Bills Digest No. 44, 2022–23

Treasury Laws Amendment (Energy Price Relief Plan) Bill 2022

Treasury Updated

Author

Howard Maclean, Dr James Prest, Tessa Satherley

Go to a section

This Bills Digest was formerly published with the title Competition and Consumer Amendment (Gas Market) Bill 2022. It was based on the Exposure Draft materials at https://treasury.gov.au/consultation/c2022-343998 as released on Friday 9 December 2022, and may not reflect the content of the Bill as introduced to Parliament.

The Treasury Laws Amendment (Energy Price Relief Plan) Bill 2022 was officially tabled on 15 December 022.

Key points

  • The Bill creates powers for the Australian Government to impose both a 12-month domestic gas price cap and an ongoing mandatory code of conduct for the gas market.
  • It does not provide for other policies agreed by National Cabinet in response to high energy prices over 2022, such as a price cap on black coal, consumer energy subsidies, or compensation (if any) to either companies or state and territory governments.
  • The draft price cap instrument specifies a cap of $12/gigajoule for domestic gas contracts.
  • The code of conduct would be developed over 2023. The Bill provides that the code of conduct may regulate most aspects of the gas industry, including: prices; the location, volume and timing of gas supplies; and other contract terms. It appears that the code need not be restricted to the domestic market alone, or the wholesale market alone.
  • Under the Bill, contraventions of the yet-to-be-developed code of conduct may be subject to the most severe penalties currently available under the Competition and Consumer Act 2010. For comparison, other offences subject to this maximum penalty level appear primarily to be defined within the Act itself rather than in regulations.
  • Both the short-term price cap and ongoing code of conduct would be legislative instruments subject to disallowance, in whole or in part, by either chamber of Parliament. However, Parliament would not be able to amend the cap or code through Parliamentary debate.
Introductory Info Date introduced: 15 December 2022
House: House of Representatives
Portfolio: Treasury
Commencement: The day after Royal Assent

Background and purpose of the Bill

In response to extraordinary increases in east coast wholesale gas and electricity prices in 2022, National Cabinet agreed on Friday 9 December 2022 to several measures intended to provide consumer price relief, described as an Energy Price Relief Plan.[1]

The Australian Government’s draft Competition and Consumer Amendment (Gas Market) Bill 2022 (the draft Bill), the final version of which is to be introduced to Parliament and debated on Thursday 15 December 2022, implements gas market measures only.

The background to the 2022 gas and electricity price pressures is analysed in the Australian Energy Regulator’s September State of the energy market 2022 report and the Australian Competition and Consumer Commission’s (ACCC’s) Gas inquiry July 2022 Interim Report, which also outline significant risks for the adequacy of future east coast gas supplies.

What the Bill does

As anticipated, the Bill gives the Australian Government power to impose an emergency domestic gas price order within 12 months of the Bill becoming law, to respond to the ‘current energy crisis’ (as clarified in the Exposure Draft Explanatory Memorandum, page 4). The draft Competition and Consumer (Gas Market Emergency Price) Order 2022 would use this power to impose a 12-month $12/gigajoule domestic price cap for new gas contracts. This level was recommended by the ACCC, according to the Treasury’s consultation paper (page 6). Spot markets are expected to remain excluded (see the consultation paper, page 7). The draft cap would not affect existing contracts.[2]

However, the expressed purpose of the Bill is broader: it aims to ‘create an overarching framework to enable the Government to regulate the gas market.’[3] Stakeholders did not previously anticipate the Bill’s creation and delegation of powers to the Executive (including public servants – see below at page 7) to apparently enable regulation of most aspects of the gas market, for example: wholesale and retail activities[4]; domestic sales and exports[5]; and both prices and the amount, timing and location of gas to be supplied, and other contract terms (see below at pages 6–7).

