Electricity Supply Act 1995

Executive summary of update

This legislative update introduces significant new regulatory frameworks and expands existing powers to enhance electricity supply security, promote renewable energy, and improve network operations. Key changes include the establishment of three new energy security safeguard schemes (Energy Savings, Peak Demand Reduction, and Renewable Fuel) with associated targets, certificates, and penalties. It also grants the Minister and Tribunal enhanced powers for emergency management, cyber security, and licence enforcement, alongside new obligations for network operators regarding bush fire prevention, excavation safety, and strategic infrastructure development. The most significant practical consequence is the introduction of complex new compliance obligations and financial incentives for energy market participants across multiple environmental and security objectives.

Impacted parties

This update significantly impacts electricity retailers, distributors, transmission operators, market customers, accredited service providers, and persons involved in excavation work or renewable fuel production.

Change Analysis

1. New Energy Security and Environmental Schemes

The update introduces three major new regulatory schemes under Part 8A (Reduction of greenhouse gas emissions) and Part 8B (Energy security safeguard), which includes Schedule 4A (Energy savings scheme, Peak demand reduction scheme, Renewable fuel scheme).

• Part 8A establishes greenhouse gas benchmarks for retailers and other electricity suppliers/consumers, requiring compliance through abatement certificates or incurring penalties. This is a comprehensive framework for reducing emissions from electricity.
• Schedule 4A introduces three distinct schemes:
• Part 1 Energy savings scheme: Creates financial incentives for reducing energy consumption, with individual targets, energy savings certificates, and penalties for shortfalls. It includes provisions for exemptions (e.g., for green hydrogen) and a civil penalty regime.
• Part 2 Peak demand reduction scheme: Aims to reduce peak electricity demand through financial incentives for creating peak demand reduction capacity, with individual targets, certificates, and penalties. It also includes exemptions and a civil penalty regime.
• Part 3 Renewable fuel scheme: Commencing 1 January 2027, this scheme creates financial incentives to increase green hydrogen and other renewable fuel production, with individual targets, certificates, and penalties. It also includes exemptions and a civil penalty regime.

2. Enhanced Regulatory Powers and Enforcement

The update significantly expands the powers of the Minister and the Tribunal, and introduces new enforcement mechanisms.

• Part 5D Electricity safety and Part 5E Protection of underground electricity power lines introduce new regulatory frameworks for electricity safety, including inspector powers, equipment testing, accident reporting, search warrants, and obligations for network operators and excavators regarding underground lines.
• Part 6A Step-in rights—Network Administration Orders grants the Minister and Tribunal powers to take control of distribution or transmission systems in cases of licence cancellation or contravention threatening safe, secure, or reliable supply.
• Part 7A Management of electricity supply emergencies empowers the Premier to declare electricity supply emergencies and the Minister to issue directions (including cyber security directions) to manage disruptions.
• Schedule 2 Licences introduces Clause 8A, granting the Tribunal powers to enforce licence conditions, including imposing monetary penalties and directing remedial action. Clause 6(5) adds new mandatory licence conditions for performance, business continuity, and operational presence. Clause 6A imposes environmental assessment compliance as a licence condition.

3. Strategic Infrastructure and Green Energy Facilitation

New provisions aim to support investment in electricity infrastructure and promote green energy.

• Section 44(4) specifies that strategic benefit payments are disregarded in land acquisition compensation under the Land Acquisition (Just Terms Compensation) Act 1991, Part 3.
• Schedule 2, Clause 6(2)(i) introduces a new licence condition for transmission operators to make strategic benefit payments related to transmission infrastructure, with detailed guidelines in Clause 6(6). Clause 12 requires trust accounts for these payments.
• Section 192 Recovery of distribution and transmission charges from green hydrogen producers allows regulations to limit charge recovery from green hydrogen producers.
• Section 192A Regulations relating to community-scale batteries enables regulations to facilitate the construction and use of community-scale batteries.
• Sections 192B and 192C introduce regulations and guidelines for network-to-network connections.

