Wholesale Acquisitions of Electricity (Liable parties)
Liable parties – relevant acquisitions
Under the Renewable Energy (Electricity) Act 2000 (the Act), parties making wholesale acquisitions of electricity (relevant acquisitions) are required to demonstrate that they are supporting the generation of renewable electricity by purchasing increasing amounts of renewable energy certificates (RECs). These parties demonstrate compliance by surrendering RECs to the Office of the Renewable Energy Regulator (ORER) annually between 1 January and 14 February for the previous calendar year (compliance year).
What is a relevant acquisition of electricity (wholesale purchases)?
Relevant acquisitions are typically large purchases of electricity that are made by large purchasers of electricity, such as electricity retailers or big electricity generation companies, on liable girds. Relevant acquisitions are required to be reported to the Office of the Renewable Energy Regulator (ORER) annually.
There are two types of relevant acquisitions:
- wholesale acquisitions; and
- notional wholesale acquisitions.
Sections 31 to 34 of the Act provide details about relevant acquisitions. Actual and potential liable parties are encouraged to review these sections and where required seek independent legal advice on liabilities under the Act. Special exclusions apply for self-generators of electricity as stipulated under section 31 (2) (b) and section 33 (3) of the Act. However, the party must be able to demonstrate to ORER that they meet the self-generator criteria described in the Act.
Is the relevant acquisiton on a liable grid (network)?
The Renewable Energy Target (RET) applies to all wholesale acquisitions of electricity (relevant acquisitions) on grids with an installed capacity of 100 MW or more. A grid is defined as a network of transmission and/or distribution lines that connects generators to an end-users. This means acquisitions of electricity on grids across Australia and isolated grids supplying regional areas above this size can be covered by the RET liability.
To calculate the installed capacity of a grid, the liable parties should identify all of the power stations that are connected to the grid and sum the installed capacity of the power stations. Liable parties can exclude standby or emergency plants and privately owned grid connected domestic generators. A standby plant must for the immediately proceeding three years:
- produce less than 50 GWh per annum; or
- has less than a 5% load factor. For example, if a power station generates less than 5% of its generation capacity.
As soon as a grid reaches the installed capacity of 100 MW or more, all relevant acquisitions on the grid become liable. Grid operators are obliged under section 31 (4) of the Act to inform the Renewable Energy Regulator (Regulator), within 28 days, of any changes to an existing grid that make the grid exceed the 100 MW threshold.
Relevant acquisition examples
The following information describes whether an acquisition is liable under the legislation. There are many cases where a company could be liable under the legislation and appropriate legal advice should be sought by the relevant entity to confirm if the entity made a liable relevant acquisition under sections 31 – 34 of the Act, as the ORER takes no responsibility for any decisions made on the basis of this information.
- A wholesale acquisition is an acquisition of electricity from:
- the Australian Energy Market Operator (AEMO) or a person or body prescribed like the Independent Market Operator (IMO); or
- a person who did not acquire it from another person.
- A notional wholesale acquisition can be an acquisition of electricity from a generator by an end user (person or company) when the end user acquiring the electricity is not registered as a market participant under the National Electricity Code. In this case the generator is considered to be a notional electricity retailer and would be liable; and
- An intermediary can be liable where the electricity is acquired from a generator in Non-NEM States or Territories when the intermediary on-sells the electricity to end user(s) (eg an electricity retailer who is acting as an intermediary between the generator and the user).
Where is the reporting point of liability?
Regulation 21 (1) (a) requires that liable parties:
For subsection 31 (3) of the Act, the amount of electricity acquired under a relevant acquisition is:
- if the electricity is acquired from AEMO or IMO – the amount worked out on the basis of metering data used for AEMO or IMO settlement statements;
Regulation 21 (1) (b) – (e) provide alternate points of liability in relation to different metering parameters. You should seek independent legal advice and where applicable discussions with the Regulator may be helpful as regulation 21 (2) specifies that the Regulator chooses in consultation with the liable party the liability point for Regulation 21 (1) (b), (c) and (e).
For further information about determining and using the correct metering points please contact the ORER.
Determining and discharging a Renewable Energy Certificate (REC) Liability
Once a liable party determines the total relevant acquisition in a year, in MWh, by including all liable relevant acquisitions that a liable party is responsible for, the liable party multiplies the total relevant acquisition with the applicable Renewable Power Percentage (RPP) for the year of compliance.
For example:
- A liable party’s total relevant acquisitions in MWh is 100,000 for the 2009 compliance year
- The 2009 RPP is 3.64%
- Liable party’s REC liability = 100,000 times 0.0364 = 3,640 REC liability
- Therefore, the liable party must surrender 3,640 RECs to fully discharge their liability for this year.
The REC liability must be discharged by acquiring and surrendering RECs or by payment of the Renewable Energy Shortfall Charge (RESC). The RESC is set under the Renewable Energy (Electricity) (Charge) Act 2000.
For example:
1. For a liable party to discharge their REC liability by RECs they must acquire and surrender the RECs between 1 January and 14 February of the following year, or a later date approved by the Regulator, in the REC Registry, which is an online internet based registry.
1.1. If a liable party surrenders more RECs than required to discharge a particular compliance year liability, the RECs will become a carried forward surplus which is banked in the REC Registry and can be used to acquit future REC liabilities, if required.
1.2 If a liable party is unable to fully discharge its REC liability for the compliance year and the REC shortfall is less than 10% of the liable party’s total REC liability, the shortfall is carried forward into the next compliance year’s liability. The liable party must therefore meet the next compliance year target plus the shortfall from the previous year in order to discharge their total liability.