These powers would be relied upon to introduce a yet-to-be-developed mandatory gas industry code of conduct, to apply on an ongoing basis. The code is intended to include ongoing wholesale price regulation through a ‘reasonable pricing provision’ based on production costs and a regulated margin of profit, according to the consultation paper (see page 10), but would have the power to regulate market activity more generally. The Bill provides that violations of the future code may be punished with the highest available penalties under the Competition and Consumer Act 2010 (CCA). As is the usual situation, a court would take into account all the circumstances in imposing a penalty and the maximum penalty would only be applied where ‘appropriate’ (Exposure Draft Explanatory Memorandum, page 25).

Of the two powers, the power to prescribe an ongoing gas code of conduct (under proposed section 53L of the CCA) will be the Bill’s substantive legacy beyond the next 12 months, after the more limited gas market emergency price order powers sunset.

The Bill also creates broad investigation, information gathering, and enforcement powers relating to ‘gas market conduct’ for the ACCC.

It creates the basis for a substantially more comprehensive regulatory framework and, in practice, harsher penalties than the existing industry code regulatory provisions (of general application) under Part IVB of the https://www.legislation.gov.au/Series/C2004A00109CCA.[6]

What the Bill does not do

The Bill does not provide for or legislate consumer energy subsidies, Australian Government compensation to either companies or state/territory governments, or the $125/tonne black coal price cap negotiated by National Cabinet. These will be implemented by agreement with state/territory governments (in relation to compensation, if any), and through new legislation by New South Wales and the application of existing legislation by Queensland (for the coal price cap).

The Bill does not attempt to control the retail price of gas or provide other direct consumer protection, though it does provide scope for such regulation to be introduced via the future code of conduct.

The Bill does not amend the National Gas Law or National Gas Rules, which are made by a process of intergovernmental legislative cooperation led by South Australia, and are amended by the Australian Energy Market Commission (AEMC) and the SA Minister for Energy and Mining.

Nor does the Bill provide directly for electricity price control. The Bill does not propose amendments to the National Energy Retail Law or National Energy Retail Rules. Nevertheless, it is anticipated that indirect electricity price relief will flow from the temporary gas price cap and coal price cap (to the extent that it is implemented by the states).

Expected short-term consumer impact according to the Australian Government

Announcing the energy market interventions on 9 December 2022, the Prime Minister’s press release stated that the Australian Government’s emergency gas price cap and the states’ coal price cap combined would:

Dampen predicted gas price increases by two percentage points in 2022-23 and 16 percentage points in 2023-24.

Reduce the impact of forecast electricity price increases of 36 per cent in 2023-24 by 13 percentage points, preventing a $230 increase that the average Australian household would have seen if these actions were not taken.

Reduce expected inflation in 2023-24 by around an estimated half percentage point.

Since the measures were announced, media have reported on manufacturers welcoming the steps, but warnings from the gas industry about the possibility of negative impacts on future domestic gas supplies and other potential side-effects. Several commentators have expressed concern about the scope of long-term market interventions that would be possible under the powers created by this Bill, and the risks this may pose for investor confidence.

Structure of the Bill

The Bill has two parts. Part 1 proposes to amend the CCA by inserting Part IVBB – Gas market into the Act. Part 2 makes various consequential changes to other parts of the CCA, mostly to include references to the new Part IVBB in existing relevant provisions. The Bill does not amend any other law. The Bill states that in general it is intended to operate concurrently with state and territory laws.[7]

Proposed Part IVBB creates two new powers for the Executive Government:

  • the power to prescribe a mandatory gas market code of conduct, under proposed section 53L
  • the power to make one or more gas market emergency price orders within the next 12 months, under proposed section 53M.

Both legislative instruments would be disallowable. Codes of conduct and emergency price orders are gas market instruments (see proposed definition inserted into subsection 4(1) of the CCA by item 1 of the Bill).   

Part IVBB is a framework legislative scheme. It contains no substantial rules governing gas market conduct. Rather, it delegates expansive powers to the Executive Government to create such rules by disallowable legislative instrument. Most provisions in proposed Part IVBB concern the scope of these powers, the matters they may deal with, delegation, conferral of powers and functions, and enforcement.

