Big changes to Victoria's regulatory landscape 6 min read
On 7 September 2021, the Essential Services Commission (Compliance and Enforcement Powers) Amendment Bill 2021 (the Bill) was introduced to the Victorian Parliament. The Bill significantly strengthens the Essential Services Commission (ESC)'s compliance and enforcement powers to give effect to the Victorian Government's Energy Fairness Plan.
We will be watching the Bill's progression through Parliament closely.
- Expanded information gathering and new entry and inspection powers
- Expanded liability to individuals who facilitate contraventions
- New civil penalty framework and remedies
- Higher penalty notice regime with expanded application
- Reforms to the way in which Codes of Practice are made and enforced
- Establishment of ESC Enforcement Fund
The Bill proposes to overhaul the ESC's information gathering powers which are currently focused on supporting the ESC's pricing and inquiries functions.
Under the Bill, the ESC will have two tiers of information gathering powers:
- The first tier will support the ESC’s pricing determinations and inquiries functions. The ESC will have the power to request information, documents and require a person to appear before it (similar to its existing powers).
- The second tier will support the ESC’s investigations of suspected contraventions of 'essential services requirements' (ie contraventions of the ESC Act, relevant legislation, Codes of Practice (see below) and licence conditions). The ESC will have the power to request information, documents and require a person to give evidence on oath (with limited protection against self-incrimination).
It will be an offence to fail to comply with either type of information gathering notice without a reasonable excuse and to knowingly provide false or misleading information or documents. These offences will be punishable by a fine of 600 penalty units ($109,044) for corporations or 120 penalty units ($21,809) or 12 months' imprisonment for individuals.
Under this second tier, the ESC will have broad entry and inspection powers, including the ability to appoint inspectors and enter and search premises (both with consent or with a search warrant).There will also be greater scope for the ESC to share certain confidential information with other regulators to allow the ESC to undertake joint investigations with regulators including the ACCC, Consumer Affairs Victoria and the AER.
The Bill proposes to overhaul the ESC's existing enforcement framework and introduce a new civil penalty framework with additional remedies.
In order to access these penalties and remedies, the ESC must show that a 'civil penalty requirement' has been contravened. A range of matters will constitute 'civil penalty requirements' including certain ESC determinations, licence conditions and specified obligations in Codes of Practice, relevant legislation and regulations. Provisions in the Energy Retail Code currently prescribed as 'energy industry contraventions' will automatically become 'civil penalty requirements'.
The maximum penalties payable have also significantly increased, with higher penalties for energy licensees than other regulated entities.
Default of 1,200 penalty units ($218,088) (unless set lower or higher up to 60,000 penalty units ($10,904,400))
Alternatively, if requested by the ESC, three times the benefit obtained from the contravention, or 10% of turnover
Default of 240 penalty units ($43,618) (unless set lower or higher up to 3,000 penalty units ($545,220))
|Other regulated entities||
Default of 1,200 penalty units ($218,088) (unless set lower)
Alternatively, if requested by the ESC, three times the benefit obtained from the contravention
Default of 240 penalty units ($43,618) (unless set lower)
The ESC will also be able to seek a range of remedies including orders:
- requiring a regulated entity to publish an advertisement that will attract adverse publicity;
- directing a regulated entity to perform a service for the benefit of the community, establish a compliance, education or training program or revise internal business operations;
- declaring that a contract or agreement (or part of it) is void or should be varied; and/or
- requiring a regulated entity to refund monies or pay compensation.
The ESC will be able to issue penalty notices even where it has reason to believe a 'civil penalty requirement' has been contravened. If the regulated entity fails to pay the notice penalty, the ESC may commence proceedings. Regulated entities are entitled to disregard the penalty notice and defend any proceeding relating to the alleged contravention.
Penalty notice penalty levels are increasing and will be extended to other regulated entities (in addition to the energy licensees).
Default of 200 penalty units ($36,348) (unless set lower or higher up to 1,500 penalty units ($272,610))
|Other regulated entities||
120 penalty units ($21,808.80) (unless set lower)
20 penalty units ($3,634.80) (unless set lower)
The Bill extends liability to persons who facilitate contraventions by regulated entities, including those who aid and abet contraventions. Likewise, corporate officers who knowingly authorise or permit contraventions will be held liable.
Under the Bill, the ESC's power to make Codes of Practice will be strengthened and certain existing 'codes' will be transitioned to become Codes of Practice, thereby elevating their legal status. These include:
- the Energy Retail Code;
- the Code of Conduct for Marketing Retail Energy;
- the Electricity Customer Metering, Customer Transfer, Distribution and Electricity System Codes;
- the Gas Distribution System Code; and
- the Public Lighting Code.
These transitioned Codes of Practice will be revoked by the end of 2025 unless remade. New Codes of Practice will sunset every 10 years (unless revoked sooner).
The Bill establishes an ESC Enforcement Fund which will receive revenue from fines and penalties and will be used to fund the ESC's litigation and related activities.
These proposed reforms will significantly expand the ESC's compliance and enforcement powers and likely change the regulatory landscape for regulated entities in Victoria. We will be watching closely to track if and when the Bill becomes law.