Small-scale electricity networks

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SSENB1/1 Bulletin no 1 - General information

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Small-scale Networks Bulletin no 1 - General information

Small-scale electricity networks (also known as off-grid electricity networks) are regional and remote communities in South Australia that are provided with electricity through standalone networks. Some of these networks are not connected to the national electricity market and some are connected to the national electricity market via an inset network arrangement. Over 6,000 customers in South Australia are supplied electricity through small-scale electricity networks. 

The Commission regulates aspects of small-scale electricity networks’ operations because these operators generally hold a monopoly provider position in the market. Small-scale electricity networks must comply with consumer protection measures and reporting requirements set by the Commission (under statutory powers). The overall regime is summarised as:

  • Consumer protection measures – licence conditions set out the behavioural standards and minimum requirements to be complied with by small-scale electricity networks when engaging with their customers.
  • Performance assessment – reporting guidelines set out the Commission’s performance monitoring framework.

Small-scale electricity networks are also required to comply with technical requirements – such as the development of a Safety, Reliability, Maintenance and Technical Management Plan (SRMTMP), a connections policy and a metering plan (if applicable).

The Commission has adopted a verified trust and accountability (VTA) regulatory approach to the way it regulates small-scale and off-grid water, sewerage and energy services in South Australia. The categorisation of licensees forms part of the VTA approach. The Commission will assess each licensee on compliance and sustainability performance and place it in one of two categories: 

  • Category A: Licensees considered trusted to competently run their networks with less prescriptive regulatory oversight. Category A licensees benefit from reduced regulatory reporting. 
  • Category B: Licensees where there are concerns regarding network performance, with respect to either compliance, medium to long-term service sustainability, or both – and there does not appear to be a credible, measurable remediation strategy. This does not imply or mean that the licensee’s operation is unsafe but indicates that customers are facing a higher level of service risk than appropriate. 

Please refer to the bulletins below, for further information on the economic regulatory regime that applies to small-scale electricity networks in South Australia. 

 

SSENB2/1 Bulletin no 2 - Licensing requirements

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Small-scale Networks Bulletin no 2 - Licensing requirements

The Commission is responsible for administering the licensing regime that applies to electricity entities, as established in the Electricity Act 1996. It is responsible for issuing, varying or transferring licences to participants in the electricity supply industry where those participants engage in:

  • the generation of electricity
  • the operation of a transmission or distribution network
  • system control over a power system, or
  • the retailing of electricity - limited to retailers not connected to the National Electricity Market (NEM).

Section 15 of the Electricity Act 1996 requires electricity entities to secure a licence to provide the above operations to South Australian consumers. An application for an electricity licence must be made to the Commission, complying with the following requirements: 

  • in a form approved by the Commission 
  • contain the information specified in the form  
  • payment of an application fee, as reasonable costs for determining the application, and
  • any relevant information that the Commission requires with respect to the licence application.

The Commission has published resources for entities wishing to apply for a new, transferred, or varied electricity licence. These reference documents set out the process and requirements to apply for a licence, issued by the Commission, pursuant to the Act. 

Information on licensing requirements for electricity entities can be accessed at the Licence applications page.

SSENB3/1 Bulletin no 3 - Regulatory obligations

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Small-scale Networks Bulletin no 3 - Regulatory obligations

 

Licensed small-scale electricity networks have ongoing compliance obligations in respect of their operations. As a condition of licence, small-scale electricity networks are required to comply with the following regulatory instruments:

  • Electricity Act 1996
  • Electricity (General) Regulations 2012
  • Electricity Industry Licence 

The Commission expects that licensees have, and rigorously adhere to, a sound and robust compliance system. Licensees are expected to regularly examine, identify, and comply with all obligations that apply to their licenced operations. 

Small-scale electricity networks should refer to their specific licence for the mandatory and/or technical conditions that apply to their operations. These are available to view on the electricity licence and exemption register.

The sections that follow summarise the types of obligations small-scale electricity networks must comply with. Please note, obligations may vary for individual licensees.