Corrective and preventive actions

• Legal

• Part 8A, Part 8B, Schedule 4A: Legal team to review all new scheme rules, civil penalty provisions, and compliance obligations for the Energy Savings, Peak Demand Reduction, and Renewable Fuel Schemes.

• Section 31A: Legal team to review and update internal policies and external contractor agreements to ensure compliance with new accreditation requirements for contestable network services.

• Section 49A, Part 5D, Part 5E: Legal team to update internal legal advice and training materials on new obligations, liabilities, and enforcement powers related to excavation work, electricity safety, and underground power lines.

• Part 6A: Legal team to develop protocols for responding to Network Administration Orders and understand the implications of step-in powers.

• Part 7A: Legal team to develop protocols for responding to electricity supply emergency declarations and directions, including cyber security directions.

• Schedule 1: Legal team to understand the Tribunal’s new powers to institute civil penalty proceedings under the National Electricity (NSW) Law for licence breaches.

• Schedule 2, Clause 8A: Legal team to review the Tribunal’s new enforcement powers and monetary penalties for licence contraventions.

• Section 179A: Legal team to update compensation advice to reflect new limitations on compensation payable by the State.

• Commercial and Procurement

• Schedule 4A, Part 1, Division 5 (Clauses 22-25): Commercial and Procurement team to assess eligibility for exemptions under the Energy Savings Scheme, particularly for green hydrogen production, and adjust procurement strategies accordingly.

• Schedule 4A, Part 2, Division 3 (Clauses 93-96): Commercial and Procurement team to assess eligibility for exemptions under the Peak Demand Reduction Scheme, particularly for green hydrogen production, and adjust procurement strategies accordingly.

• Schedule 4A, Part 3, Division 3 (Clauses 157-160): Commercial and Procurement team to assess eligibility for exemptions under the Renewable Fuel Scheme, particularly for green hydrogen production, and adjust procurement strategies accordingly.

• Section 192: Commercial and Procurement team to evaluate potential for reduced distribution and transmission charges for green hydrogen production and incorporate into project financial models.

• Schedule 2, Clause 6(2)(i), Clause 12: Commercial and Procurement team to incorporate strategic benefit payment obligations and trust account requirements into financial planning and contracts for transmission infrastructure projects.

• Government & Regulatory Affairs

• Part 8A, Part 8B, Schedule 4A: Government & Regulatory Affairs team to monitor the development of scheme rules and engage with the Minister, Scheme Regulator, and Scheme Administrator on implementation and compliance.

• Section 31A: Government & Regulatory Affairs team to monitor regulations for accredited service providers and ensure internal accreditation processes align.

• Part 7A: Government & Regulatory Affairs team to establish clear communication channels with the Premier and Minister for rapid response during electricity supply emergencies.

• Section 181A: Government & Regulatory Affairs team to monitor regulations for cyber security requirements and ensure alignment with industry best practices.

• Section 191: Government & Regulatory Affairs team to review all new regulation-making powers and potential impacts on operations.

• Section 192A, 192B, 192C: Government & Regulatory Affairs team to monitor regulations and guidelines for community-scale batteries and network-to-network connections, engaging with relevant stakeholders.

• Community & Social

• Part 5, Division 2A (Sections 53E(2)(b), 53I): Community & Social team to develop and publicize a hardship policy for property owners affected by bush fire risk mitigation work.

• Section 90, 91 (Repealed): Community & Social team to review the impact of the repeal of customer consultative group provisions and ensure alternative channels for customer engagement are effective.

• Human Resources

• Part 5D, Division 2 (Section 63M): Human Resources team to ensure inspectors are properly appointed and provided with identification.

• Part 7A, Section 94G: Human Resources team to ensure authorised officers for electricity supply emergencies are properly appointed and identified.

