New wholesale electricity and gas market reporting obligations on the horizon — what you need to do to get ready

What you need to know

• On 5 November 2024, the Australian Energy Regulator (AER) released its final Wholesale Market Monitoring and Reporting Guidelines (Guidelines). Under the National Electricity Law, the AER is required to monitor wholesale energy markets to assess whether there is sufficient participant competition. The AER has traditionally done this by gathering information from publicly available sources.
• The new Guidelines, and the orders to be made under the Guidelines, seek to extend the AER's ability to gather information directly from electricity and gas market participants. This is a significant change for electricity industry participants. However, many in the gas sector have been providing such information regularly to the ACCC as part of its inquiry into gas supply in Australia.
• On 11 November 2024, the AER issued draft market monitoring information orders requiring electricity and gas market participants to provide certain information to the AER on both a quarterly and annual basis, including commercially sensitive details of any OTC standard contracts, OTC large non-standard contracts, and power purchase agreements entered into by participants (Orders). The draft Orders for both electricity and gas market participants are open for submission until 20 December 2024.
• Once finalised, the Orders will apply from the date of issue until 31 July 2030 for electricity market participants and 1 April 2025 to 30 June 2030 for gas market participants.
• Together with the recently released "ASIC Derivative Transaction Rules (Reporting) 2024", reporting obligations for wholesale market participants are significantly increasing with obligations to disclose commercially sensitive information.

What you need to do

Prepare for compliance with the draft Orders by:

• ensuring that any exchange trade information, OTC standard and large non-standard contracts, and power purchase agreements entered into by market participants between 1 July 2019 and 31 December 2024 are compiled and stored appropriately having regard to confidentiality obligations under those documents;
• considering potential responses to certain qualitative questions, such as whether participants have identified any operational issues that may have a material impact on their ability to operate in the market; and
• implementing document and file management procedures to ensure that all current and historical disclosure materials are sufficiently stored prior to disclosure with the AER.

Who will be affected

The Guidelines and draft Orders will apply to the following market participants:

• for electricity market participants, any Retailers, Market Generators, Integrated Resource Providers, and Trading Companies; and
• for gas market participants, anyone who is required to disclose information under Parts 10 and 18A of the National Gas Rules, which will largely include pipeline operators.

Obligations of electricity market participants

Under the draft Orders, electricity market participants will have quarterly, annual, and one-off reporting obligations to the AER.

For each quarter, participants must provide:

• details of any contracts with a total volume greater than 1MW entered into on the ASX or FEX Global Financial Exchange;
• OTC standard products; and
• OTC large non-standard contracts.

These details will include price and volume data.

Market Generators and Integrated Resource Providers must also respond to certain qualitative questions required by AER, such as whether there are any factors that may affect fuel supply security or whether there are any restrictions to operate any Generating Unit.

By no later than 31 March in each calendar year, participants must:

• provide any information relating to any Power Purchase Agreements they are party to, including region, trade volume, production unit, delivery dates and prices; and
• respond to annual qualitative questions required by the AER such as disclosure of any information or contracts participants are party to that are not otherwise required to be provided to the AER on a quarterly or annual basis.

By no later than 31 August 2025, participants must provide to the AER certain details of any Exchange traded products, OTC standard products, OTC large non-standard products, and Power Purchase Agreements entered into between 2019 and 2024.

What is a Contract (for electricity)

Under the Orders, a Contract is defined as:

• an electricity derivative contract or master agreement, such as those traded on an Exchange and OTC markets, that uses the NEM Settlement Price as the underlying exposure; or
• an electricity derivative contract not exposed to the NEM Settlement Price (such as those relating to wind or solar generation).

What is a Power Purchase Agreement

Under the Orders, a Power Purchase Agreement is defined as a long-term financial agreement between an electricity generator and a customer at an agreed price over a fixed term for energy generated from a renewable energy asset, including but not limited to solar power and wind power.

It excludes Retail Pass-through contracts, contracts pertaining to networks, interconnectors or network capacity or agreements between a Class Member and its Related Body Corporates.

Application

It is unclear if government support schemes such as the NSW Long Term Energy Service Agreement or the Federal Government Capacity Investment Scheme Agreements are intended to be captured. It is also unclear where industrial scale "behind the meter" arrangements might fall into these arrangements.

Undoubtedly, there are other arrangements where participants will be uncertain if they are to be included.

Qualitative information

The qualitative information to be requested seems broader than the market monitoring remit for the AER. According to the Guidelines, this will include information pertaining to participants’ risk appetite, risk management strategies, trading strategies and investment consideration in the context of the energy transition.

Obligations of gas market participants

The Orders require gas market participants to give to the AER any information published under Part 10, rule 101E and Part 18A, rule 198E(1)(b) of the National Gas Rules.

Exemptions

The AER may grant an exemption to market participants from compliance with the Orders, with or without conditions, under either section 18EL of the National Electricity Law or section 30AQ of the National Gas Law. The Guidelines and the Orders provide no guidance as to the possible grounds for an exemption for the Order (see section 4.8.3 of the Guidelines).

Failure to comply

Failure to comply with the Orders may result in the AER taking compliance or enforcement action such as issuing infringement notices or seeking civil penalties. The Criminal Code Act 1995 (Cth) makes it an offence under the National Electricity Law and National Gas Law to provide the AER with false or misleading information.

Assessment and reporting

Under the Guidelines, the AER will release a wholesale market performance report at least once every 2 years based on the information it has gathered from participants during that period. This will facilitate the AER providing advice to the Ministerial Council on Energy on the performance results of the wholesale market monitoring functions. The reports will identify and analyse whether there is:

• 'effective competition' within the market;
• market features that may be detrimental to effective competition within the markets; and
• features that may detrimentally impact on the efficient functioning of the market and achievement of the relevant legislative objectives.

In addition, for the wholesale gas market, these reports will:

• monitor and review performance of markets, bilateral trade agreements and financial risk management products; and
• identify and analyse whether structural features may be detrimental to effective competition within the market.

Various reports on the performance of wholesale electricity and gas markets will require increased frequency in monitoring and information disclosure. Other reporting requirements may include, but are not limited to:

• wholesale markets quarterly reports;
• significant price variation reports;
• state of the energy market report; or
• special reports issued between standard monitoring reports.

Factors relevant to an assessment of effective competition include:

• active competitors and the sustainability of their position;
• prices dictated by market forces as opposed to market power;
• barriers to entry;
• independent rivalry of good or service; and
• any other relevant matters.

Confidentiality and use of information

Under the Guidelines and draft Orders, the AER is required under the Privacy Act 1988 (Cth) to take all reasonable measures to protect any information provided by market participants from unauthorised disclosure. Any inadvertent disclosure of confidential information will be managed in accordance with established AER processes.

Disclosure of confidential information is permitted where:

• the information has been de-identified;
• disclosure is required by law;
• the disclosure will not be of detriment to a person; or
• the detriment to the person is outweighed by the public interest benefit.

Information obtained from other regulatory agencies may be confidentially provided to the AER subject to conditions imposed by the other agency. Information obtained may be used for secondary purposes, including compliance and enforcement purposes, but not for investigating a breach of laws or regulations.

Want to know more?

• New derivatives transaction reporting rules are now in force – is your data in order? (7 November 2024)