New Products and Services in
the Electricity Market
Consultation on regulatory implications
Energy Market Reform Working Group
December 2014
Submissions are invited on this consultation paper by Friday 13 March 2015. Electronic submissions are preferred
and can be sent to the COAG Energy Council Secretariat at energycouncil@industry.gov.au.
Those who wish to provide hard copies by post may do so by addressing their submissions to:
COAG Energy Council Secretariat
GPO Box 9839
Canberra ACT 2601
All submissions will be published on the Council website (www.scer.gov.au) unless stakeholders have clearly
indicated that a submission should remain confidential, either in whole or in part.
Please note that this paper does not provide legal advice about any of the laws discussed in it, and it should not be
relied on for any purpose. It is intended as a consultation paper only. It does not reflect the final views of officials or
Council policy.
The Energy Market Reform Working Group consists of officials from the state, territory and Commonwealth agencies
with responsibility for energy policy. It operates under the COAG Energy Council framework.
2
Contents
Introduction ..................................................................................................................................... 4
Purpose ....................................................................................................................................... 4
Scope .......................................................................................................................................... 4
Why conduct this consultation now? ........................................................................................... 4
Making a submission ................................................................................................................... 5
What will happen after this consultation? .................................................................................... 5
Which products and services? ........................................................................................................ 5
Stakeholder views........................................................................................................................... 5
Electricity retailers ....................................................................................................................... 5
Electricity distributors .................................................................................................................. 5
Consumer groups........................................................................................................................ 6
New entrants ............................................................................................................................... 6
What are the current regulatory frameworks? ................................................................................. 6
National Electricity Law and Rules .............................................................................................. 6
National Energy Customer Framework: National Energy Retail Law and Rules ......................... 7
General consumer law ................................................................................................................ 7
Why are there energy-specific consumer protections? ............................................................... 7
Electricity supply market ................................................................................................................. 8
National Electricity Law and Rules .............................................................................................. 8
National Energy Customer Framework ....................................................................................... 8
Demand management market .......................................................................................................10
National Electricity Law and Rules .............................................................................................11
National Energy Customer Framework ......................................................................................11
Energy information market .............................................................................................................11
Privacy and use of metering data ...............................................................................................12
Market participants accessing data ............................................................................................12
Other parties accessing data......................................................................................................12
Conclusion .....................................................................................................................................13
3
Introduction
Australian electricity markets are entering a
period of change. The traditional, centralised
electricity supply model is being challenged
by emerging products and services that
allow customers greater control over how
their electricity is delivered and consumed.
These include new products and services
that enable customers to generate and store
their own electricity, find the best electricity
retail tariff, improve energy efficiency, or
decide how specific appliances operate in
response to changes in electricity prices,
temperature and other factors.
Many of these new products and services
could be offered by traditional participants in
the National Electricity Market (NEM), that
is, electricity retailers and distributors.
However, many could also be offered by
new entrants that do not have defined roles
within the current national electricity rules
and laws.
As business models emerge around these
new products and services, it is worth
considering whether they should be covered
by the regulatory frameworks that currently
govern how various parties operate in the
NEM. On one hand, regulatory frameworks
should not create a barrier to innovative
products and services that could benefit
customers. Equally, new products and
services should not infringe on the
protections and customer outcomes that the
regulatory frameworks are intended to
ensure.
Purpose
The purpose of this paper is to begin a
consultation on whether the regulatory
frameworks that govern the NEM are
appropriate in the context of new products
and services being offered to small
electricity customers.
This paper is intended to seek feedback on:

the range of new products and services
that could be offered to small electricity
customers;

the implications of these new products
and services for small customers and for
the effective operation of the NEM; and

whether regulatory reforms will be
needed to accommodate new products
and services.
This paper considers some of the products
and services that are currently emerging in
the market. However, a regulatory
framework cannot hope to regulate every
possible product and service individually. A
regulatory framework needs to be based on
principles that help all parties, including
so a greater level of regulatory oversight is
customers, businesses and the regulator,
appropriate.
understand the situations in which activities
will be regulated, and the goals of regulation. New products and services offered to
small customers: The paper focusses on
new products and services that could be
Scope
offered directly to customers. This helps to
separate this consultation from related work
Electricity: To date, most of the discussion
requested by the Council of Australian
about new products and services has been
Governments (COAG) Energy Council in
about their implications for the electricity
May 2014, which is looking at scenarios for
market and its regulatory framework. For
electricity market development over the next
example, new technology options are
20 years, and their implications for network
emerging that offer alternatives to a
economic regulation2.
traditional supply of grid-sourced electricity,
such as on-site generation and storage.
There are few alternative sources of gas
however. While some products and services
available to energy customers affect how
they use both electricity and gas (for
example energy efficiency advice), this
paper focusses on the electricity market in
order to manage the scope of the
discussion.
National Electricity Market (NEM): Similar
issues relating to new products and services
exist in all Australian electricity markets. This
paper focusses on the NEM, which is the
largest electricity market in Australia. The
NEM operates in Queensland, New South
Wales, the Australian Capital Territory,
Victoria, Tasmania and South Australia.
Given this focus, the paper considers a
range of issues related to consumer
protections in the electricity market, as well
as the possible impact that some new
products and services could have on
electricity network operations (rather than on
economic regulation).
Why conduct this consultation now?
It is timely to look at the regulatory
implications of new products and services
related to electricity entering the market
because:

A number of technology options and
business opportunities are beginning to
emerge in the market, and it would be
better to consider any regulatory
implications of new products and
services at an early stage. This will help
to ensure that the regulatory framework
is not creating barriers to innovation, and
that supporting frameworks are in place
as new products and services emerge in
the market.

