The Electricity Generation and Retail Corporation Regulatory Scheme was introduced in response to the merger of Verve Energy and Synergy on 1 January 2014, to mitigate the potentially adverse effects of the merger on competition in the Wholesale Electricity Market. The Scheme instruments require Synergy to:
- divide its operations into generation, retail and wholesale business units, and prepare separate financial statements for each on a quarterly basis.
- establish transfer pricing arrangements for wholesale electricity supply trades between the wholesale and retail business units.
- provide Standard Products, being fixed quantities of wholesale electricity supplies available for sale and purchase at published prices.
- restrict the flow of commercial information between its business units relating to a generator or retail competitor.
A Directions Report outlining regulatory changes to address matters raised in the Economic Regulation Authority Scheme review process has been endorsed by the Minister for Energy. The regulatory changes include:
- A reduced maximum buy-sell spread for Standard Products from 20% to 15%, from 1 January 2020 to 31 December 2020, to allow assessment of the effects on Standard Product and customised product transactions.
- A requirement for Synergy to publish the foundation transfer price mechanism and any replacements to the mechanism. This mechanism establishes the price of wholesale supplies used by Synergy to service non-contestable customers and contestable customer contracts established before the Synergy-Verve Energy merger.
- Removal of the reference to the original method for applying the foundation transfer price mechanism.
- Scheme reviews conducted by the Economic Regulation Authority are also to move from an annual process to every two years.
Implementation
Ministerial instruments were gazetted on 23 July 2019 to give effect to the reduced buy-sell spread and removal of the original method for applying the foundation transfer price mechanism from the Electricity (Standard Products) Wholesale Arrangement 2014. These Ministerial instruments are available below:
- Segregation and Transfer Pricing Amendment Instrument 2019
- Electricity (Standard Products) Wholesale Arrangements Amendment Instrument 2019
Draft Amendment Regulations have been prepared to require Synergy to publish the current foundation transfer price mechanism (and any replacements to the mechanism) and also extend the frequency of Scheme reviews.
Stakeholder feedback is invited as to any drafting errors or unintended consequences arising from the draft Amendment Regulations by 5.00 pm on Thursday 10 October 2019, by email to submissions@energy.wa.gov.au.
Documents relating to the review process are available below:
Amendment to the Electricity (Standard Products) Wholesale Arrangements 2014
The Electricity (Standard Products) Wholesale Arrangements 2014 provides for the maximum spread between the price of buy and sell standard products offered by Synergy.
The Economic Regulation Authority (ERA) 2020 Report to the Minister for Energy on the Effectiveness of the Electricity Generation and Retail Corporation Regulatory Scheme (the Scheme) recommended reducing the buy-sell spread applied to standard products from the current 20% to 15% from 1 July 2022 and to 10% from 1 July 2023.
A Ministerial Amendment Instrument was made by the Minister for Energy and gazetted on 29 April 2022 to give effect to the reduced buy-sell spread applied to standard products under the Scheme from 20% to 15% on 1 July 2022 to ensure the Scheme continues to meet effectively its objective of providing price discovery. The Ministerial Amendment Instrument is available on the WA Legislation website.
