and sharing of information is to ensure the continuity of the sale of energy to customers, and to enable the AER and other regulatory bodies to undertake their regulatory functions. The provisions ensure important information about customers is available to all relevant entities following a retailer of last resort event, including, for example, whether a customer is a life support customer. The collection, use and disclosure of information are clearly defined and subject to a number of parameters. The provisions relating to information clearly set out in which circumstances they operate.

In addition, a similar information-sharing regime in relation to the sharing of customer information in a retailer of last resort event was included in the Electricity Industry Act 2000 and the Gas Industry Act 2001. That regime has been revoked by the Bill. Therefore, the amendments do not impose any limitations on the right to privacy in Victoria.

Further, the Essential Services Commission is a public entity within the meaning of the Public Administration Act 2004 and is bound by the requirements of the Privacy and Data Protection Act 2014 and must ensure that any collection, use or disclosure of information is undertaken in accordance with the Information Privacy Principles set out in Part 3 of that Act. Similarly, the AER is bound by section 44AF of the Consumer and Competition Act 2010 of the Commonwealth.

These provisions engage the privacy right but do not limit it because they are logical, rational, reasonable and proportionate to the purpose to ensure the continuity of the sale of energy to customers, and to enable the AER and other regulatory bodies to undertake their regulatory functions.

Accordingly, in my view, these provisions are not an arbitrary or unlawful interference with privacy and therefore do not limit that right.

Freedom of expression

Section 15(2) of the Charter provides that every person has the right to freedom of expression. Section 15(3) of the Charter provides that special duties and responsibilities are attached to the right to freedom of expression and that the right may be subject to lawful restrictions reasonably necessary to respect the rights of other persons and for the protection of national security, public order, public health or public morality.

Sections 158 and 206 of the National Energy Retail Law (Victoria) make it an offence for a person to provide false or misleading information in purported compliance with a retailer of last resort regulatory information notice, or a relevant notice issued by the AER. This may engage a person’s right to freedom of expression.

However, section 158 is reasonably required to ensure that information collected by that notice is correct and that the bodies receiving that information can reasonably rely on the truthfulness of the information provided. Section 206 is reasonably required to enable AER to perform its regulatory functions. In addition, section 160 protects legal professional privilege, and section 161 provides for a protection against self-incrimination. Section 206 provides for similar protections.

For this reason, to the extent that the right to freedom of expression is engaged, the impacts are reasonable and necessary to enable the retailer of last resort scheme to operate effectively.

Property rights

Section 20 of the Charter provides that a person must not be deprived of that person’s property other than in accordance with the law.

As a contractual right could be considered a property right, sections 140 and 141 of the National Energy Retail Law (Victoria) may engage this right. Section 140 provides that the customer of a failed retailer ceases to be a customer of the failed retailer and becomes a customer of the retailer of last resort. Section 141 sets out that the contract for sale of energy between the customer and failed retailer is terminated in that circumstance.

The termination of a contract may deprive a person of their property rights in relation to that contract. However, the deprivation of property is confined to the circumstances set out in these sections. Any deprivation is for the legitimate purpose of ensuring continuity of the sale of energy to that customer.

Therefore, any deprivation of property would be in accordance with the law and do not limit property rights under the Charter.

Criminal rights

Section 24(1) of the Charter provides that a person charged with a criminal offence or a party to a civil proceeding has the right to have the charge or proceeding decided by a competent, independent and impartial court or tribunal after a fair and public hearing.

Section 25(1) of the Charter provides that a person charged with a criminal offence has the right to be presumed innocent until proved guilty according to law. The right is relevant where a statutory provision shifts the burden of proof onto an accused in a criminal proceeding, so that the accused is required to prove matters to establish, or raise evidence to suggest, that they are not guilty of an offence.

‘Reasonable excuse’ offence provisions

Sections 161 and 206 of the National Energy Retail Law (Victoria) introduce offence provisions that contain ‘reverse onus’ elements. By creating ‘reasonable excuse’ exceptions, these offences in the Bill place an evidential burden on the accused, in that it requires the accused to raise evidence as to a reasonable excuse. However, in doing so, this offence does not transfer the legal burden of proof. Once the accused has pointed to evidence of a reasonable excuse, which will ordinarily be peculiarly within their knowledge, the burden shifts back to the prosecution who must prove the essential elements of the offence.

I do not consider that an evidential onus such as this limits the right to be presumed innocent, and courts in other jurisdictions have taken this approach.

Section 159 provides that a person must not refuse to comply with a retailer of last resort regulatory information notice on the ground of any duty of confidence. Section 206 provides that it is not a ‘reasonable excuse’ to refuse to provide information to the AER on the grounds of a duty of confidence. Section 321 provides that if an individual has a privilege against self-exposure to a penalty, they are not excused from proving information, a document, evidence or answering a question. These sections may limit the protection against self-incrimination. However, these limitations are required to enable relevant information to be collected and shared so that the AER and other bodies can perform their functions and duties, including ensuring the continuity of the sale of energy. There are no less restrictive means available to achieve the purpose of enabling access to this information. Finally, section 159 and section 206 provide that a person, by complying with a notice, bears no liability for breach of contract, confidence or a civil wrong. The Bill also provides for other avenues for granting of relief from liability.