There are a number of reforms
underway that could support the
emergence of new products and
services, including: changes to the
principles and processes for setting
network tariffs; changes to the
framework for providing meters,
including advanced meters; and
proposed reforms to allow relationships
with more than one retailer at a single
site3.
However, the discussion will also be relevant
to markets in Western Australia and the
Northern Territory.
National laws: Although some of the
discussion in this paper has implications for
jurisdictional energy laws in the NEM states
and territories, the paper does not discuss
the operation of those laws directly.
Jurisdictions are responsible for reviewing
any legislation where this is needed to
support the national laws.
Small customers: The paper focusses on
residential and small business customers1.
Although new products and services are and
will be offered to large customers, an
underlying assumption in the national energy
laws and rules is that these customers
should have incentives and expertise to
negotiate efficient energy supply

arrangements, and to understand and adopt
new products and services.
Although small customers have similar
incentives, they may not have the expertise
or time to achieve the best outcomes, and
In the NEM, all residential customers are ‘small
customers’ for the purposes of the National
Energy Retail Law, and small business customers
are defined by usage thresholds. See National
Energy Retail Law, section 5.
1
Stakeholders are seeking certainty from
governments about whether and how
new products and services might be
integrated into the regulatory framework.
2
https://scer.govspace.gov.au/files/2014/05/COAGEnergy-Council-Communique-Final-1-May20141.pdf
3
Details on the implementation of the Power of
Choice Review are available at
http://www.aemc.gov.au/Major-Pages/Power-ofchoice
4

Previous reviews have included
discussion of new products and services,
but were not intended to address these
issues specifically. These include the
Australian Energy Market Commission’s
(AEMC) Power of Choice review4 and
the Energy Market Reform Working
Group’s (EMRWG) review of consumer
protections for new products and
services enabled by smart meters5.
This consultation process is an opportunity
to consolidate consideration of these issues,
and any subsequent regulatory changes, in
a single work stream.
Making a submission
Stakeholders are invited to provide written
submissions on the consultation paper by
close of business on Friday 13 March 2015.
All stakeholder submissions will be
published on the Council website unless
stakeholders have clearly indicated that a
submission should remain confidential,
either in whole or in part. Electronic
submissions are preferred and can be sent
to the COAG Energy Council Secretariat at
energycouncil@industry.gov.au.
Those who wish to provide hard copies by
post may do so by addressing their
submissions to:
COAG Energy Council Secretariat
GPO Box 9839
Canberra ACT 2601
Should you have any queries, please
contact the COAG Energy Council
Secretariat at
energycouncil@industry.gov.au.
What will happen after this consultation?
Submissions on this consultation paper will
be used to inform a discussion paper to be
presented to Ministers at the first COAG
Energy Council meeting in 2015. The paper
will identify any priorities for regulatory
reform that officials consider should be
addressed in the context of new products
and services in the electricity market.
If any reforms are prioritised as a result of
this process, these will also involve
extensive consultation. We will need to
consider the best options for progressing
any work. The rule change process
managed by the AEMC is one option,
although changes to laws require legislative
actions.
Which products and services?
The range of new products and services that
could be offered to customers is potentially
very broad, and it is difficult to predict what
they all are or could be. One of the purposes
of this paper is to seek feedback on the
range of new products and services that are
being, or could be, offered to electricity
customers.
and services might include home energy
management systems, or the remote control
of appliances in return for a financial benefit.
The energy information market: in this
market, customers receive advice and
information to help them manage energy
consumption and costs. Current examples
include energy efficiency advice and
electricity price comparators. Future
products and services might involve access
to real-time information about household
consumption via a home area network.
Each of these markets, and the new
products and services that could be offered,
are discussed in more detail later in this
paper.
Consultation question:
Do these three markets cover all new
products and services that could be
offered to small electricity customers?
We understand that the major concern of
retailers is that some new products and
services should be regulated in a similar way
to electricity retail contracts.

If the customer receives ongoing
services under contract.

If supply to the property or appliance can
be controlled or disconnected, including
by charging technology.

If the customer is billed or compensated
directly from the service provider.
Electricity distributors
Distribution businesses have expressed
concerns about the impacts that new
products and services could have on
network operations and security.
For example, the Energy Networks
Association (ENA) has argued that
distribution businesses’ obligations for
network safety and security could be
undermined when other parties can remotely
energise and de-energise premises, or
6
Stakeholder views
5
https://scer.govspace.gov.au/files/2012/11/SmartMeters-Officials-Report.pdf
Electricity retailers
The Energy Retailers Association of
Australia (ERAA) has argued that there
should be a comprehensive review of ‘third
However, for the purposes of this paper it is parties’ (that is, companies offering energyuseful to identify three broad markets, which related products that are currently not
regulated under energy legislation) with a
we think should cover most products and
view to bringing them into the National
services relating to electricity supply and
Energy Customer Framework6. They
use:
suggest that the ‘sale of energy’ is no longer
The electricity supply market: this involves an adequate test for retailer authorisation,
and that the concept should instead shift to
the supply and sale of electricity to
the sale of energy services, which includes
customers. The electricity supply
retailing energy but also energy
relationship currently in the market involves
management services such as direct load
the sale of electricity by a retailer to a
customer, delivered via electricity networks. control and services that need ongoing
New products and services emerging in this access to metering data.
market typically involve selling electricity
The ERAA argues that new products and
from onsite generation, possibly combined
services should be judged on criteria based
with storage in future.
on the core aspects of why retail contracts
are currently regulated, such as:
The demand management market:
products and services in this market allow
 If the product or service is marketed in
customers to take an action to change their
competition with other services, and
electricity consumption or costs. Current
specific information needs are required
products and services in the market include
to ensure informed consent.
hot water load control tariffs. New products
4
http://www.aemc.gov.au/Major-Pages/Power-ofchoice
products and services is discussed below, to
provide an introduction to some of the issues
considered in this paper.
Our understanding of the views of some
stakeholders about the regulation of new
ERAA (2012) Submission to the National Smart
Meter Consumer Protections and Pricing Draft
Policy Paper Two.
http://www.scer.gov.au/files/2012/06/ERAASubmission.pdf
5
control loads at premises7.
Concerns expressed to date centre on:
Consumer groups

Consumer groups generally want to ensure
that there are consistent protections for
customers across the electricity market,
regardless of who is providing the product or
service. Particular concerns relate to privacy
of energy consumption data, issues around
contracts including dispute resolution, and
energy-related marketing.
For example, the Consumer Action Law
Centre has recently published a report
looking at consumer protection issues in the
future ‘smart’ electricity market. The highlevel messages from this report include that

take-up of new products and services
should be supported by a consistent
consumer protection framework that
covers not only the current market
participants but also new entrants that
would otherwise be unregulated; and

the need for market regulation to not
pose a barrier for new market entrants;
and
the need for regulation to be
proportional (i.e. not impose a burden
on businesses disproportionate to the
risks being managed).
As part of our consultation on this paper,
officials are keen to hear from other
developers of new products and services
about how regulatory frameworks affect their
businesses.
What are the current regulatory
frameworks?
This section describes the current regulatory
frameworks in the NEM. These govern the
requirements that are placed on some
parties to ensure that their actions serve
customer interests.

