EXPLANATORY STATEMENT

Select Legislative Instrument 2013 No. 18

Issued by the Authority of Minister for Climate Change and Energy Efficiency

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment Regulation 2013 (No. 1)

Section 161 of the Renewable Energy (Electricity) Act 2000 (the Act) provides, in part, that the Governor-General may make Regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Act, as amended by the Renewable Energy (Electricity) Amendment Act 2010 (the Amendment Act) establishes the Renewable Energy Target (RET) scheme to encourage electricity generation from eligible energy sources. The RET is designed to ensure that the equivalent of at least 20 per cent of Australia's electricity supply is generated from renewable sources by 2020.

Under the Act, wholesale electricity purchasers ('liable entities') are required to contribute to the RET in proportion to their share of the national wholesale electricity market. The Act provides for the creation of renewable energy certificates by renewable energy generators and for installations of small generation units (SGUs) such as rooftop solar photovoltaic (PV) systems, and solar water heaters. One certificate generally represents one megawatt-hour (MWh) of electricity from eligible energy sources. The Act also provides for assistance in the form of partial exemption certificates (PECs) for electricity used in activities that are defined to be emissions-intensive and trade-exposed (EITE), such as aluminium smelting and the integrated production of lead and zinc.

The Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) provide an administrative framework to implement the Act, including in relation to assistance to EITE activities in the form of PECs.

The Regulation amends the Principal Regulations to streamline the audit process for EITE entities applying for PECs under the RET scheme, where they have already applied for assistance through the Jobs and Competitiveness Program (JCP) under the Clean Energy Regulations 2011.

Policy guidance around the Regulation is included in Attachment A.

Details of the Regulation are included in Attachment B.

Consultation

The Department of Climate Change and Energy Efficiency conducted a public consultation on the draft regulations to prescribe the circumstances under which a PEC applicant would be exempt from audit requirements.  The consultation targeted key stakeholders for feedback including those in the audit field and those industries that may be eligible to apply. This consultation was undertaken during December 2012 and January 2013 and feedback helped to inform the final regulations.

Statement of Compatibility with Human Rights

A statement of compatibility with human rights for the purposes of Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is set out at Attachment C.

                                                                                                          ATTACHMENT A

General policy guidance on the arrangements to be made through the Renewable Energy (Electricity) Amendment Regulation 2013 (No. 1), concerning audit requirements for applications for Partial Exemption Certificates

The Climate Change Authority (CCA) released its final report on the RET scheme on Wednesday 19 December. The CCA recommended that the Australian Government consider opportunities for efficiencies through the alignment of application processes and data requirements for applications for free carbon units under the JCP and applications for PECs under the RET.

On 12 December 2012 the Government announced amendments to the Principal Regulations which allow the Clean Energy Regulator to exempt PEC applications in 2013 from audit requirements where a previous audit report was provided with a 2012-13 JCP application if written notice is provided before 28 February 2013.

This Regulation continues the process of streamlining audit requirements that the Government has started and further addresses the recommendations made by the CCA. It aligns audit and statutory declaration requirements, and it provides the criteria under which PEC applications are automatically exempt from audit requirements from 2013 onwards.

ATTACHMENT B

Details of the Renewable Energy (Electricity) Amendment Regulation 2013 (No. 1)

Section 1 - Name of Regulation

This section provides that the title of the Regulation is the Renewable Energy (Electricity) Amendment Regulation 2013 (No. 1).

Section 2 - Commencement

This section provides for sections 1 to 4 and Schedule 1 to the Regulation to commence on the day after registration on the Federal Register of Legislative Instruments.

Section 3 - Authority

This section specifies that the Regulation is made under the Renewable Energy (Electricity) Act 2000.  

Section 4 - Schedule(s)

This section provides that the Regulation amends or repeals each instrument that is specified in a Schedule to the Regulation.

Schedule 1 - Amendments

1 Subregulation 22U(2)

Subregulation 22U(2) sets out the information that is required to be included in an application must be verified by a statutory declaration by one of the following:

*         a director of the applicant;

*         the applicant's chief executive officer;

*         the applicant's chief financial officer; or

*         the applicant's company secretary.