Electricity Act 1996  and Regulations
  • Requirement for licence
  • Licence fees and returns
  • Offence to contravene licence conditions
  • Transfer of licence
  • Surrender of licence
  • Initial electricity pricing order
  • Standard terms and conditions for sale or supply of electricity
  • Prevention of dismantling of electricity infrastructure 
  • Electricity officers
  • Powers and duties relating to infrastructure
  • Clearance of vegetation for powerlines
  • Requirements relating to electrical installation connection and meter installation
  • Technical and safety requirements related to infrastructure 
  • Reporting of accidents
  • Obstruction
  • False or misleading information
Electricity industry licence
  • Compliance with laws and industry codes
  • Ombudsman
  • Information to the Commission
  • System controller and the AEMO
  • Operational and compliance audits
  • Confidentiality
  • Taking over operations
  • Community Service
  • Insurance
  • Access
  • Dispute resolution
  • Access
  • Consumer protection obligations, such as:
    • customer sale contracts
    • customer Information obligations
    • retailer supply obligations
    • customer service obligations
    • disconnection of services, and
    • restoration of supply.
 

SSENB4/1 Bulletin no 4 - Reporting requirements

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Small-scale Networks Bulletin no 4 - Reporting requirements

Small-scale electricity networks (also known as off-grid electricity networks) have ongoing monitoring and reporting obligations. As a condition of licence, small-scale electricity networks are required to report in accordance with the following regulatory instruments:

Guideline No 5 - Regulatory reporting requirements for small-scale networks

The Commission places a strong emphasis on licensees and constantly monitoring performance, outcomes and trends. 
Small-scale electricity networks are expected to regularly examine, identify, report on, and explain performance outcomes, to provide greater transparency to consumers and stakeholders. 

Key dates for small-scale electricity networks’ regulatory reporting each year are shown below.

Date Reporting requirement Guideline
31 August Annual return certificate of insurance No 5 - Small-scale networks
As soon as reasonably practicable Material service issue report No 5 - Small-scale networks
Within 3 business days of becoming aware of the breach Material compliance breach report No 5 - Small-scale networks
Within 30 days of the change occurring Change in office holders or major stakeholders No 5 - Small-scale networks

The sections that follow summarise the types of reporting requirements small-scale electricity networks must comply with. 

Guideline No 5 - Regulatory reporting requirements for small-scale networks
Guideline No. 5 - Regulatory reporting requirements for small-scale networks, has been developed to support the implementation of the Commission’s VTA regulatory approach (refer Bulletin no. 6 – VTA approach, below).


Category A licensees are required to provide an annual return, which must contain the following information:

  • a list of office holders
  • connection and customer numbers
  • number of customers on flexible payment arrangements
  • number of customers receiving a concession toward their energy or water bill
  • number of customers registered as life support customers
  • identification of any material changes to operations
  • information on all licensee compliance breaches in the preceding 12 months
  • information on all licensee material service issues in the preceding 12 months, and
  • a signed statement of assurance confirming that it is complying with its obligations.

In addition, licensees must also: 

  • provide information to the Commission, as soon as reasonably practicably, in relation to any material service issue that arises
  • notify the Commission if it commits a material breach of an applicable law or industry code, a material compliance breach, within 3 business days of becoming aware of that breach
  • notify the Commission in writing of any changes to its officer holders and major shareholders (if applicable) within 30 business days of that change occurring, and
  • provide as part of its annual return a current certificate of insurance certifying that the required insurance is
  • adequate and appropriate given the nature of the licensed operations (if applicable).

Category B licensees are required to provide an annual return, comprising:

  • all of the above annual reporting obligations identified, and
  • any additional specific reporting obligations required by the Commission from time to time and notified to the licensee in writing.

Reporting proformas and sign-off requirements are detailed in the guideline. Licensees should ensure the correct proforma is used and that reports are approved and signed per the guideline requirements.

Please refer to Guideline No 5 – Regulatory Reporting Requirements for small-scale networks, for further information.

Completed reports must be submitted to the Commission via email to reporting@escosa.sa.gov.au. Alternatively, access to a secure file sharing application can be provided each year on request.

SSENB5/1 Bulletin no 5 - Templates

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Small-scale Networks Bulletin no 5 - Templates

Completed reports must be submitted to the Commission via email to reporting@escosa.sa.gov.au.  
Alternatively, access to a secure file sharing application can be provided each year on request.

Completed forms must be submitted to the Commission via email to compliance@escosa.sa.gov.au. 
Alternatively, access to a secure file sharing application can be provided each year on request.