establishing the wholesale electricity
market (Chapter 3 of the Rules);

defining power system security roles and
obligations (Chapter 4);

applying an economic regulation
framework, and a connections
framework, to electricity networks
(because they are monopoly services)
(Chapters 5-6A); and

defining metering arrangements
(Chapter 7).
Parties that have roles and obligations in
these aspects of the market must be
registered and/or accredited with the
Australian Energy Market Operator (AEMO)
(Chapter 2). Some parties must register as
market participants to sell into the wholesale
market, to buy from the wholesale market, or
to operate networks transporting electricity.
The Rules describe how these parties must
act, and how they interact with each other.
This section also discusses the principles
that underpin these laws and rules, which
are helpful in thinking about whether new
products and services need to be drawn into
the regulatory framework.
Some parties are also required to register
with AEMO because they could affect power
system security, even if they are not
operating in the wholesale market. The main
examples are generators between 5 MW
and 30 MW13.
The two overarching frameworks are created
by the National Electricity Law, and the
National Energy Retail Law10. The AER is
responsible for enforcement of both laws
With some exceptions, new entrant
providers of new products and services have and the associated rules.
not participated significantly in consultations
National Electricity Law and Rules
about the regulatory frameworks that may
affect their business models. This is likely
because many of these companies are small The objective of this law (the National
and/or are focused on developing their
Electricity Objective, or NEO) is to:
businesses, rather than making submissions
“promote efficient investment in, and efficient
to energy market governance processes.
Some parties are also required to be
accredited by AEMO because they have a
role that could affect the operation of or
confidence in the market. Metering Providers
and Metering Data Providers are the main
examples. As the wholesale market relies on
accurate metering data for settlement,
businesses performing metering roles need
to demonstrate that they have the technical
capabilities needed in these roles, which
include maintaining accurate meters and
collecting and delivering accurate data 14.

this framework would need to address
issues such as product use disclosure,
some product standardisation to enable
comparisons, clear and fair contract
conditions, and accessible dispute
resolution8.
New entrants
One exception relates to the Australian
Energy Regulator’s (AER) recent
consultation on ‘alternative energy sellers’,
which is an emerging service relating to
purchasing electricity from a distributed
generator. This example will be discussed in
more detail later in the paper 9.
7
ENA (2014) Submission to the Consultation
Paper: Expanding competition in metering and
related services rule change, p.5.
http://www.aemc.gov.au/RuleChanges/Expanding-competition-in-metering-andrelated-serv
8 Consumer Action Law Centre (2014) Smart
Moves for a Smart Market: Simple steps to ensure
consumer protections keep pace with innovation in
a high-tech energy market, p.95.
http://consumeraction.org.au/report-smart-movesfor-a-smart-market/
9 http://www.aer.gov.au/node/22188
operation and use of, electricity services for
the long term interests of consumers of
electricity with respect to—
(a) price, quality, safety, reliability and
security of supply of electricity; and
(b) the reliability, safety and security of the
national electricity system”11.
The National Electricity Law and Rules also
allow for some parties to be exempted
because their circumstances mean that the
full regulatory framework is not appropriate,
or would be costly to apply in return for little
benefit. Examples include:

embedded networks, which are small,
privately owned networks where it would
not be efficient to apply the economic
regulation framework otherwise applied
to networks15; and

generators below 5 MW (and not selling
The National Electricity Law and the related
National Electricity Rules12 achieve this in
practice by:
10
The national energy laws referred to in this
paper can be accessed from
http://aemc.gov.au/Australias-EnergyMarket/Market-Legislation/Relevant-LegislationElectricity
11
National Electricity Law, section 7.
12 These Rules can be accessed from
http://aemc.gov.au/Energy-Rules/Nationalelectricity-rules/Current-Rules
13
AEMO (2013) NEM Generator Registration
Guidelines. See Schedule 6 for a discussion of
generator exemptions.
http://www.aemo.com.au/Electricity/Registration/A
pplication-Forms/Generator
14 Rule 7.4 covers accreditation of these roles.
15 http://www.aer.gov.au/networkspipelines/network-exemptions
6
into the wholesale market), which are
normally too small to affect the power
system.
From this, the following principles are
proposed for identifying whether a product or
service should be drawn into the National
Electricity Law and Rules:
1. it affects the operation of or confidence
in the wholesale electricity market;
2. it is a monopoly activity; or
3. it affects power system quality, safety,
reliability and security (referred to as
‘power system operations’ in the rest of
this paper16).
For most new products and services in the
three markets identified above, principles 1
and 2 will not be relevant in the foreseeable
future. However, as noted later in this paper,
officials are interested in feedback on
whether any new products and services
could have implications for power system
operations.
long term interests of consumers of energy

with respect to price, quality, safety, reliability
and security of supply of energy”17.
The National Energy Retail Law and the
related National Energy Retail Rules18
achieve this in practice by regulating the
relationships between three parties:
customers, energy retailers and energy
distributors.
Parties are drawn into the NECF through a
registration and exemption framework,
depending on the products and services
offered. In particular, if a business intends to
Distribution businesses (that are registered
sell electricity or gas for use at premises, it
under the National Energy Law) are included must have a retailer authorisation granted by
in the NECF where they have a relationship the AER, or be exempted by the AER from
with a small customer. This provides
needing an authorisation19.
protections relating to a customer’s
distribution services.
General consumer law
Under the NECF, residential and small
business customers are supported by a
range of customer protections, including:

guaranteed access to an offer of supply
for electricity and gas;
The NECF works alongside general
consumer protection laws. If a business is
not drawn into the NECF specifically, its
obligations to customers will still be
regulated by national and jurisdiction laws.