For these reasons, I consider that these provisions are unlikely to limit the right to protection against self-incrimination. However, to extent that that any limitation is imposed, that limitation is reasonable and justified under section 7(2) of the Charter.

Accessorial liability of officers of body corporate for offences

Section 304 of the National Energy Retail Law (Victoria) provides that officers of a body corporate to be liable if the body corporate commits an offence by contravening breach provisions of the National Energy Retail Law, if the officer knowingly authorised or permitted the contravention or breach. The right is relevant where a statutory provision shifts the burden of proof onto an accused in a criminal proceeding, so that the accused is required to prove matters to establish, or raise evidence to suggest, that they are not guilty of an offence.

This provision is relevant to the presumption of innocence as it may operate to deem as ‘fact’ that an individual has committed an offence based on the actions of another body, based on their association with that body. However, it is my view that the right is not limited in this context.

Section 304 provides that the relevant person only taken to commit the offence committed by the corporation if the person knowingly authorised or permitted the commission of the offence. In my view, these provisions do not limit the presumption of innocence as the prosecution is still required to prove the accessorial elements of the offence – that is, that the relevant person knowingly authorised or permitted the commission of the offence.

In the event that this provision is considered a limit, I am of the view that any limitation is reasonably justified. As with any regulated industry concerning essential services to the public, such as energy, there is a strong need to ensure adequate deterrence of regulatory offences that may cause harm to industry participants or the public at large. Courts in other jurisdictions have held that the presumption of innocence may be subject to reasonable limits in the context of regulatory compliance. These provisions only target persons who have elected to undertake a position as an officer of a body corporate, which includes assuming the responsibilities and duties that apply to that role, and who have the capacity to influence the conduct of the entity concerned.

The provisions ensure such persons are appropriately held responsible for all breaches that occur by or on behalf of the entity in which they have responsibility for, enabling offences to be successfully prosecuted and operate as an effective deterrent. Affected persons should be well aware of the regulatory requirements and, as such, should have the necessary processes and systems in place to effectively meet these requirements and not incur accessorial liability. In my view, there is no less restrictive way of ensuring accountability of officers of bodies corporate for breaches of the Bill, and it follows that these provisions are compatible with the Charter.

Penalty provisions

The Bill also repeals certain provisions relating to civil penalties in the Electricity Industry Act 2001 and the Gas Industry Act 2000. This amendment does not affect any Charter rights.

The National Energy Retail Law (Victoria) will also introduce a limited range of civil penalty provisions relating to the retailer of last resort scheme, and compliance by regulated entities (relating to sections 143, 156, 274, 276 and 282).

The imposition of civil penalties will generally not engage the right under sections 24 (fair hearing) or 25 (presumption of innocence) or 26 (Right not to be tried or punished more than once) the Charter, unless the penalty is in the nature of a punishment. Section 26 of the Charter provides that a person must not be tried or punished more than once for an offence in respect of which he or she has already been finally convicted or acquitted in accordance with law. This rule only applies in respect of criminal punishment. The principle does not prevent civil proceedings being brought in respect of a person’s conduct which has previously been the subject of criminal proceedings, or vice versa. The imposition of civil penalties will not, generally, engage the right, unless the penalty is in the nature of a ‘punishment’, or a penal consequence. To the very limited extent that these civil penalties apply to a natural person, the penalties and the powers of the Court to make orders set out in section 291 serve the purpose of ensuring that a person upholds their duties in a retailer of last resort scenario in relation to information notices. I consider the maximum civil penalty appropriate and not disproportionate given the central role these persons play in the regulatory scheme. Furthermore, the National Energy Retail Law (Victoria) provides that the breach of a civil penalty provision is not an offence. These provisions are largely protective in nature, with the aim of ensuring compliance with the regulatory scheme.

Accordingly, I conclude that the penalties attaching to these provisions are civil in nature and thus do not engage this Charter right.

A natural person may have a criminal penalty amount imposed on them if they breach section 158 or 206 of the National Energy Retail Law (Victoria). To the extent that section 24 or 25(2) of the Charter is engaged by these sections, I do not consider the rights to be limited. A criminal proceeding will be heard by a competent court of relevant jurisdiction and the person entitled to the minimum guarantees. I consider the maximum criminal penalty appropriate and not disproportionate given the central role these persons play in the regulatory scheme. The extent to which section 25(1) of the Charter is engaged is addressed above.

Conclusion

I am therefore of the view that the Bill is compatible with the Charter.

