The Australian Energy Regulator (AER) has accepted a court-enforceable undertaking from Icon Distribution Investments Limited and Jemena Networks (ACT)—together trading as Evoenergy—to address concerns that Evoenergy breached its ring-fencing obligations.
Ring-fencing obligations encourage competition in the electricity distribution sector and play an important role in providing a level playing field for third-party operators in the sector, placing downward pressure on prices.
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In May 2023, Evoenergy self-reported breaches of its ring-fencing obligations since 1 January 2018, by providing maintenance, operation and inspection services, to a customer in the Australian Capital Territory, in breach of clause 3.1(b) of the Electricity Distribution Ring-Fencing Guideline (the Guideline) and clause 6.17.1 of the National Electricity Rules.
The guideline requires Evoenergy and other electricity network businesses to provide only regulated electricity distribution and transmission services and not to provide any other services, thereby ensuring a level playing field for third party providers to compete in the sector.
By providing other services, Evoenergy may have impacted competition by inadvertently extending its distribution network service monopoly into maintenance, operation and inspection services that are supposed to be subject to competition and thereby potentially discouraging third party providers from entering the market.
The court-enforceable undertaking outlines the steps to be taken by Evoenergy to redesign systems and separate assets so that maintenance, operation and inspection services may be provided by another business and it may cease to provide the services. The court enforceable undertaking also requires regular reporting of progress to the AER as well as to the customer.
The AER has also granted a waiver to Evoenergy to provide the maintenance, operation and inspection services to the customer for 24 months, ensuring continued electricity supply to the customer while Evoenergy transitions away from providing the services and undertakes the steps outlined in the court enforceable undertaking such that it may cease to provide these services.
AER board member Justin Oliver said Distributed Network Service Providers had a serious responsibility to comply with ring-fencing requirements and maintain market competition.
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“Since its introduction in 2016, the Electricity Distribution Ring-Fencing Guideline has promoted competition in the provision of electricity services by providing a level playing field for third party providers.
“It’s critically important that Distributed Network Service Providers are aware of, and continue to abide by, their obligations in the guideline and do not unfairly favour their own services in contestable markets,” Oliver said.