requirements relating to information
about and marketing of energy
contracts;
At the national level, the Australian
Consumer Law20 provides consumer
protections relating to:

requirements relating to customer
consent, including that customers must
give explicit informed consent to enter
into a market retail contract (as opposed
to a standard contract or deemed
contract);

misleading, deceptive and
unconscionable conduct;

unfair contract terms and unfair
practices;

consumer guarantees,
a customer hardship regime, requiring
retailers to develop customer hardship
policies that must be approved by the
AER, with certain prescribed elements,
to assist residential customers
experiencing longer-term payment
difficulties;

unsolicited consumer agreements
(including door-to-door and telephone
sales);

product safety; and

enforcement and remedies.
limitations on disconnection, including
the processes that must be followed,
restrictions on when disconnections can
occur, additional protections for
customers experiencing hardship or
financial difficulties, and a prohibition on
disconnecting premises where life
support equipment is required;
Other general consumer protections are
provided by state and territory fair trading
legislation.
National Energy Customer Framework:
National Energy Retail Law and Rules
The National Energy Retail Law and Rules
form the National Energy Customer

Framework (NECF), which Energy Ministers
have agreed will be adopted in the NEM.
The NECF has commenced in the Australian
Capital Territory, Tasmania, South Australia
and New South Wales. Queensland intends
to adopt the NECF from 1 July 2015, with
Victoria aiming to transition to the NECF by

31 December 2015. Where the NECF has
not yet been adopted, state and territory
governments remain responsible for
regulating retail energy markets.
The NECF applies to the retail sale of
electricity and gas to residential and small
business customers, and to large customers
in a limited way.
The objective of the retail law (the National
Energy Retail Objective, or NERO) is to:
“promote efficient investment in, and efficient
operation and use of, energy services for the

information requirements for planned
and unplanned interruptions;

requirements relating to customers with
life support equipment;
17
‘Power system security’ has a specific meaning
in the NER, and we are interested in a wider range
of issues in this paper.
16
retailer of last resort arrangements, so
that a customer can receive an electricity
supply from another retailer should the
current retailer be unable to continue
providing the service (for example if it
goes out of business).
The retailer-customer relationship is
regulated because it is fundamental to a
customer accessing a supply of energy on
fair and reasonable terms.
Consultation question:
Are these principles useful for
identifying whether a product or
service should be drawn into the
National Electricity Law and Rules?

a requirement on retailers and
distributors to have, and inform
customers of, complaints procedures;
and
National Energy Retail Law, section 13.
These rules can be accessed from
http://aemc.gov.au/Energy-Rules/Retail-energyrules/Current-rules
18
Why are there energy-specific consumer
protections?
Energy-specific consumer protections are
required because of the essential service
nature of a supply of energy, which is
necessary to support the health and
Details of the AER’s role in retail authorisation
and exemptions are available at
http://www.aer.gov.au/retailmarkets/authorisations and
http://www.aer.gov.au/retail-markets/retailexemptions.
20 See www.consumerlaw.gov.au
19
7
wellbeing of residents of Australia and the
functioning of the Australian economy 21.
The consumer protections in the NECF and
equivalent state and territory regimes reflect
that customers should be able to access a
reliable, safe and high-quality supply of
energy on fair and reasonable terms, and
that this supply can only be withdrawn in
specific circumstances and after appropriate
procedures have been followed.
where there is the potential for market
failures or customer detriment that would not
be managed under the current rules.
In this discussion, we are mindful that
regulatory frameworks need to strike a
balance between supporting development of
innovative products and services, and
achieving the market and consumer
protection outcomes in the NEO and NERO.
small generator to participate in the
wholesale market as a registered Market
Generator, or through a Small Generation
Aggregator. Otherwise, unless the generator
is large enough to impact on power system
operations (above 5 MW) it will be exempt
from registering with AEMO.
Some distributed generation schemes may
involve use of a private network to supply
electricity to customers, for example in a
new real estate development or commercial
Electricity supply market
One way to help ensure that terms are fair
site. We consider that the current
and reasonable is to make sure that
arrangements for exempting embedded
The
most
familiar
electricity
supply
service
in
customers are informed about the
networks under the National Electricity Rules
this market involves the sale of electricity
agreements they are entering into. The
are appropriate to these situations.
NECF includes specific requirements around between a customer and an authorised
retailer, supplied from a connection to the
explicit informed consent. In the context of
Given this discussion, we do not consider
national grid (in the case of a small
new products and services in the electricity
that fundamental changes to the National
customer, a connection to a distribution
market, it is worth thinking about the
Electricity Law and Rules are needed to
network). As discussed above, this model is support the entry of most new products and
situations when customers should be
informed about the nature of these products extensively regulated under the current
services in the electricity supply market.
energy laws and rules.
and services, including any risks involved.
Incremental improvements can always be
proposed through the rule change process
These laws and rules were designed around
We consider that the following principle is
provided for in the law, overseen by the
this form of energy supply service. It is worth
useful for discussing whether new products
AEMC22.
considering how new electricity supply
and services related to electricity should be
services could integrate with the current
drawn into the energy-specific consumer
However, we do recognise the need to make
regulatory frameworks, or be limited by
protections framework (rather than being
sure that the economic regulation framework
them.
regulated by other consumer protections
for network businesses is flexible enough to
laws):