Hon Lily D’Ambrosio

Minister for Energy and Resources

Second reading

Lily D’AMBROSIO (Mill Park – Minister for Climate Action, Minister for Energy and Resources, Minister for the State Electricity Commission) (10:59): I move:

That this bill be now read a second time.

I ask that my second-reading speech be incorporated into Hansard.

Incorporated speech as follows:

The Bill is an essential piece of legislation that will enhance protections for Victorian consumers and strengthen the resilience of the energy retail market. This Bill marks a significant step towards safeguarding the interests of energy consumers in the face of an evolving and, at times, challenging energy landscape.

The Bill adopts the national retailer of last resort scheme in Victoria, provided for in the National Energy Retail Law. The retailer of last resort scheme is a key consumer safeguard designed to transfer customers to alternative energy retailers should their current provider fail in the market. The scheme ensures customers continue to receive electricity and/or gas supply without disruption.

In any efficient competitive market, market exit is a natural occurrence. However, in essential services like electricity and gas, it is crucial to have well-functioning exit arrangements in place to ensure uninterrupted energy supply to customers. The scheme serves as the primary regulatory mechanism for dealing with market exits, quickly transferring customers of failed retailers to another retailer to avoid disruption to their energy supply.

While Victoria has had its own successful retailer of last resort scheme since 2007, recent energy market instability has prompted us to assess the scheme’s suitability. Over the past year alone, there have been a total of nine retailer failures across the east coast electricity and gas markets, including four in Victoria. Factors such as the surge in wholesale gas and electricity prices, coupled with unexpected global events like the war in Ukraine, have added substantial strain on our retailers.

Recognising the need to enhance the scheme, the Bill proposes the adoption of the national retailer of last resort scheme in Victoria. This national scheme, already operational in several jurisdictions, provides a uniform framework for managing retailer failures, ensuring consistency and reducing the risk of unintended consequences for customers.

The Bill will provide the Australian Energy Regulator with the power to direct the failed retailer’s gas contracts and supply to the retailer that takes on the failed retailer’s customers. This ensures that the retailer has the necessary gas to service a larger customer base. This provision addresses a crucial gap in Victoria, where the Essential Services Commission does not have equivalent powers in Victoria and the Victorian retailers of last resort are at risk of having insufficient capacity to service their new customers.

The Bill also allows for the transfer of affected customers to multiple retailers, minimising the disruptive impact across the community and energy market. This stands in contrast to the current Victorian scheme, which does not allow additional retailers to be appointed after an event, placing undue pressure on a single retailer.

The Bill provides better financial protection for affected customers of a retailer of last resort event. Unlike the current one-time fee imposed on customers of failed retailers in Victoria, the Bill spreads costs across a wider consumer base, mitigating the impact on those unexpectedly affected by the aftermath of a retailer failure.

Lastly, by adopting the national retailer of last resort scheme, amendments made to the scheme will automatically apply in Victoria. On 12 August 2022, the Australian Energy Market Commission proposed recommendations to Energy Ministers, aiming to enhance the national RoLR scheme and address crises and the risk of market participant failure. These changes are proposed to commence in 2024. The reforms considered include expanding the Australian Energy Regulator’s powers to direct gas storage supply to the designated retailer of last resort; coordinated crisis management approaches informed by scenario planning; and introducing the option for small customers of a failed retailer to be transferred to a market retail contract, which offers competitive prices.

Unlike in other jurisdictions where energy retail laws are regulated by the National Energy Retail Law and monitored by the Australian Energy Regulator, Victoria maintains its own regulatory framework enforced by the Essential Services Commission. Victoria has some of the strongest energy consumer protections in the country and these will continue.

While the Australian Energy Regulator will regulate the National Energy Retail Law retailer of last resort arrangements to be introduced by the Bill, the rest of the energy retail laws will still be overseen by the Essential Services Commission under Victorian legislation.

Some of the retailer of last resort scheme in the National Energy Retail Law will need to be modified to ensure that the provisions operate consistently with the Victorian energy retail framework and terms are defined consistently with how they are used in the Victorian framework. These modifications will be effected by regulations made under the Bill.

As we navigate both the opportunities and the challenges posed by the shift towards clean energy, the Bill acknowledges the potential disruption to energy retailers. The increasing adoption of clean and distributed energy generation, including household solar photovoltaics and batteries, will decrease the amount of supply purchased from retailers, leading to reduced revenue and likely increase the market exits of smaller retailers with marginal profitability. Strategic planning and proactive measures are therefore essential to ensure the financial stability of retailers in a transforming energy market.

In conclusion, the Bill introduces a clear and robust scheme that ensures well-functioning exit arrangements, which are crucial for maintaining an uninterrupted energy supply to consumers and protecting retailers from cascading retail failures.

I commend the Bill to the house.

James NEWBURY (Brighton) (10:59): I move:

That debate be adjourned.

Motion agreed to and debate adjourned.

Ordered that debate be adjourned for two weeks. Debate adjourned until Wednesday 20 March.