SSENB6/1 Bulletin no 6 - VTA approach

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Small-scale Networks Bulletin no 6 - VTA approach

The Commission has adopted a verified trust and accountability (VTA) regulatory approach to the way it regulates small-scale and off-grid water, sewerage and energy services in South Australia. The categorisation of licensees forms part of the VTA approach. The Commission will assess each licensee on compliance and sustainability performance and place it in one of two categories: 

  • Category A: Licensees considered trusted operators to competently run their networks with less prescriptive regulatory oversight. Category A licensees benefit from reduced regulatory reporting.
  • Category B: Licensees where there are concerns regarding network performance, with respect to either compliance, medium to long-term service sustainability, or both – and there does not appear to be a credible, measurable remediation strategy. This does not imply or mean that the licensee’s operation is unsafe but indicates that customers are facing a higher level of service risk than appropriate. 

The Commission will work with and monitor Category B licensees as they develop and implement remediation strategies, with the goal of future reassessment as Category A. The results of the assessment for each licensed operator will be publicly available. This ensures customers and licensees have transparency regarding the outcome of the assessment. Classification of licensees may change, depending on the licensee’s performance over time.

Please refer to the Licensee categorisation methodology - fact sheet, for further information on implementing the VTA approach. 

The VTA approach was adopted following the Commission’s Inquiry into regulatory arrangements for small-scale and off-grid water, sewerage and energy services, which identified enhancements and refinements to the nature and scope of its existing economic regulatory framework. In doing so, its primary objective was to protect South Australian consumers’ long-term interests with respect to the price, quality and reliability of essential services.


SSENB7/1 Bulletin no 7 - Materiality

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Small-scale Networks Bulletin no 7 - Materiality

In accordance with Guideline No. 5 - Regulatory reporting requirements for small-scale networks and licence requirements, licensees must provide to the Commission:

  • identification of any material changes to operations (in annual return)
  • information on all licensee material service issues in the preceding 12 months (in annual return)
  • information to the Commission, as soon as reasonably practicably, in relation to any material service issue that arises, and
  • notification the Commission if it commits a material breach of an applicable law or industry code, a material compliance breach, within 3 business days of becoming aware of that breach.

The sections that follow provide further guidance on materiality for small-scale electricity networks.

Material change to operations

 A material change means any change to a licensee’s operations that has or may have a substantial impact on customers, including, but not limited to, pricing, quality or viability of the service being provided.

Material changes to operations will include anything that may impact customers, such as pricing or the viability of the service. In determining if a change to operations is material, the Commission is of the view that licensees should be guided by the definition of ‘material’, which is: ‘of substantial import or much consequence’ and ‘likely to influence the determination of a cause.’

Examples of material changes

Licensee A provides a reticulated LPG service to two hundred customers and has expanded into a new housing development. This adds thirty new customers, as well as the necessary supporting infrastructure. Since this expansion is a significant change to operations, increasing the asset stock as well as customer numbers, the licensee determines it is a material change, and informs the Commission in its annual reporting return.

Licensee B publishes a new asset management plan for its sewerage operations, and subsequently increases prices by nine percent. Since this is a significant price increase above current levels of inflation, the licensee determines it is a material change, and informs the Commission through its
annual reporting return.

In the following year, Licensee B replaces 13 percent of its pipes. Although this should reduce the number of service issues it records, the licensee determines the upgrade is a material change to its asset base, and informs the Commission through its annual reporting return.

Licensees should have the capability to determine if a change is material in the context of their network and the services provided. If uncertain, a licensee should discuss the matter with the Commission as early as possible, and should err on the side of caution – if uncertain then it should classify the change as material.

Material service issue

 A material service issue means an occurrence that has a substantial impact on a licensee’s ability to deliver its service to its customers (eg a major unplanned interruption, or a matter that causes frequent planned or unplanned interruptions to its service).

The Commission acknowledges that operational issues occur from time to time, and that such one-off events are not themselves probative of competent operation. Rather, it is the licensee’s response and subsequent actions that will inform the Commission’s assessment of, and judgement on, that matter. 

Given this, licensees are required to provide to the Commission relatively immediate ’real time’ information regarding any material service issues (for example, major unplanned interruptions), their subsequent response to resolving those issues, and the outcome. This information should be reported to the Commission as soon as practically possible, having regard to licensees needing time to respond and resolve the issue.

This encourages the rectification of issues in a timely and efficient way. It also assists the Commission to identify, over time and across licensees, any systemic issues early, through identifying trends and patterns. It further assists in developing constructive relationships between the Commission and licensees, as well as deepening the Commission’s knowledge of the operations of individual networks. 

The Commission has not defined materiality thresholds in the context of service issues. If uncertain, a licensee must communicate with the Commission, and should err on the side of caution, identifying service issues as material if uncertain as to classification.