2. If the liable party did not discharge their REC liability by surrendering RECs or the REC shortfall is more than 10% of the liable party’s total REC liability for the compliance year, the entity must pay a RESC of $40 per REC not surrender for the 2001 – 2009 compliance years or $65 per REC not surrendered for the 2010 and future compliance years.
For more information about how the RPP is calculated and published you can visit the Renewable Power Percentage page of the ORER’s website.
Annual Energy Acquisition Statement (AEAS) and Renewable Energy Shortfall Statement (RESS)
Liable parties are required to report to the Regulator all relevant acquisitions and discharge REC liabilities between 1 January and 14 February annually for the proceeding compliance year that just ended. The liable party may also revise previously reported relevant acquisitions or report and discharge additional relevant acquisitions for previous compliance years.
For example, a liable party must report and discharge any relevant acquisitions made in 2010 between 1 January and 14 February 2011, including any revisions to relevant acquisitions reported for the 2010, 2009, 2008 and 2007 compliance years and report any additional relevant acquisitions for previous compliance years, if applicable.
To report relevant acquisitions, liable parties must submit an Annual Energy Acquisition Statement (AEAS) or Renewable Energy Shortfall Statement (RESS) by 14 February for the compliance years being reported by the liable party. These forms advise the Regulator of the total relevant acquisition, which is the sum of all relevant acquisitions in a compliance year. Liable parties must also discharge the REC liability when lodging these forms by offering RECs for surrender in the REC Registry (online REC market place) or by offering the Renewable Energy Shortfall Charge, which is set under Part 4 – Division 1 of the Act.
Visit - Annual energy acquisition statement and renewable energy shortfall statement
For the 2010 and future compliance years you may need to report Partial Exemption Certificates (PECs) that are allocated to emissions-intensive trade-exposed activities under the Renewable Energy (Electricity) Regulations 2001.
Mandatory REC surrender and accepting offers
If liable parties offer RECs for mandatory surrender under option 1, 1.1 or 1.2 as mentioned under Determining and discharging a renewable energy certificate (REC) liability, then liable parties must mandatory surrender RECs in the REC Registry between 1 January and 14 February each year for the given compliance year.
After the Liability Assessment Team finalises the assessment of the AEAS or RESS, RECs offered for mandatory surrender are accepted by the team. The RECs are then permanently removed from the REC market.
As part of the mandatory surrender process liable parties are also required to pay an 8 cent surrender fee, as required under section 44 of the Renewable Energy (Electricity) Act 2000 (the Act) and regulation 28 of the Renewable Energy (Electricity) Regulations 2001. When the mandatory surrender offer was accepted by the ORER a REC surrender fee was generated in the REC Registry as a fee item. At the time of REC acceptance emails are sent to the account administrator and appropriate account user indicating that a payment for the fee item be made after rendering the fee item to an invoice within 28 days of the written email notice.
Liable parties should note that the compliance process is not finalised until the REC surrender fee is received by the ORER.
Information on invoice payment methods and processes are available through the REC Registry help pages or by contacting the REC Registry helpdesk on 1800 159 724.
Reporting Partial Exemption Certificates (PECs) in the AEAS or RESS
ORER provides partial exemption certificates (PECs), on application from prescribed entities conducting eligible emissions-intensive trade-exposed (EITEs) activities. This may include liable parties.
For the 2010 and future compliance years liable parties may report PECs received when submitting the AEAS and RESS. The AEAS and RESS will include a new section containing fields regarding PECs. In order to receive the partial exemptions set out on the PECs, liable parties must provide copies of relevant PECs with the AEAS and RESS.
PECs reduce the liable party’s total REC liability for a given compliance year.
The PEC details the amount in megawatt hours of the electricity to be exempted for a given year and includes the name of the liable entity.
For detail information about how to apply for PECs see Partial exemption for emissions-intensive trade-exposed activities.
Renewable Energy Shortfalls
If liable parties have a REC shortfall greater than 10% of the total REC liability a:
1. Renewable Energy Shortfall Statement (RESS) to the Regulator by 14 February for the give compliance year. Payment of the penalty must also be lodged with the RESS at the same time to avoid penalty interest. For more information about penalty interest you can view section 70 of the Act.
2. Renewable Energy Shortfall Charge (RESC) $40 per REC not surrender for the 2001 – 2009 compliance years or $65 per REC not surrendered for the 2010 and future compliance years must be paid.
Liable parties can redeem the RESC minus an administrative fee, stipulated under regulation 28 (5) of the Renewable Energy (Electricity) Regulations 2001 (the regulations), within 3 years of the RESC providing the liable parties are able to meet their current year REC liability.
For example:
If a liable party paid the RESC in 2010 for a 2009 REC shortfall, then the liable party can surrender additional RECs in the 2011, 2012 or 2013 surrender periods to redeem the RESC providing they acquire their current year REC liability. Once the surrender function of the REC Registry closes on 14 February 2013 the liable party will not be able to redeem the RESC.
Shortfalls occurring within the final three years of the scheme (2028-2030) will need to be made up prior to the measure ceasing for RESC to be redeemed.
For more information about REC shortfalls and penalties you can view Part 4 – Division 1 and Part 7 – Division 1 of the Act.
Liable parties with REC shortfalls
Liable parties should note that even if you are one REC short to discharge your total REC liability the Regulator under section 134 of the Act may publish a list of liable parties that do not discharge their liability through REC surrender.
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