• Schedule 4A, Part 1, Division 13A (Clause 71A), Part 2, Division 11A (Clause 136B), Part 3, Division 13 (Clause 214): Human Resources team to develop training programs for compliance officers under the new energy schemes.

• Operations

• Section 12A: Operations team to understand the expanded definition of “distribution system” and its implications for network management.

• Section 31A: Operations team to ensure only accredited service providers are used for contestable network services.

• Section 49A: Operations team to implement new procedures for managing excavation work near electricity works to prevent damage and ensure public safety.

• Part 5, Division 2A: Operations team to implement new procedures for bush fire risk mitigation work on private land, including notice requirements and emergency actions.

• Part 7A: Operations team to develop and implement operational plans to comply with electricity supply emergency directions, including demand reduction and plant shutdown requirements.

• Section 196: Operations team to integrate new powers of entry for metering coordinators and providers into field procedures.

• Health Safety and Environment

• Part 5D: Health Safety and Environment team to implement the new electricity safety framework, including examination and testing of equipment, accident reporting, and investigation procedures.

• Part 5E: Health Safety and Environment team to develop and implement procedures for providing information on underground electricity power lines and ensuring compliance with excavation work requirements.

• Section 49A: Health Safety and Environment team to update safety protocols for excavation work near electricity works.

• Part 5, Division 2A: Health Safety and Environment team to update bush fire prevention plans and procedures in line with new powers and obligations.

• Project Management

• Section 93B: Project Management team to ensure all network infrastructure projects involving transmission systems obtain the necessary transmission operator’s licence.

• Section 192A: Project Management team to explore opportunities and regulatory requirements for community-scale battery projects.

• Section 192B, 192C: Project Management team to integrate new regulations and guidelines for network-to-network connections into project planning and delivery.

• Schedule 2, Clause 6(2)(j): Project Management team to ensure compliance with network-to-network connection guidelines in all relevant projects.

• Finance

• Part 3, Division 5 (Levy): Finance team to monitor changes in distributor’s levy calculations and exemptions.

• Part 4, Division 4 (Pricing): Finance team to incorporate new electricity network pricing determination increases into financial models.

• Part 8A, Part 8B, Schedule 4A: Finance team to establish new accounting and reporting mechanisms for energy savings, peak demand reduction, and renewable fuel certificates, penalties, and associated costs/revenues.

• Schedule 2, Clause 8, 8A: Finance team to budget for potential monetary penalties imposed by the Minister or Tribunal for licence contraventions.

• Schedule 2, Clause 12: Finance team to establish and manage trust accounts for strategic benefit payments.

• Engineering

• Section 12A: Engineering team to review and update design and operational standards for distribution systems, particularly concerning rail network electricity systems and regulated stand-alone power systems.

• Section 26, 27, 28, 30: Engineering team to review and update technical requirements for service lines, equipment, transformers, and apparatus installation/use.

• Part 5D, Division 3 (Section 63P, 63Q): Engineering team to ensure electricity delivery equipment can be operated safely and in accordance with relevant safety management systems, and to respond to orders prohibiting unsafe operation.

• Section 192A: Engineering team to develop technical specifications and safety standards for community-scale batteries.

• Section 192B, 192C: Engineering team to integrate network-to-network connection regulations and guidelines into design and construction processes.

Risks & opportunities assessment

The update presents significant risks related to increased compliance burden, potential for substantial financial penalties under new civil penalty regimes, and operational disruptions from emergency directions or network administration orders. The introduction of new schemes (greenhouse gas, energy savings, peak demand reduction, renewable fuel) creates opportunities for market participants to innovate in energy efficiency, demand management, and renewable fuel production, potentially unlocking new revenue streams through certificate creation and trading. Strategic infrastructure provisions, including those for green hydrogen and community-scale batteries, signal a clear government direction towards decarbonization and grid modernization, offering long-term investment opportunities for agile operators. However, the complexity of these interconnected schemes and the potential for regulatory changes (e.g., to targets or penalty rates) also introduce market uncertainty and require continuous monitoring.