Energy-specific consumer protections
are required when a product or service
impacts on a customer’s access to a
reliable, safe and high-quality supply of
energy on fair and reasonable terms.
Consultation question:
Is this principle useful for identifying
whether a product or service should
be drawn into the NECF?
The following sections of the paper discuss
emerging products and services in the
electricity supply, demand management and
energy information markets in more detail,
and consider how the principles discussed
above could influence decisions about
appropriate regulatory frameworks. Changes
to regulatory frameworks may be needed
21
This justification was clear during the
development of the NECF. For example, the
NECF includes an obligation on some electricity
retailers to make an offer to supply small
customers. In developing this policy the Senior
Committee of Officials (SCO) considered that “the
characteristic of energy (particularly electricity) as
an essential service to ensure the health, safety
and wellbeing of residents of Australia warrants
the continued regulation of the obligation to offer
supply”. Ministerial Council on Energy Standing
Committee of Officials (June 2008), A National
Framework for Regulating Electricity and Gas
(Energy) Distribution and Retail Services to
Customers: Policy Response Paper, p.18.
New products and services in this market
could involve supplying customers with
electricity from on-site generation, as well as
micro-grids, community-owned renewable
generation, or district energy schemes.
In the sections below, we consider the
implications of new energy supply products
and services for each of the frameworks
created by the National Electricity Law and
the NECF. We use the example of products
and services based on distributed
generation, partly because these are already
emerging in the market and partly to simplify
the discussion.
National Electricity Law and Rules
We previously identified three principles for
judging whether a product or service should
be regulated under the National Electricity
Law and Rules: does it affect operation of
the wholesale market; is it a monopoly
service; and could it affect power system
operations?
We consider that the current registration and
exemption framework under the National
Electricity Law and Rules is appropriate to
new products and services based on
distributed generation. This framework
regulates the impact of generators on the
electricity market and the power system
(rather than the relationship with the
customer, which is the subject of the
National Energy Retail Law and Rules).
accommodate market changes in future.
This is the subject of the work requested by
Ministers in May 2014, discussed in the
introduction to this paper, which will ‘stress
test’ the economic regulation framework for
networks against a number of development
scenarios for the electricity market.
There may also be situations where the laws
and rules as drafted do not reflect changing
technologies. One example relates to
electricity storage, which could import
electricity (and be considered a load) or
export (and perhaps be considered a
generator) but in either case was probably
not considered when the definitions in the
laws and rules were being drafted. It may be
worth considering the most effective way to
address these kinds of issues in the current
regulatory framework.
National Energy Customer Framework
The AER has recently considered in detail
the issue of how the current framework for
selling energy relates to emerging products
and services in the electricity retail market,
in its Statement of Approach: Regulation of
Alternative Energy Sellers in the National
Energy Retail Law23.
22
23
http://aemc.gov.au/Energy-Rules
http://www.aer.gov.au/node/22188
The National Electricity Rules allow for a
8
Scenario - Alternative energy seller:
A company (the alternative energy seller)
installs a solar photovoltaic (PV) system at a
customer’s premises, retains ownership of
and maintains the system, and sells the
electricity it produces to the customer at a
fixed price over a fixed period.
In establishing its approach to alternative
energy sellers, the AER has considered the
tools currently available to it through the
retailer authorisations and exemptions
framework.
As these companies are selling energy for
use at premises, they are regulated by the
NECF. In this framework, the available
choices for the regulator are to require a
party that is selling energy to become an
authorised retailer, which attracts the full
complement of consumer protections, or to
grant an exemption. The AER can impose
conditions on an exempt seller that mirror
the consumer protections available to a
customer of an authorised retailer, to the
extent that this is possible24.
The AER considers that the key test for
determining whether a retailer authorisation
is needed in these situations is whether the
seller is the primary supplier of electricity to
a customer’s premises25. Where a small
customer is buying an ‘add-on’ or optional
service (such as a solar power purchase
agreement), and also has a contract with an
authorised electricity retailer, the AER
considers that an exemption is appropriate.
This reflects that the AER considers that
access to a reliable, safe and high quality
supply of electricity is assured by the fact
that the customer has a separate electricity
supply contract with an authorised retailer.
We agree with the approach adopted by the
AER in the context of the current rules. The
NECF’s registration and exemption
framework requires the AER to make a
decision about whether a retailer
authorisation or exemption is appropriate,
and about the appropriate conditions to
impose on an exempt seller.
To date, in most cases, the AER has
decided to impose minimal conditions on
exempt alternative energy sellers, only
requiring the exempt sellers to inform their
customers that they are exempt and that the
relevant consumer protections are under the
24
Section 114(1)(c) of the Retail Law states that
‘exempt customers should, as far as practicable,