Key issues and provisions

Emergency price order

Under proposed section 53M, the Minister may make a gas market emergency price order that:

  • sets the terms and conditions under which gas commodities are supplied or acquired, including price (proposed section 53X)
  • regulates the operation of a gas exchange (proposed section 53Y)
  • imposes incidental rules related to reporting, records and fees, and so on (proposed Subdivision D of Division 2 of Part IVBB—proposed sections 53Z to 53ZE)
  • creates civil penalty provisions (proposed section 53ZJ).

Any gas market emergency price order will automatically sunset 12 months after the commencement of the Bill, after which no further gas market emergency price orders may be made. The exposure draft Explanatory Memorandum clarifies that the intent is to use this power to address one-off price impacts stemming from the war in Ukraine. However, the Bill also creates the power for ongoing regulation, including price regulation, via a new gas market code to be developed in 2023 (see below).

The Treasury has published an exposure draft of the intended price cap instrument: the Exposure Draft Competition and Consumer (Gas Market Emergency Price) Order 2022. Definitions in that order state that ‘price cap means $12 per gigajoule’.

The Minister must consult with the ACCC prior to making a gas market emergency price order (proposed subsection 53M(4)), in addition to the general consultation requirements for rule making imposed by section 17 of the Legislation Act 2003.

Gas market code

The power to prescribe a mandatory gas market code under proposed section 53L is not limited to the 12-month sunset period applying to gas market emergency price orders, and would continue to remain in force indefinitely.

This mandatory code is to supersede the current voluntary gas industry code.[8]

The code of conduct provisions permit everything that may be done under a gas market emergency price order, including imposing price caps (proposed section 53T). However, the code of conduct provisions confer many additional powers, as follows:

  • The Government may make rules related to gas market conduct generally (proposed section 53P). ‘Gas market conduct’ is defined broadly under proposed section 53C to be ‘conduct relating to supplying or acquiring a gas commodity or to the potential supply or acquisition of a gas commodity’. The definition of market conduct extends to issuing or receiving an expression of interest, and to offering to supply or acquire a gas commodity (proposed paragraph 53C(1)(b)). The regulations may further prescribe conduct which is ‘gas market conduct’ (proposed subparagraph 53C(1)(b)(ix)).
  • Proposed sections 53Q to 53W provide detailed categories of matters that a gas market code may deal with. These additional grounds for the making of code of conduct provisions exist concurrently with—but separately to—the general grounds provided in proposed section 53P. They include the power to make rules with respect to:
    • dealings with other gas market participants (proposed section 53Q)
    • negotiations, expressions of interest and offers (proposed section 53R)
    • agreements (proposed section 53S), which on its face would include long-term Gas Supply Agreements (GSAs) with overseas customers, including the terms, timing, location and other conditions of supply
    • terms on which gas commodities are supplied or acquired, including the substantially unrestricted discretion to regulate prices (proposed section 53T), including but not limited to setting a maximum or minimum price, or requiring a price to be ‘reasonable’ (proposed subsection 53T(2))[9]
    • the operation of gas exchanges (proposed section 53U)
    • requirements to supply or not to supply gas commodities (proposed section 53V), including the terms, timing, location and other conditions of supply[10]
    • dispute and complaint resolution (proposed section 53W).[11]

Definition of gas market participants and activity

The definition of ‘gas market participant’ (under proposed section 53D) for the purposes of the application of the above instruments includes former gas market participants, persons capable of engaging in gas market conduct, a body corporate related to a body corporate that is a gas market participant, joint ventures, and any person or body prescribed by the regulations.

‘Gas market matters’ are defined at proposed section 53B to include gas market conduct and compliance with a gas market instrument. As with other key definitions in this Bill, they may be extended to any matter prescribed by the regulations. (The regulations may also prescribe that certain matters are not gas market matters.)

The ability to prescribe both the persons and conduct to which rules apply under the regulations amounts to a very broad regulation-making power.