Material compliance breach

 A material compliance breach means a breach of a licensee’s regulatory obligations that is material in the licensee’s particular circumstances. In determining whether the breach is material, the licensee should consider (in addition to any further relevant consequences/outcomes of the compliance breach):

  • the impact of the breach on customers, or the potential future impact
  • whether the breach has a financial impact on customers
  • the number of customers affected, and
  • the potential (and actual) impact on safety and risk to the public.

The Enforcement Policy outlines matters (refer section 5.2) that are considered by the Commission in determining whether or not to impose any intervention measures, in respect of a breach, and the nature of those measures. The relevance of and weight to be accorded to each matter (or any other factors) will depend upon the particular circumstances of each case. The order of the following matters does not indicate a priority of one over another:

  • whether the offence is a trivial infringement
  • whether there was a deliberate decision to infringe an obligation
  • whether there is a history of non-compliance (or compliance) with the South Australian regulatory regime
  • whether the public could realistically expect some punitive action to be imposed as a result of the breach
  • whether the offence is remedied quickly or there is a demonstrated willingness to remedy the non-compliance
  • whether there was a failure to put reasonable measures in place to avoid a contravention
  • whether there is an appropriate compliance program in place
  • whether the offence was inadvertent or accidental
  • whether a prosecution would be likely to create an incentive for compliance and deter future breaches
  • whether the offence was beyond the person’s control, ie as a consequence of a force majeure event or incident any gain (financial or otherwise) made as a result of the contravention
  • the degree of harm (actual or potential) in the event of continuing non-compliance (including financial loss to consumers)
  • whether the person promptly and voluntarily disclosed the offence and co-operated with the investigation of the offence by the Commission
  • the estimated length, complexity and expense involved in an investigation and prosecution, and
  • the factors set out in section 6 of the Essential Services Commission Act 2002.
General guidance on materiality

Materiality is a relative term, determined by considering the qualitative (quality) and quantitative (amount) factors arising from an event. There are no definitive rules or thresholds (such as percentages or dollar amounts) that can be applied, as materiality must be considered in context of the licensee’s particular circumstances. 

Quantitative assessment

Licensees may consider using a percentage as a numerical threshold may provide the basis for a preliminary assumption that a deviation of less than that percentage is unlikely to be material. This may be used for year-on-year changes in income, expenses, asset values and any other financial or statistical information (eg customer numbers or network length).

In making a preliminary assessment of materiality:

  • a change which is equal to or less than 5 percent of the appropriate base amount may be presumed not to be material unless there is evidence, or convincing argument, to the contrary
  • a change between 5 percent and 10 percent (inclusive) must be consciously considered by the licensee and determined to be material or not material, and
  • a change which is equal to or greater than 10 percent of the appropriate base amount may be presumed to be material.

Example of material changes

If there is a six percent increase in network length or customer numbers as a new sub-division is added to the area of operation, this could be considered material as a new sub-division may change the risk profile of the licensee. This is due to the addition of new assets may increase the risk of operational issues such as increased interruptions due to commissioning issues with equipment.

In considering whether an event is material licensees may be guided by the definition of material for financial reporting. IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors define materiality as follows:

“Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”

Qualitative assessment

Qualitative materiality generally includes an assessment of whether the event is significant to the licensee and the effect it has on the licenced operations. Examples of qualitative matters include (but are not limited to):

  • omission of relevant information in licensee reports
  • serious weakness in governance systems, processes and controls, or
  • fraudulent reporting of information.


In determining whether an event is material, licensees should also consider the following: 

Qualitative materiality factor Guidance for assessment
The impact of the breach of that obligation on consumers, or the potential future impact
  • The event caused a loss of electricity supply for a protracted period such as greater than 12 hours.
  • A customer experiences nine or more unplanned outages in one financial year.
Whether the breach of the obligation has a financial impact on consumers
  • metering or billing error which resulted in the overcharging of customers over a period of more than one billing cycle.
  • property damage of more than $5,000 to a customer’s property.
The number of customers affected
  • incident affected more than one (1) percent of customer base.
The potential (and actual) impact on safety and risk to the public

Please note, the information provided is for guidance only and is not a prescriptive procedure for determining if an event is material. Licensees should consider all factors giving rise to the event and the actual (or potential future) impacts when making a materiality assessment. If uncertain, a licensee must communicate with the Commission, and should err on the side of caution, identifying service issues as material if uncertain as to classification.