The Electricity Industry Amendment Bill has now emerged as a finalised print-out and, as previously reported, it includes several clauses that could have a profound impact on trusts. It is expected to become law shortly and the Minister says that it will take effect as soon as it’s enacted.
- It removes uncertainties about trust and trustee exposure to the EA’s Electricity Industry Participation Code by specifically introducing trust/trustee requirements in relation to ‘non-discrimination’ and to ‘arms-length separation’ into the Code.
- It gives the EA responsibility for ensuring that trusts, as well as the companies they own, do not sell or get any consideration for transferring customers amongst retailers and/or connected generators.
- It spells out how non-discrimination amongst customers (a requirement of the parent Act) must be applied to trust dividends and rebates too, and includes this in the Code.
- It also gives the EA extended powers to control the transfer of information within trusts, and between trusts and their companies, where arms-length separation of line and energy activities applies.
- It extends the EA’s role to protecting the interests of small business and domestic consumers, in relation to electricity supply (this is the one provision that won’t come in immediately – it has been given a 4-month delay).
- It exposes trustees to a much more punitive regime if they breach the Code (fines of up to $2 million).
To achieve this, the Bill requires the sections covered below to be inserted directly into the Electricity Industry Participation Code, without going through the Electricity Authority’s normal consultation processes.
Interestingly, the Bill also repeals a clause (114) in the parent Act that gave the Minister power to produce “regulations promoting accountability in customer trusts and community trusts”. Probably this is redundant because the Minister will now have powers to intercede in the Code.
The ban on transferring customers
This is a confusing requirement, as trusts and distributors don’t normally ‘own’ customers so wouldn’t appear to have an ability to sell them (in contrast to the initial line/energy separation days, when the old power companies were required to sell their energy businesses). However, trusts with distribution ‘satellites’ in other distributors’ areas might be exposed, as might trusts or their companies involved in the transfer of (say) a large industrial connection from one retailer to another.
6A.5 Person involved in distributor must not pay for transfer of retail customers to connected retailers (1) A distributor, and any other person listed in subclause (2), must not pay, or offer to pay, any consideration to a retailer in respect of the transfer to a connected retailer of any retail customers who are connected to the distributor’s networks. (2) The persons are— (a) the distributor or any other person involved in the distributor: (b) a connected generator in respect of the distributor or any other person involved in the connected generator: (c) a connected retailer in respect of the distributor or any other person involved in the connected retailer. (3) To avoid doubt, subclause (1) includes a prohibition on— (a) any agreement to acquire the assets or voting securities of another retailer (regardless of whether any, or only nominal, consideration is attributed to customers) as a result of which there is a transfer of responsibility for retailing electricity to customers; and (b) any consideration that is directly or indirectly or in whole or in part in respect of the transfer of any of another retailer’s customers or customer accounts.
The ‘no discrimination in rebates or dividends requirement
Giving the EA oversight of this requirement via the Code suggests that the Authority is planning to apply a ‘one size fits all’ approach to all financial dealings involving distribution services. Trusts that don’t offer all connected parties identical rebate or dividend regimes will need to get advice on how to proceed once the bill is enacted (or seek such advice as soon as the amended Code appears).
6A.6 No discrimination when paying rebates or dividends (1) This clause applies if a distributor has a connected retailer. (2) Every person listed in subclause (3) must ensure that any rebates or dividends or other similar payments paid do not discriminate between (a) customers of the connected retailer; and (b) customers of other retailers where those customers are connected to the distributor’s networks. (3) The persons are— (a) the directors of the distributor: (b) the trustees of any customer trust or community trust that is involved in the distributor and the connected retailer: (c) the directors of any customer co-operative that is involved in the distributor and the connected retailer. (4) In this clause, connected retailer has the same meaning as in clause 6A.4. (5) A director or trustee who knowingly fails to comply with this clause breaches this Code.
Giving the EA oversight of the arms-length separation regime
The increasingly complex ‘Arms-length rules’ will form part of the EA’s Code. These now include requirements for lines/energy separation within trusts, meaning that any trust (such as Top Energy) that oversee both distribution and energy operations must restrict internal information sharing:
Restriction on use of information 11(1) Business A must not disclose or permit the disclosure to business B, or use or permit the use for the purposes of business B, of restricted information of business A. An electricity trust that is a parent of business A (trust A), business A, and every parent of trust A must not disclose or permit the disclosure to business B, an electricity trust that is a parent of business B (trust B), or any parent of trust B, or use or permit the use for the purposes of business B or trust B, of restricted information of business A or trust A. In these rules, restricted information is information received or generated, and held, by business A or trust A that is connected with its business, being information that— (a) is not available to the competitors or potential competitors of business B or trust B; and (b) if disclosed to business B or trust B, would put, or be likely to put, business B or trust B in a position of material advantage in relation to any competitor or potential competitor. (2) This rule does not prevent cross-directors under rule 8 from having access to normal board information.