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House of Assembly - Fifty-Fifth Parliament, First Session (55-1)
2025-09-18 Daily Xml
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Bills

National Energy Retail Law (Retailer of Last Resort) Amendment Bill

Introduction and First Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (12:00): Obtained leave and introduced a bill for an act to amend the National Energy Retail Law (South Australia) Act 2011 and to make related amendments to the National Electricity (South Australia) Act 1996. Read a first time.

Second Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Infrastructure and Transport, Minister for Energy and Mining) (12:01): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

The Retailer of Last Resort, or RoLR, scheme is a vital safety net designed to protect energy consumers and maintain uninterrupted energy supply in the event of a retailer's failure.

The scheme is overseen by the Australian Energy Regulator (AER), working alongside the Australian Energy Market Operator (AEMO) and energy retailers.

It transfers impacted customers to designated RoLRs in situations such as retailer insolvency, market suspension, or when a retailer stops operating. Historically, it has operated smoothly, with only four activations between 2012 and 2022, and no major interruptions to service.

However, Russia's invasion of Ukraine in early 2022 led to a sharp surge in wholesale electricity and gas prices, resulting in ten retailer failures and the first use of the AER's gas directions power. In response, in June 2022, Energy Ministers tasked the Australian Energy Market Commission with re-examining its earlier review of the scheme.

In August 2022, Energy Ministers agreed in principle with the AEMC's updated recommendations and committed to reforming the RoLR framework as part of wider initiatives to bolster retail market resilience during volatile periods and an unprecedented spike in RoLR events.

Following public consultation, Energy Ministers approved the amendments that are set out in the National Energy Retail Law (Retailer of Last Resort) Amendment Bill 2025 on 6 December 2024.

This Bill puts those reforms into action. It fortifies the scheme's operations, increases market durability, and improves the handling of retailer failures. It offers greater assurance to participants, lowers financial risks, and fosters competition while placing consumer protections at the forefront. The AER will maintain oversight, including ongoing monitoring and scope for additional changes based on further AEMC guidance.

I will now speak to these critical reforms in more detail.

The Bill enhances clarity in cost recovery arrangements. At present, designated RoLRs can face substantial costs such as acquiring extra energy or hedging contracts—with recovery decisions left to broad AER discretion. This uncertainty can complicate financing and cash flow, particularly in large-scale failures. The reforms amend the principles to allow recovery of all prudently incurred costs, including administrative, energy, and financing expenses. They define eligible cost types, introduce fast-tracked cost recovery applications within three months, restrict scheme alterations to significant errors, and clarify recovery via distributor payments. These adjustments will build retailer trust, simplify access to finance, and motivate more retailers to step up as RoLRs, thereby distributing risks and sustaining market competition over the long term.

The Bill also extends the AER's window for designating RoLRs to up to 72 hours following a RoLR event, moving away from reliance on pre-set default RoLRs. This extension enables the AER to select multiple or alternative RoLRs after the event, inform AEMO, and distribute customers more effectively. It also clarifies the role of default RoLRs while guaranteeing uninterrupted supply, reducing the chance of chain-reaction failures and maintaining market variety by preventing customers from clustering with a handful of large retailers.

The Bill amends AEMO's credit support demands by establishing a one-week grace period for designated RoLRs, followed by gradual increases over four weeks, to account fully for the added customer load. Current requirements for swift increases can pressure retailers during unstable times, risking suspensions. Amendments to the National Electricity Law (NEL) and Rules (NER) permit the Minister to make initial rules to implement this phased approach, striking a balance between RoLR responsibilities and the risks to generator payments. This will encourage involvement, enable precise credit adjustments as customers transition, and ease immediate financing pressures.

The Bill also eliminates overly rigid language in RoLR plan requirements, granting the AER more leeway in crafting, upholding, and implementing these plans. Such plans detail event procedures and exercises for participants, but strict timelines presently hinder flexibility. These minor revisions will improve efficiency for everyone, aiding better preparation without undue restrictions.