The subregulation further specifies that the statutory declaration must state that, based on all reasonable steps having been taken to verify the information in the application, the application is accurate and complete as far as the person verifying knows. This wording is consistent with the wording requirements for statutory declarations required to accompany applications for free carbon units under the Jobs and Competitiveness Program as prescribed in the Clean Energy Regulations 2011.

This statutory declaration wording is intended to convey that the person making the statutory declaration has taken all reasonable steps to satisfy themselves that the information being provided in the application is materially correct and complete.

2 At the end of regulation 22UA

This subregulation sets out the criteria under which an application for Partial Exemption Certificates (PECs) is not required to be accompanied by an audit report. This subregulation comes into effect automatically when an applicant meets the criteria. Applicants are not required to apply for an exemption or advise the Clean Energy Regulator prior to submitting their PEC application. These criteria for exemption from the PEC application audit requirements are:

*         that the Clean Energy Regulator has already been given an audit report (the clean energy audit report) under paragraph 603(1)(b) of the Clean Energy Regulations 2011;

*         the clean energy audit report accompanied an application for free carbon units under the Jobs and Competitiveness Program (the clean energy application) under clause 701 of the Clean Energy Regulations 2011;

*         the clean energy application is made in the financial year ending on the 30 June of the calendar year for which the application is made;

*         all the facilities used for the production of the amount or volume of relevant product in the application were included in the clean energy application; and

*         the amount or volume of relevant product produced at the facilities included in the application is the same amount or volume of relevant product produced at those facilities that was included in the clean energy application.

Note that the amount or volume of relevant product produced at the facilities included the application is measured over the same period as in the clean energy application, being the financial year ending on the 30 June of the calendar year prior to the year for which the application is made.

The subregulation further sets out that an applicant may elect to submit an audit report with their PEC application, even if they meet all the criteria for an exemption.

3 Subregulation 22UB(3)

Subregulation 22UB is amended to make the audit requirements for PEC applications set out in the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) consistent with the audit requirements for applications for free carbon units through the Jobs and Competitiveness Program under the Clean Energy Regulations 2011. 

Specifically, the subregulation prescribes that the audit report must set out, under a separate heading from any limited assurance conclusion provided, the auditor's reasonable assurance conclusion as to whether the activities in the application that are claimed to be emissions intensive trade exposed activities comply in all material aspects, with each of the requirements in the description of the activity set out in Schedule 6 of the Principal Regulations. Further, the auditor's report must set out whether the application presents fairly, in all material aspects, the amount or volume of the relevant product produced in each previous financial year, that is relevant to the application in accordance with the requirements for that amount or volume set out in Schedule 6 of the Principal Regulations, and in accordance with the measurement policies adopted and disclosed by the applicant in the application.

Subregulation 22UB (3A) prescribes that where an applicant is undertaking an emissions-intensive trade-exposed activity for the first time or is undergoing a significant expansion as defined in subregulation 22ZD (3) or (4), the audit report accompanying a PEC application must include a limited assurance statement regarding the estimates of expected additional production included in the application. Specifically, the audit report must set out, under a separate heading from any reasonable assurance opinions provided, the auditor's limited assurance conclusion as to whether, based on the audit procedures performed, anything causes it to believe that:

*         the applicant's assumptions do not provide a reasonable basis for the preparation of the expected production amount or volume of the relevant product; and

*         the expected production is not properly prepared, in all material respects, on the basis of the assumptions described in the application; and

*         the expected production is not presented fairly, in all material respects, in accordance with the measurement policies adopted and disclosed by the applicant in the application.

4  Subregulation 22UB(5)

This subregulation prescribes that the term 'reasonable' be removed from subregulation 22UB(5) of the principal regulations when referring to the auditing standards with which audits accompanying PEC applications must comply. This is because subregulation 22UB (3A) now prescribes that the section of the audit report that sets out the conclusion relating to expected additional production will be a limited assurance conclusion rather than a reasonable assurance conclusion.

5 After regulation 22UC

This subregulation sets out that the meanings of 'limited assurance conclusion' and 'reasonable assurance conclusion' are the same as the meaning given by the National Greenhouse and Energy Reporting (Audit) Determination 2009 at subsection 3.18(2) and subsection 3.17(2) respectively.