Delegation to officials

Under proposed section 53ZI, gas market instruments may confer a power to make legislative instruments on a Minister, the ACCC, an ACCC employee or another APS employee, or a Commonwealth Government entity (as set out at proposed subsection 53K(3)).

Given the broad scope permitted for gas market instruments—particularly a gas market code—these provisions could be used to delegate substantive decisions about market regulation to officials long term.

It does not appear that legislative instruments made by officials under this section are themselves gas market instruments. The definition of ‘gas market instruments’ in Item 1 of the Bill provides:

gas market instrument means:

(a) a gas market code; or

(b) a gas market emergency price order.

This definition does not appear to extend to legislative instruments made under a gas market code or a gas market emergency price order. The Exposure Draft Explanatory Memorandum does not provide further clarity on this point. This may have consequences for the ability of legislative instruments made under proposed section 53ZI delegation to rely on the various powers and capabilities that proposed Part IVBB extends to gas market price instruments, such as the enhanced infringement notice scheme discussed below, as proposed paragraph 53ZK(2)(f) only extends such penalty notices to the civil penalty provisions of gas market instruments.

Parliamentary oversight and disallowance

Both types of gas market instruments (price orders and codes of conduct) are legislative instruments. Both are disallowable, in whole or in part, by either chamber of Parliament.[12]

The scope of the gas market code of conduct powers under the Bill would allow the Government to develop a comprehensive regulatory framework for the gas industry. This comprehensive framework, as a legislative instrument, will not require further legislation by Parliament. It will be disallowable, however:

  • Disallowance motions may only disallow instruments or parts of instruments. They may not amend them.[13]  
  • The Constitution provides that when questions arising in the Senate result in a tied vote, they are resolved in the negative (they fail to pass).[14] This practically means that the number of votes that the Government needs to prevent disallowance of a legislative instrument in the Senate is one less than the number of votes it needs to pass a Bill.[15]
  • The Legislation Act 2003 contains a prohibition against remaking disallowed legislative instruments that are the ‘same in substance’ as previously disallowed provisions (section 48). However, previous Parliaments have had some difficulty enforcing this restriction.[16]

Penalties and compliance

Division 3 of proposed Part IVBB of the CCA provides for compliance with gas market instruments and associated penalties. Items 8 to 44 of Part 2 of Schedule 1 to the Bill make corresponding amendments to Part VI of the CCA (‘Enforcement’) and Items 45 to 47 of Part 2 make corresponding amendments to Part XID of the CCA (‘Search and seizure’).

Civil penalties

Proposed section 53ZJ of the CCA provides that a gas market instrument may create civil penalties. These civil penalties are enforceable under the Regulatory Powers (Standard Provisions) Act 2014.

The maximum civil penalty that may be imposed by a gas instrument is provided by section 76(1B) of the CCA, and is whichever is the greater of the following penalties:

  • $50,000,000
  • if the Court can determine the value of the benefit that the body corporate that breached the civil penalty provision (and any related body corporate) obtained that is reasonably attributable to the commission of the offence—three times that benefit
  • if the Court cannot determine the benefit—30% of adjusted annual turnover for the 12 months prior to when the body corporate ceased breaching the civil penalty provision, or proceedings in relation to the contravention were instituted (whichever is earlier). If the contravention continued for longer than a year, the period from the beginning of the month when the breach commenced through to when it ceased.

This is the same penalty as the existing highest tier of major penalty provisions of the CCA. Other contraventions subject to this penalty (such as for certain contraventions of the News Media Bargaining Code and general cartel conduct) are set out in the Act itself, not under delegated legislation. The Exposure Draft Explanatory Memorandum states that ‘The maximum penalty has been designed to provide an effective deterrent to breaches of the law’.[17]

The Bill also includes anti-avoidance provisions. Proposed section 53ZQ provides that a person also becomes liable to a civil penalty if they enter into a scheme where it ‘would be reasonable to conclude that the purpose of the person engaging in that conduct was to avoid the application of a civil penalty provision of a gas market instrument.’ The potential civil penalties for such conduct would be the same as the subsection 76(1B) penalties described above.

