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Client Update: Repeal of the Energy Efficiency Opportunities Program

22 May 2014

In brief: The Federal Government has introduced into Parliament legislation which, if passed, will terminate the Energy Efficiency Opportunities Program and so remove the mandatory requirement for large energy using businesses to assess opportunities to improve energy efficiency and to report publicly on the outcomes of those assessments. Partner Grant Anderson and Lawyer Albert Yu report.

Overview of the Energy Efficiency Opportunities Program

The Energy Efficiency Opportunities Program (the EEO Program) was introduced in 2006 by the previous Coalition Government for the purpose of improving the identification and evaluation of energy efficiency opportunities by large energy using businesses, with the intended consequence of encouraging the implementation of cost-effective energy efficiencies.1

The Energy Efficiency Opportunities Act 2006 (Cth) (the EEO Act), which establishes the EEO Program, requires that, if the total energy used by the members of a corporate group is more than 0.5 petajoules in a financial year (known as the Trigger Year), the controlling corporation of the group must apply for registration under the EEO Program. The controlling corporation's group includes its subsidiaries, joint ventures and partners. The controlling corporation or any of its subsidiaries, joint ventures and partners is deemed to be the user of energy where it has operational control over the facility at which the energy is consumed.2 'Operational control' under the EEO Program is defined similarly to the concept of 'operational control' as used in the carbon pricing scheme and the National Greenhouse and Energy Reporting Scheme – that is, broadly speaking, an entity has operational control over a facility if the entity has the authority to introduce and implement operating policies, health and safety policies and/or environmental policies for the facility.3

Once registered, the controlling corporation must submit an assessment plan to the Department of Industry within 18 months of the end of the Trigger Year, and then every five years. The assessment plan is to set out proposals for assessing opportunities to improve the energy efficiency of the controlling corporation's group. The controlling corporation must also prepare and make publicly available reports that include information on how the proposals in the approved assessment plan were carried out, the results of carrying out those proposals, the response of the corporation to those results, the total energy use covered by all assessments, and resultant energy savings.

Repeal of the EEO Program

In the Mid-Year Economic and Fiscal Outlook 2013-14 released in December 2013, the Federal Government announced that, as part of 'abolishing a range of initiatives associated with the carbon tax', the funding for the EEO Program would be terminated from 1 July 2014.4 On 15 May 2014, the Government introduced into the House of Representatives the Energy Efficiency Opportunities (Repeal) Bill 2014 (Cth) (the EEO Repeal Bill).

While recognising the important role played by the EEO Program in encouraging energy management practices (between 2006 and 2011, the EEO Program was responsible for approximately 40 per cent of the energy efficiency improvements in the Australian industrial sector), the Government's view is that the EEO Program is no longer needed because the economic and regulatory context has changed since it was first introduced. These changes include:

  • Since the introduction of the EEO Program in 2006, companies have improved their internal management processes to such an extent that the EEO Program is no longer needed (in its second five-year cycle, the EEO Program is expected to be responsible for only 25 per cent of energy efficiency improvements in the Australian industrial sector).
  • When the EEO Program was introduced, there was no national regulation to drive energy efficiency improvements, whereas now there are national schemes such as the National Greenhouse and Energy Reporting Scheme and the proposed Emissions Reduction Fund, as well as state-based energy efficiency programs.
  • Rising energy prices have driven increased energy efficiency activity in businesses, and consequently have reduced the need for the EEO Program.
  • Terminating the EEO Program would relieve the regulatory burden on businesses and save them $17.7 million per year.

Having considered other options, such as amending the EEO Program to make it 'streamlined, less prescriptive and more relevant to current business conditions', the Government has therefore decided to terminate the EEO Program.

Next steps

If the EEO Repeal Bill passes both Houses of Parliament, the EEO Act (and consequently the EEO Program) will be repealed on 29 June 2014 and so the EEO Program will not apply as from the 2014/15 financial year (this will be the case even if the Bill passes after this date, in which case the EEO Program will be retrospectively repealed).5

On the same date as the EEO Repeal Bill was introduced into the House of Representatives, the Senate referred the EEO Repeal Bill to the Senate Standing Committee on Economics. Submissions to the Standing Committee close on 20 June 2014, with the Committee's report to be delivered by 14 July 2014.6 This suggests that retrospective repeal, once the new Senators take their seats on 1 July 2014, is the most likely outcome.

Footnotes
  1. The EEO Act, s.3(1).
  2. Energy Efficiency Opportunities Regulations 2006 (Cth), reg.1.4.
  3. Energy Efficiency Opportunities Regulations 2006 (Cth), reg.1.3A.
  4. Commonwealth of Australia, Mid-Year Economic and Fiscal Outlook 2013-14 (December 2013), pp.144-145.
  5. The EEO Repeal Bill, s.2.
  6. Senate Standing Committee on Economics, Energy Efficiency Opportunities (Repeal) Bill 2014.

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