not be denied customer protections afforded to
retail customers under this Law and the Rules’.
25
AER (2014) Statement of Approach: Regulation
of Alternative Energy Sellers in the National
Energy Retail Law, p5.
http://www.aer.gov.au/node/22188
Australian Consumer Law, rather than the
National Energy Retail Law26.
These models can raise challenging
questions about energy consumer
protections. For example, if a customer is
getting most of their electricity supply from
an alternative energy seller (maybe from a
combination of on-site generation and
storage) and only has a network connection
and a retail contract as back-up, how should
energy consumer protections be assured?
In this context, we note that a number of
traditional retailers have applied for retail
exemptions for their PV business arms,
presumably to compete in the same market
as other alternative energy sellers.
We are interested in views on the consumer
protection obligations that are appropriate
for alternative energy sellers.
The AER has recently begun a further
consultation on these issues, and you are
welcome to indicate that you have provided
a submission to the AER, which we will also
consider27.
protections.
Customers who choose to install, maintain
and operate their own generation and
storage have also chosen to take on the full
risk involved in not having a grid connection.
However, we are interested in feedback on
the types of information that could or should
be provided to customers thinking about this
option. This might include information about
the risks of going off-grid and/or how to
reconnect.
Off-grid supply by a regulated provider:
Another scenario relates to situations where
currently regulated electricity providers
choose to serve some customers with
distributed generation and storage. For
example, it may be more cost effective for
distribution businesses to serve some
remote customers with distributed resources
and remove the connection to the national
grid. However, this would have a number of
flow-on implications, including limiting those
customers’ ability to access retail
competition and to receive the same
consumer protections as on-grid customers.
The issues become even more complex if
we consider scenarios where large numbers
of customers go off-grid but have a
Scenarios:
relationship with an electricity seller. The
Off-grid alternative energy seller: This
CSIRO and others have identified increasing
scenario is similar to the previous example,
numbers of off-grid customers as one
in that a provider offers customers an on-site possible scenario arising from increasing
generation option. However, in this case the costs of grid-supplied electricity and falling
generation (and possibly storage) is sized to costs of alternatives like distributed
meet the site’s full electricity needs and the
generation and storage28.
network connection is removed.
On one hand, off-grid customers should
In this scenario, the off-grid solution could be have similar rights to anyone else to access
offered to individual customers, or to a group a reliable, safe and high-quality supply of
of customers, for example in a real-estate
electricity. On the other hand, customers
development that is not connected to the
may choose to accept higher levels of risk in
national grid and is marketed to customers
their relationship with an energy seller in
on the basis of benefits such as certainty
return for lower costs or other benefits.
about energy costs, or environmental
Another possibility relates to customers who
sustainability.
find themselves off-grid because their
In this scenario the generation would not be electricity providers decide this is the most
owned or operated directly by the customer
efficient way to supply them. As costs for
and so the contract with an energy seller
distributed generation and storage fall, it
(rather than the use of distributed
may become more cost effective to serve
generation) is the key issue for thinking
some communities at the end of long
about appropriate energy consumer
transmission and distribution lines with
distributed energy technologies, compared
26 For example, in granting an individual
to maintaining a connection to the national
exemption to one company providing a solar
grid.
Off-grid customers
power purchase agreements, the AER imposed a
condition that “the exempt seller must provide the
customer in writing a plain English notice
explaining that the contract is covered by the
Australian Consumer Law (as set out in schedule
2 of the Competition and Consumer Act 2010) and
is separate to the customer’s contract with their
retailer and distributor which are covered under
the National Energy Retail Law”.
http://www.aer.gov.au/node/23291.
27 http://www.aer.gov.au/node/28403
This already happens in some remote
28
CSIRO (2013) Change and choice: The Future
Grid Forum’s analysis of Australia’s potential
electricity pathways to 2050.
http://www.csiro.au/OrganisationStructure/Flagships/Energy-Flagship/Future-GridForum-brochure.aspx
9
regions (e.g. regional Queensland).
Customers in these isolated communities
are not considered to be part of the NEM
and are not covered by NEM-based
consumer protections, but rather by
separate protections put in place by the
jurisdiction.
Earlier in this paper we discussed the
principle that energy-specific consumer
protections are required when a product or
service impacts on a customer’s access to a
reliable, safe and high-quality supply of
energy on fair and reasonable terms.
informed decisions about going offgrid?
Are there other consumer protection
issues we should consider in this
market?
If so, how could these be addressed?
Demand management market
heater is separately metered and charged at
a discounted rate, and heating times are
controlled by a remote signal or timer
according to the requirements of the
distributor. This allows distributors to control
when hot water loads come on line, in order
to manage demand in the network. Some
distributors and retailers are also offering or
proposing direct load control products for
other appliances. For example:

Queensland distributor Energex offers
rebates for air conditioners connected to
its PeakSmart system29.
Products and services in the demand
management market allow customers to
take an action to change their electricity
This is useful for identifying when energy Pooled Energy is an authorised retailer
consumption or costs. This is distinct from
specific consumer protections are required.
proposing to offer bundled electricity
It suggests that the current arrangements for providing customers with advice or
retail and pool pump direct load control
information about their energy use and
grid-connected customers are appropriate,
products to small customers30.
because their electricity seller will need to be costs, which is discussed in the next section.
Other parties could also offer these types of
authorised or exempted, with appropriate
Some new products and services in the
products in situations where they are not
consumer protections applied in either case.
demand management market may raise
covered by the energy laws.
questions about appropriate levels of
However, it also suggests that the
regulation under the energy frameworks,
Scenario – Demand aggregator: a
arrangements for off-grid customers may
because they involve active control of how a company (known as an ‘aggregator’) signs
need more consideration. An off-grid
up small customers to a direct load control
provider would not be subject to the NECF in customer’s electricity supply is used, and
product and installs control equipment on
most jurisdictions, although any jurisdictional decisions made on behalf of a customer,
rather
than
by
a
customer.
suitable appliances (such as air conditioners
energy laws would apply, as would general
and pool pumps). The company offers to
consumer laws. For example, an off-grid
Scenario - Home energy management
share the financial benefit of the controlled
provider may not be required to have the
systems: A provider offers a system that
loads with the customers (for example in the
same hardship and dispute resolution and
automates how appliances operate in
form of a fixed payment for being part of the
disconnection arrangements as an energy
response to factors like electricity prices and program, and variable payments depending
seller under the NECF.
temperature. Dishwashers, washing
on how often or how long the loads are
machines, pool pumps and dryers can be
Information requirements may also be
controlled).
programmed to operate when prices are low.
applicable, to enable customers to fully
Air-conditioners can be programmed to
The aggregator can operate the direct load
evaluate the risks and benefits of going off
provide a certain level of cooling during
control in accordance with the contract with
grid before making an informed decision.
normal price periods, and a different level
the customer, and offers the load that it has
during high price periods such as a critical
under control to electricity retailers and
Consultation questions:
peak pricing event during a heatwave that
distributors to help them manage their
results in high levels of network demand.
wholesale and network costs respectively.
Are there other products and services
emerging in the electricity supply
market (beyond distributed generation
and storage) that we should consider
in our advice to Ministers?
Do you agree that the National
Electricity Law and Rules can
accommodate new products and
services in this market, through the
framework for authorising and
exempting generators and network
operators?
Is the NECF flexible enough to allow
the AER to ensure customers of
alternative energy sellers have
appropriate consumer protections?
Will off-grid energy supply
arrangements create specific
consumer protection issues if this
becomes a mass-market option?
Are specific consumer protections
required to help consumers make
We consider that there is no rationale to
regulate active demand management
systems that operate at the discretion of
the customer. The energy laws are not
intended to regulate the choices that
customers make about how they use
energy, and these types of systems would
only be automating actions that customers
could do manually anyway.
Remote control of load, generation and
storage
However, some forms of active demand
management may operate at the discretion
of parties other than the customer (with
customer consent), and feedback is sought
on the regulatory implications of these
products where they are offered by parties
not currently covered by the energy laws.
As the aggregator is not operating in the
wholesale market or running a network, it is
not required to be registered under the
National Electricity Law. As it is not selling
electricity, it is also not required to be
authorised or exempted as a retailer.
In future, similar business models could
involve on-site generation and storage. For
example, electricity stored in stand-alone
batteries or batteries in electric vehicles
could be aggregated and called on to
support wholesale market and network
objectives, as could some forms of on-site
generation, such as fuel cells.
29
Direct load control products offered by
electricity retailers or distributors are already
widely available. The main example is offpeak hot water tariffs, where the water
https://www.energex.com.au/sustainability/positive
-payback/positive-payback-forhouseholds/households
30 http://www.aer.gov.au/node/22521
10
National Electricity Law and Rules
in slightly different locations, and changes in
load are ramped up or down more gradually.
The discussion below focusses on direct
load control, but the issues are essentially
the same for remotely controlled generation
and storage.
Registration under the National Electricity
Law may also not be the best solution to any
problems identified. For example, if the real
issue with demand aggregation is a lack of
In the scenario above, the aggregator could transparency for network operators, a better
option might involve communication
have a significant amount of load under
control, which is being activated according to between demand aggregators and network
operators. The Energy Networks Association
the aggregator’s commercial incentives 31.
has previously developed a Load
This could mean that there are large blocks
of load switching on and off with no visibility Management and Network Security
Protocol32 that sets out principles for
to other market participants, particularly
integrating direct load control products into
network operators. It seems possible that
distribution network operations. An
that this switching could have unintended
alternative to registration could involve
results such as tripping network protection
equipment, making it harder for operators to formalising this kind of protocol for use in the
market.
manage the stability of their networks.
Feedback is sought on whether these are
material risks.
Large blocks of controlled load could also be
a resource for AEMO in managing power
system security events. Under the National
Electricity Rules, AEMO can direct
registered participants to take actions that
would help restore power system security (a
clause 4.8.9 instruction). Registered
participants also give AEMO information that
it uses in developing its demand forecasts,
which are used in wholesale market
operations, network planning and investment
decisions.
For these reasons, some form of registration
for demand aggregators might seem
appropriate.
On the other hand, the National Electricity
Law does not require customers to register
large loads for power system operation
reasons. Large industrial customers
routinely switch large loads on and off with
no obligation to inform market participants.
This can be managed under the existing
rules and probably affects the large
customer’s retailer as much as the network.
It may also be the case that controlled loads
do not represent a material risk to power
system operations. For example, it is
possible to stagger or randomise the
operation of direct load control, so that
appliances respond at slightly different times
retailer or distributor offering the same
product.
However, a third party demand aggregator
would not be drawn into the NECF at
present. We are seeking feedback on
whether the discussion above leads to the
conclusion that a direct load control
aggregator should be subject to similar
energy consumer protections, noting that
this may be a barrier to entry for these
businesses.
Consultation questions:
Are there other products and services
emerging in the demand management
market that we should consider in our
advice to Ministers?
Could direct load control products
create material risks for power system
operations? If so, how could these
risks be managed within the
regulatory framework?
National Energy Customer Framework
Officials have previously looked at
appropriate consumer protections relating to
direct load control products in the context of
new products and services enabled by smart
meters33. Officials considered the possible
impacts of direct load control products on
customers, and noted that they might have
negative impacts that a customer should be
aware of before accepting a direct load
control product. For example, a customer
should be informed about any risks before
accepting an air conditioner direct load
control product, which could arise, for
example, if they have medical cooling
needs.
As a result of that review, officials are
drafting changes to the National Energy
Retail Rules34, relating to the situations
when information about a direct load control
product must be given to customers, and the
nature of the information. These new rules
will apply to electricity retailers, distributors
and their agents.
In principle, this logic should also extend to
other providers of direct load control
products. That is, a company offering direct
load control products directly to customers
should have the same marketing,
information and consent obligations as a
ENA (2012) ENA Submission – AEMC Power of
Choice Directions Paper. The text of the protocol
follows Attachment 2.
http://www.aemc.gov.au/Media/docs/EnergyNetworks-Association---120516-e53dc460-6769404d-9179-e6889aed62c5-0.PDF
33 EMRWG (2012) National Smart Meter
Consumer Protections Review – Officials’ Report,
p. 75.
https://scer.govspace.gov.au/files/2012/11/SmartMeters-Officials-Report.pdf
34 http://www.scer.gov.au/workstreams/energymarket-reform/demand-side-participation/smartmeters/consumer-protections/
Are there similar implications for
power system operations where
distributed generation and storage are
being controlled remotely?
Should parties offering direct load
control products to customers have
similar obligations to retailers and
distributors regarding informed
consent?
If so, how could these obligations be
created for parties not covered by the
National Electricity Retail Law?
Energy information market
Many organisations already provide
customers with information to help them
manage energy consumption and costs. As
advanced electricity meters and
complementary technologies become more
widely available, the variety and complexity
of information products and services is likely
to grow. These could include:

energy efficiency advice to identify
opportunities to lower consumption and
manage demand, and ultimately costs;

bill forecasting and checking services,
for example where a customer has a
solar PV system or complex energy
arrangements;

price comparator websites that help
customers find the best retail offer for
their circumstances; and

monitoring energy use, for example
through an in-home display or a web
portal.
32
31
Very roughly, an aggregator would need to
control 4,200 pool pumps if each pump had a
capacity of 1.2 kW and could only be turned on
and off, to reach 5 MW of controlled load (a 5 MW
generator would need to register with AEMO for
power system operations reasons). An aggregator
would need to control 2,900 split system air
conditioners each using 1.75 kW, to reach 5 MW
of controlled load. Actual demand response
modes are likely to include more than just on and
off, for example operating at 50% and 75%
capacity.
11
We consider there is no reason to include
these types of products and services in the
energy regulatory frameworks, as they don’t
invoke the principles identified above. In the
case of the National Electricity Law, they
don’t involve the wholesale market or impact
on power system operations, for example,
and they don’t affect a customer’s ability to
access a reliable, safe and high-quality
supply of electricity under the NECF.
Further, customers receive suitable
consumer protections under the Australian
Consumer Law.
However, there are some issues that are
worth considering because they relate to the
privacy and use of electricity consumption
data.
Privacy and use of metering data
Metering data can be an important input to
energy information products and services.
Easy access to and sharing of data is an
important enabler in this market.
However, some customers may only fully
engage with these opportunities if they are
confident that their privacy is being
protected. Recent research by the
Consumer Action Law Centre identified the
privacy of consumption information, and the
use of this information for marketing, as the
two major concerns of customers about
engaging with new energy products and
services35.
There are two frameworks relevant to
privacy that work side-by-side in the NEM.
National Electricity Rules: For registered
participants, the National Electricity Rules
include provisions relevant to the privacy of
metering data. The rules define metering
data as confidential information, impose
obligations on the handling of confidential
information, and set out which parties can
access a customer’s metering data36.
Registered participants must use all
reasonable endeavours to make sure that
confidential information stays that way, but
they can disclose confidential information
with consent37.
Privacy Act: This is Commonwealth
legislation that includes 13 Australian
Privacy Principles (APPs) that govern how
some entities must handle personal
information. These entities are generally
Australian Government agencies, and
businesses with annual turnover above
$3 million, although businesses that
undertake specific activities, such as
disclosing personal information ‘for benefit’,
are also covered by the Act38. Under the
Privacy Act, ‘personal information’ is defined
as “any information or an opinion about an
identified individual, or an individual who is
reasonably identifiable”39.
Market participants accessing data
In order for the electricity market to function,
a number of parties have a genuine need to
access metering data, including AEMO and
electricity retailers and distributors, as well
as the metering service providers that
actually collect, process and deliver data.
For this reason, the best framework for
managing confidentiality of electricity
metering data is under the electricity
framework. The National Electricity Rules
establish procedures for parties to access
the metering data they need to fulfil their
roles, while protecting the confidentiality of
that data.
However, we understand that customers
want to know that their privacy is being fully
protected when they take advantage of
opportunities in the energy information
market.
Officials have previously engaged Seed
Advisory to examine privacy issues related
to metering data from smart meters40. Seed
Advisory found that the confidentiality
requirements under the National Electricity
Rules are generally consistent with the
requirements of the Privacy Act, although
there is scope to impose some additional
obligations on electricity market participants.
These relate to informing customers about
how metering data is used in the market.
The AEMC has also recently considered the
issue of privacy protections for metering
data in its determination on a rule change
request submitted by the Standing Council
on Energy and Resources (SCER) (now the
COAG Energy Council).
That rule change request was intended to
38
35
Consumer Action Law Centre (2014) Smart
Moves for a Smart Market, p.82.
http://consumeraction.org.au/report-smart-movesfor-a-smart-market/
36 Rule 7.10 defines metering data as confidential
information. Rule 8.6 defines how Registered
Participants must deal with confidential
information. Rule 7.7 defines who can access
metering data.
37 Rule 8.6.2(c)
http://www.oaic.gov.au/privacy/privacy-act/theprivacy-act
39
Office of the Australian Information
Commissioner (2014) Australian Privacy Principle
Guidelines, p.18.
http://www.oaic.gov.au/privacy/applying-privacylaw/app-guidelines/
40
Seed Advisory (2013) Privacy for the National
Smart Meter Program – Final Advice.
http://www.scer.gov.au/files/2013/08/Final-AdvicePrivacy-for-National-Smart-Metering-Program.pdf
clarify the ability of customers to access their
own electricity consumption data, and the
obligations on retailers and distribution
businesses to provide it. The rule change
request also included a proposal for retailers
and distributors to provide information on
their websites about how metering data is
used in the market and who has access to it.
This was intended to increase transparency
for customers about the nature and use of
metering data.
In its final determination, the AEMC did not
accept this element of the rule change
request. The AEMC considered that any
privacy concerns are better addressed
through the application of privacy legislation
to the extent that metering data is personal
information41.
We consider that the current arrangements
are appropriate to manage how market
participants handle metering data, because
they balance legitimate needs for market
participants to access data with the need to
protect the confidentiality of customers.
However, we are interested in feedback from
stakeholders on whether there are privacy
issues related to market participants that
have not been discussed in this paper but
that should be addressed.
One example may relate to situations where
market participants provide data to specialist
companies for analysis, for example to
identify trends that would help improve
business efficiencies. We would want to
ensure that data is appropriately protected in
these situations.
Other parties accessing data
We also recognise that, in future, parties that
are not covered by the National Electricity
Rules could have access to customer
metering data.
Scenarios
Energy adviser: A company (the adviser)
offers to provide a customer with advice
about how to lower energy costs, including
by using electricity at different times of the
day (because the customer has a time-ofuse tariff). The customer asks their electricity
retailer to give them a copy of their interval
data for the past 12 months, and gives the
file to the adviser. The customer gets the
benefit of the advice, but the adviser also
has a copy of the customer’s data.
41
AEMC (2014) Final Rule Determination:
National Electricity Amendment (Customer access
to information about their energy consumption)
Rule, p.9. http://www.aemc.gov.au/RuleChanges/Customer-access-to-information-abouttheir-energy
12
Direct access to metering data:
Smart meters can include functionality to
support a home area network (HAN) that
includes a link to the meter to use its
measurement functions. If the system also
provides this information back to a central
database, the provider, who is not a market
participant and not governed by the National
Electricity Rules, has access to a stream of
data about the customer.
Consultation questions:
Do the National Electricity Rules
protect metering data sufficiently
where it is held by market
participants?
Is the Privacy Act sufficient to protect
metering data where it is used by
parties outside the electricity market?
How can the privacy expectations of
Seed Advisory recommended relying on the
customers and the need for market
Privacy Act to ensure the privacy of metering
participants to access data best be
data that is available to parties not covered
managed concurrently?
by the National Electricity Rules. This is a
national regime that is considered
appropriate to protect privacy with regard to Conclusion
many types of sensitive information about
individuals.
This paper is intended to begin a
consultation on whether the regulatory
However, other stakeholders have
frameworks in the NEM are appropriate in
suggested that specific privacy protections
the context of new products and services
are necessary for consumption data, so that being offered to small electricity customers.
electricity customers have confidence to
engage with new products and services. For The National Electricity Law and Rules, and
example, the Consumer Action Law Centre
the NECF, reflect underlying principles about
has proposed the development of a limited
when activities should be regulated to
and industry specific privacy regime for
ensure that the NEO and the NERO are
consumption data that would:
achieved; both of these objectives are
intended to ensure that the electricity market
 include standard contract terms that
operates in the long-term interests of
cover all permitted uses of metering
consumers.
data;
As the electricity market evolves in future,
 set out the agreed primary and
these principles will continue to be relevant
secondary purposes for the collection of as a basis for making decisions about when
metering data; and
activities should be regulated.

ensure customers have to opt-in (rather
than opt-out) to any use of metering data
for any agreed secondary purpose42.
However, we also believe that it is
appropriate to review whether the way that
these principles are operationalised in the
laws and rules means they are flexible
There would be challenges in implementing
enough to accommodate new products and
this kind of regime in practice so that it
services. This paper has discussed some of
covered all parties with access to metering
the issues that need to be considered, such
data, enabled the continuing operation of the
as finding a balance between supporting
electricity market and included parties not
innovation while not infringing on the
covered by the National Electricity Rules.
objectives that are being sought for
This would essentially involve placing
customers.
special obligations on access to metering
data so that all parties accessing the data
Officials would like to hear from stakeholders
were covered.
about whether you think the current
This kind of regime would also only be
necessary if there was something specific
about consumption data that meant it
needed a specific privacy regime.
regulatory frameworks are sufficiently
flexible, or if changes are needed which can
support innovation in the small customer
market.
We are seeking feedback on whether
metering data is sufficiently sensitive to
require specific privacy protections, and if
so, how these could be implemented.
42
Consumer Action Law Centre (2014) Smart
Moves for a Smart Market, p.81.
http://consumeraction.org.au/report-smart-movesfor-a-smart-market/
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