Infringement notices

Proposed section 53ZK extends the infringement notice regime in Division 5 of Part XI of the CCA (which exists in relation to certain breaches of the Australian Consumer Law) to most civil penalty contraventions under a gas market instrument (other than a provision requiring a participant to deal with another participant in good faith).

A maximum penalty of 600 penalty units may be applied for a body corporate. This is 10 times the standard maximum of 60 penalty units able to be imposed on a body corporate through an infringement notice under subsection 104(2) of the Regulatory Powers (Standard Provisions) Act 2014, and 10 times the maximum amount recommended to be payable by a body corporate under an infringement notice, according to A Guide to Framing Commonwealth Offences, Infringement Notices, and Enforcement Powers (page 59). The Exposure Draft Explanatory Memorandum states that this is necessary and appropriate ‘given the significant possible financial benefit that corporations stand to gain from potential breaches’.[18]

Public warning notices and orders to redress loss or damage

The Bill also contains provisions for the ACCC to issue public warning notices (proposed sections 53ZL to 53ZN), and to apply to courts for orders to redress loss or damages suffered by certain people[19] due to a contravention of a gas market instrument civil penalty provision (proposed sections 53ZO and 52ZP).

These provisions are similar to existing powers in the CCA in relation to Part IVB—Industry codes. Section 51ADA of the CCA provides for public warning notices, and sections 51ADB and 51ADC provide for orders to redress loss or damage under that Part.

There are differences—the public warning notices scheme in this Bill provides for the issuing of draft notices generally to the person before a public notice, and proposed section 53ZN provides that the Australian Government, ACCC or ACCC employees cannot be sued for defamation in relation to a public warning notice.

Transparency, reporting and oversight

Proposed Part IVBB, Division 2, Subdivision D (proposed sections 53Z to 53ZE) allows gas market instruments (either price orders or the code of conduct) to impose various transparency, auditing and reporting requirements.

Proposed section 53ZB provides that a gas market instrument may confer on a person or body wide powers to monitor compliance with the instrument, and to conduct investigations in relation to gas market matters. Proposed section 53ZC provides that a gas market instrument may provide for the charging of a fee, but such fees must not amount to taxation (proposed section 53ZH).

Proposed section 53ZT gives the ACCC the power to compel persons to provide information.

Further reading

  • References

    [1]. For a high-level discussion of energy price increases, see the article ‘Coal, gas and decarbonisation’ in the Parliamentary Library’s Briefing Book for the 47th Parliament. See also ‘Further reading’ at the end of this Bills Digest.

    [2]. The Exposure Draft Explanatory Memorandum (page 4) states that ‘The order would apply to uncontracted gas offered on the wholesale market from currently operational fields capable of supply during the period in which the emergency price order is in force.’

    [3]. Exposure Draft Explanatory Memorandum, page 4.

    [4]. Regulation of the retail gas market is not explicitly provided for in the Bill. However, retail would seem to fall within the scope of the definitions of ‘gas market participants’ and ‘gas market conduct’ for which the Bill creates regulatory powers – see pages 6 to 7 of this Bills Digest. The consultation paper notes that while price regulation under an ongoing code of conduct is not expected to apply to retailers, there is ‘the possibility of extending the code and reasonable pricing provision to other market participants in future if warranted by the structure and conduct of the market’ (page 10).

    [5]. The Bill provides for gas market codes to set rules for the industry broadly – for example, in relation to ‘agreements relating to supplying or acquiring a gas commodity’ in general rather than only for domestic supply agreements (proposed section 53S of the Competition and Consumer Act 2010 (CCA), at item 2 of the Draft Bill). Further, proposed section 53H states that the Bill’s provisions ‘in relation to supplying a gas commodity’ apply to any supply originating within Australia, or for sale to a person within Australia, or which is ‘by means of exporting the gas commodity from Australia’.

