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Embedded Network Services Provider – ENSP

Updates

On 29 May 2020, National Cabinet formed the National Federation Reform Council (NFRC) to replace the Council of Australian Governments (COAG).

As of 28 September 2020, the working group is still considering the Australian Energy Market Commissions (AEMC) proposed framework. It was expected that Energy Ministers would consider the AEMC’s proposed framework by the end of 2020.

Highlights

New Proposed Roles

  • Off-Market Retailer – Authorisation to be required by the Australian Energy Regulator (AER) for those on-selling electricity purchased from a NEM retailer at a Parent Meter connection to customers within an Embedded Network. Most operators who were previously categorised as “exempt sellers” will now need to obtain this off-market retailer authorisation to continue selling to off-market customers
  • Embedded Network Services Provider (ENSP) – the role that engages in the activity of owning, controlling, or operating an electricity Embedded Network – and does not hold a network exemption. May become an authorised off-market retailer and required for all new Embedded Networks.

Important Documents

Key Dates

  • Transition Timeline: Possible transition cycle of 1 July 2021 – 1 July 2023, depending on COAG Energy Council (COAG has now been replaced by NFRC).

Background

The Australian Energy Market Commission (AEMC) published a final report regarding proposed law and rule changes on 20 June 2019 “Updating the Regulatory Frameworks for Embedded Networks”. This report details the creation of two new roles, the Embedded Network Services Provider (ENSP) role and the Off-Market Retailer, as well as many other significant changes for Embedded Networks.

How will the new rules impact the industry?

The recommended changes will be wide-reaching with the first of the proposals being that metering provisions under chapter 7 of the National Electricity Rules (NER) will apply to Embedded Networks, with the new role of Off-Market Retailer now required to appoint a Metering Coordinator. All new customers in Embedded Networks will be considered ‘retail’ customers and eligible for consumer protections under the National Energy Retail Law (NERL) and National Energy Retail Rules (NERR).

Meanwhile, the new role of Embedded Network Service Provider (ENSP) will be classed as a registered participant in the market and fulfill connection services under the NERL and chapter five in the NER similar to that of Distribution Network Service Providers, performing the same market interface functions as a Distributed Network Service Provider (DNSP). Importantly, many Embedded Networks that were previously classified as “Deemed” under the exemption framework will now be required to become registered. Existing Embedded Network operators will need to become or appoint an ENSP and obtain an off-market retail authorisation.

Under the proposed changes, all meters within an Embedded Network will need to be registered with the market operator (AEMO) and have NMI’s. This will allow all Embedded Network customers to be ‘discoverable’ by retailers in MSATS.

What is the role of the Embedded Network Service Provider?

The Embedded Network Service Provider (ENSP) is the role that engages in the activity of owning, controlling, or operating an electricity Embedded Network – and does not hold a network exemption. The ENSP will be required to register with AEMO and may also be authorised as an off-market retailer. ENSP’s will be required for all new Embedded Networks, performing the market interface functions for NMI creation and approval through MSATS, as well as maintaining information on the metering register. Legacy networks however will still be able to utilise the services of accredited ENM’s who are not registered as an ENSP through AEMO.

Where does the off-market retailer fit in?

The off-market retailer authorisation will be required by the AER for those on-selling electricity purchased from a NEM retailer at a parent connection to customers within an Embedded Network. Off-market retailers will be required to appoint a Metering Coordinator and obliged to make an offer to all off market and new customers in Embedded Network they operate in. ENSP’s will need to nominate at least one off-market retailer for a specific Embedded Network area with AEMO. Off-market retailers may also register as an ENSP.

This change would currently apply to all states and territories following the Retail Rules within the NEM, except for Victoria who have their own regulations and would need to adopt this recommended change to be included.

Why the changes?

The 2017 review and 2019 follow up report were commissioned to address issues faced by customers in Embedded Networks. Despite the changes from the 2017 report, this has not been fully realised and these recommendations are designed to help facilitate improvements for Embedded Network customers across a number of areas including pricing, customer protections and billing accuracy.

The aim of these changes is to further provide Embedded Network customers with:

  • Access to competition,
  • Less impediments in obtaining an offer and signing up with a NEM retailer,
  • All the same consumer protections as an on-market customer,
  • Standardised billing so customers are not receiving two bills, and
  • Broader access where applicable to state ombudsmen schemes.

These changes are the next step in fulfilling the recommendations of the Power of Choice reforms.

When will these changes take effect?

While the actual dates will vary depending on the actions of the COAG Energy Council (now NFRC), a possible effective date of 1 July 2021 (one year after commencement date as a rule) with legacy networks in this bracket of implementation, will be required to make the changes on or before April 2022 – nine months from effective date. All Embedded Networks established from 1 January 2020 will need to register as an ENSP. For those legacy networks afforded further two years to transition, this would need to be completed on or before 1 July 2023. By this time:

Embedded Networks established between 1 December 2017 and 31 December 2019:

  • Registered exempt sellers must have registered as on-market retailers or as off-market retailers and subject to relevant obligations within two years of effective date
  • Registered Networks must have registered as ENSPs and become subject to the relevant obligations within two years of the effective date

Embedded Networks established prior to 1 December 2017:

  • These registered exempt sellers must now have registered as On or Off-Market Retailers and will be subject to all relevant obligations except the appointment of a metering coordinator, within two years of the effective date. However, where it’s possible – once a customer decides to go on market in these networks established prior to 1 Dec 2017, Ch 7 of the NER will require the On-Market retailer at the child connection point to appoint a metering coordinator.
  • These will also be subject to the AER Pricing schedule applying to off market retailers selling to legacy networks, mirroring the AER’s powers to cap prices for exempt sellers into exempt networks at a level up to the standing offer of the local retailer.
  • No required changes for registered exempt networks. Their arrangements have been grandfathered into the new arrangements.

Importantly, all those networks requiring individual exemptions in the process of transition must have these granted on or before the due date for transition.

Do you need to appoint an ENSP?

If you have other core businesses to focus on, are a smaller Embedded Network or single Owners Corporation, you may want to consider appointing an ENSP and/or off-market retailer rather than go through the process of completing these applications and registrations yourself. You will be compliant to these rule changes if you appoint an operator who has the correct registration or authorisation. Any Embedded Network previously considering the appointment of an Embedded Network Manager, that is not classified as a legacy network, should now be looking at the appointment of an ENSP to fulfill this role. Smaller operators such as Caravan parks providing only supply to temporary customers with no ‘sale of energy’ established after 1 December 2017 and before 31 December 2019, will need to register within two years of effective date. Those established after 1 January 2020 up to the effective date will need to register as an ENSP within nine months, with any networks established after the effective date will requiring an ENSP registration upon commencement.

Those who were established pre-1 December 2017 will be grandfathered and subject to exemption frameworks under the legacy network exemptions but will be subject to new NEL and NERL enforcement frameworks. Below is a graph outlining the implementation timeline for legacy Embedded Networks.

For more information, click “Here” for a copy of the AEMC Final Report – “Updating the Regulatory Frameworks for Embedded Networks (2019)”.

ENM Solutions is an accredited Embedded Network Manager (ENM) with the Australian Energy Market Operator (AEMO). We were one of few participants accredited before the commencement date of 1 December 2017. Our unique offering as an ENM is that we do not offer billing or retail services. With a purpose-built system to manage the creation and management of On-Market Child Meters and NMIs and customers throughout the NEM, ENM Solutions is now well positioned for the role of Embedded Network Services Provider.

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