The Bill permits RoLRs to provide transferred customers with a 'designated contract', based on the terms and conditions of a market retail contracts (MRCs). This reform provides an alternative to the RoLR deemed retail arrangements and has the goal of attracting wider participation and offering customers more affordable, competitive options. Transferred customers currently default to deemed retail arrangements equivalent to SRCs, which can be more expensive than market alternatives. Retailers may now inform the AER if it is willing to transfer customers on to a designated contract, ensuring these contracts meet core safeguards:

Contain the same terms and conditions as a market retail contract,

Prices not exceeding the RoLR's standing offer prices,

No price increase for the first three months,

No exit fees for breaking the contract during the first three months, and

Adherence to NERL and NERR standards.

Most importantly, the reforms ensure a small customer transferred to the designated RoLR's designated contract will not be in a worse position than if the customer had been transferred to the registered RoLR's standard retail contract.

Explicit informed consent is not required in relation to the designated contract. The intent of the RoLR scheme is to avoid interruption to customer supply by having pre-established contractual arrangements. The designated contract must be published on the RoLR's website.

The AER will evaluate and oversee these requirements through guidelines, mandating records and follow-up communications. After three months, prices may increase if customers are properly notified via best endeavours, in line with the AER's Better Bills guidelines to promote engagement. This approach balances benefits for consumers with incentives for retailers, lowering obstacles to joining the scheme.

Finally, the Bill adjusts the deadline for responding to AER directions on gas supply and pipeline capacity from 'immediate' to within 24 hours of the RoLR notice. Current requirements lack clear enforceability, creating compliance issues. This modification enhances precision and feasibility, aligning with the extended designation timeframe without compromising supply.

I commend the Bill to members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provision

These clauses are formal.

Part 2—Amendment of National Energy Retail Law

4—Amendment of section 132—Designation of registered RoLR for RoLR event

This amendment relates to the designation of a registered RoLR for a RoLR event.

5—Amendment of section 135—AER RoLR Guidelines

This amendment adds an additional matter that the AER RoLR Guidelines must specify.

6—Amendment of section 136—Issue of RoLR notice

This amendment includes another requirement for a RoLR notice.

7—Amendment of section 137—RoLR notice—direction for gas

This amendment includes a requirement connected with a direction for gas.

8—Insertion of sections 148A to 148C

New sections 148A to 148C are inserted:

148A—Designated contract for RoLR

This section relates to designated contracts for RoLRs relating to transferring small customers.

148B—Transfer of customers to designated RoLR with designated contract

This section includes provisions relating to the transfer of customers to a designated RoLR with designated contracts.

148C—Keeping records about, and giving information to, transferred customers

This section relates to requirements for keeping records about, and giving information to, transferred customers.

9—Amendment of section 163—Contents of RoLR plans

These amendments are technical or consequential.

10—Amendment of section 166—RoLR cost recovery schemes

Additional provisions are included in relation to RoLR cost recovery schemes.

11—Amendment of section 167—RoLR cost recovery scheme distributor payment determination

This amendment provides that a RoLR cost recovery scheme distributor payment determination may involve distributors making payments to satisfy the full costs of the scheme.

12—Amendment of section 168—Amendment of schemes and determinations

These amendments make provision in relation to the amendment of schemes and determinations.

13—Amendment of Schedule 1—Savings and transitionals

Savings and transitional provisions are inserted for the purposes of the measure.

Schedule 1—Related amendments to National Electricity Law

1—Amendment of section 2—Definitions

Certain definitions are inserted for the purposes of the measure.

2—Amendment of section 6—Ministers of participating jurisdictions

The defined term South Australian Minister is substituted into this provision.

3—Amendment of heading to Part 7, Division 2, Subdivision 1

This amendment is consequential.

4—Insertion of section 90EH

New section 90EH is inserted:

90EH—South Australian Minister to make initial Rules relating to credit support for RoLR events

This section provides for the South Australian Minister to make initial Rules relating to credit support for RoLR events.

5—Amendment of section 90F—South Australian Minister may make Rules on recommendation of MCE and Energy Security Board

The defined term South Australian Minister is substituted into this provision.

Debate adjourned on motion of Mr Teague.

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