    [6]. Part IVB Industry Codes may have a civil penalty for contravention of the code (section 51ACB and subsection 76(1A) table Item 10 of the CCA), which under the CCA is theoretically any amount prescribed within the code of conduct. However, all the existing codes of conduct have far lower penalties than the subsection 76(1B) civil penalty being contemplated for contravention of provisions of the gas market code of conduct. The largest penalty in a Part IVB code of conduct is the lower section 76(1C) penalty (the 10% adjusted turnover penalty) for certain contraventions of the Franchising Code of Conduct (Clause 5A). See also ACCC ‘Fines and Penalties’.

    [7]. Proposed section 53ZZ of the CCA, at item 2 of the draft Bill. However, proposed subsection 53ZZ(2) provides that the gas market code or a gas market emergency price order may exclude or limit the operation of a state or territory law.

    [8]. The existing voluntary gas code (‘Voluntary Code of Conduct for the Negotiation of Gas Supply Agreements’, appended to the Heads Of Agreement with east coast domestic gas suppliers) was not made pursuant to provisions of an existing Australian Government law. Rather, it was negotiated with the gas industry as a voluntary code of self-regulation outside of statutory frameworks.

    [9]. This may be used to make rules requiring that prices are ‘reasonable’, and the factors to be considered in determining what is reasonable (paragraphs 51T(2)(e)–(f)). However, maximum and minimum prices can be determined independently of rules related to a ‘reasonable price’ – that is, the prices and terms that can be set via regulation appear to be unrestricted.

    [10]. The Bill is explicit that this may apply to former gas market participants, or a person that is a gas market participant only because they are prescribed to be under the regulations. This is the case for rules regarding gas market operators generally, however subsection 52V(2) reaffirms this explicitly.

    [11]. This may include rules relating to mediation and arbitration (including compulsory arbitration), and extend to the powers, appointment and processes of such arbitrators and mediators.

    [12]. Disallowable subject to the provisions of section 42 of the Legislation Act 2003.

    [13]. The Senate Standing Committee for the Scrutiny of Delegated Legislation may seek an undertaking for specific action to address its scrutiny concerns, including amendments to an instrument. The Committee ‘will give a “protective” notice of motion to disallow an instrument where it is unable to conclude its consideration of an instrument before the original disallowance period expires. In addition, the committee may give such a notice where the committee requires an undertaking to be implemented before it can conclude its consideration of the instrument. The committee will usually withdraw a 'protective' notice when it receives a satisfactory response to its scrutiny concerns or confirmation that any outstanding undertakings have been implemented’: Standing Committee for the Scrutiny of Delegated Legislation, Delegated Legislation Monitor, 9, 2022, 30 November 2022: ix. Through this process, the Committee is able to seek amendment of instruments of concern. 

    [14]. Section 23 of the Constitution provides ‘Questions arising in the Senate shall be determined by a majority of votes, and each senator shall have one vote. The President shall in all cases be entitled to a vote; and when the votes are equal the question shall pass in the negative.’

    [15]. This is less relevant to the House of Representatives, where the Speaker has the casting vote in the case of a tie—section 40 of the Constitution.

    [16]. See ‘Remaking of instruments following disallowance’, Odgers Senate Practice. In Perrett v Attorney General of the Commonwealth of Australia [2015] FCA 834 [2015] FCA 834, Dowsett J held that this restriction applied only to remade instruments that are ‘in substance or legal effect, identical to the previously disallowed measure.’

    [17].    Exposure Draft Explanatory Memorandum, 25.

    [18]. Exposure Draft Explanatory Memorandum, 26.

    [19]. Those who have not been parties to an enforcement proceeding under Part VI of the CCA in relation to the conduct.

  • Licence

    © Commonwealth of Australia

    Creative commons logo

    Creative Commons

    With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

    In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

    To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

    Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

  • Disclaimer

    Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

    Any concerns or complaints should be directed to the ParliamentaryLibrarian at webmanager@aph.gov.au. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.