LEGISLATIVE NOTE

ENERGY EFFICIENCY OPPORTUNITIES ACT ­ A STEP IN THE RIGHT DIRECTION The Energy Efficiency Opportunities Act 2006 (Cth) creates a framework in which large energy using businesses will be required to assess opportunities for improving energy efficiency and report publicly on outcomes. Andrew Komesaroff and Brooke Lanarus** 1. INTRODUCTION The Energy Efficiency Opportunities Act 2006 (Cth) (Act) came into effect on 6 April 2006. The act aims to encourage the business sector to take a more rigorous approach to energy efficiency. It creates a framework in which large energy using businesses will be required to assess opportunities for improving energy efficiency and report publicly on those outcomes. The Act follows concerns that Australia is lagging behind other countries in respect of energy efficiency. It is expected that the demand for energy in Australia will increase by 50 per cent by the year 2020, and at least a $37 billion investment in energy will be required to meet Australia's increased energy demand1. The Act is a key part of the government's broader new energy policy. In its white paper, Securing Australia's Energy Future, the Australian Government identified that the performance of corporations to improve energy efficiency will contribute significantly to the government's energy objectives of prosperity, security and sustainability, and the ability to move towards a low emissions future2. The Act is targeted at Australia's largest energy users, those businesses using more than half a petajoule (pj) of energy per year3. That amount of energy is the equivalent of: · electricity usage of approximately 10,000 Australian households; · 139,000 megawatt hours of energy; · 9000 tonnes of LNG or 10,000 tonnes of LPG; · 13 megalitres of diesel; or · spending of approximately $5-10 million on electricity, $1.5-2.5 million on gas or $11-13 million on diesel4.

 ** 1 2 3 4 Partner, Corrs Chambers Westgarth Graduate Lawyer, Corrs Chambers Westgarth Commonwealth, Securing Australia's Energy Future (2004) p 2. Ibid p 3. s 10. Commonwealth, Energy Efficiency Opportunities - Draft Industry Guidelines (2006) p 11.


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It is expected that up to 250 corporations from the mining, resource processing, manufacturing, transport and commercial sectors will meet the energy usage threshold and accordingly participate in the program5. These 250 large energy using corporations account for 60 per cent of the entire business energy use across the country6. Therefore, improvement in their energy efficiency and the identification of energy efficiency opportunities is likely to have a significant impact on energy use in Australia.

2. 2.1 OUTLINE OF THE ACT Registration

The Act provides that from 1 July, 2006 a controlling corporation that uses over 0.5 pj of energy within its corporate group in a financial year will be required to register under the energy efficiency opportunities program.7 The controlling corporation will be required to register within nine months following the end of the trigger year (the year where the corporate group first exceeds 0.5 pj of energy use)8. Formal registration in accordance with part 4 of the act will enable a public register of participants in the program to be created and published on the energy efficiency opportunities website. Exemption from registration may be considered for controlling corporations experiencing fluctuations in energy use. A corporation may apply to the Department of Industry, Tourism and Resources (Department) for such an exemption where energy use in the trigger year was above 0.5pj but was not illustrative of the controlling corporation's typical energy consumption9. 2.2 Preparing an assessment plan Following registration, under Part 5 of the Act, the registered corporation will be required to prepare an assessment plan. The assessment plan must set out a proposal for assessing the opportunities for improving the energy efficiency of the corporation over a five year period10 and must include: · a corporate structure; · current energy use and current energy savings projects; · an assessment schedule which outlines details of the operations of the business and sites to be assessed, including the proposed timing and manner of assessments; and · a reporting schedule outlining how and when reports will be produced, and where public reporting will be published.11

5 6

7 8 9 10 11

Ibid. Commonwealth, Energy Efficiency Opportunities Bills 2005: Second Reading, House of Representatives, 14 September 2005 (Warren Entsch, Parliamentary Secretary to the Minister for Industry, Tourism and Resources). Energy Efficiency Opportunities Act 2006 (Cth) s 9(1). s 9(4). s 9(11). s 15. s 18.


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The registered corporation will have 18 months after the trigger year to submit its assessment plan12 which may be varied by the Secretary of the Department before approval13. 2.3 Conducting assessments After submission of the assessment plan, in accordance with Part 6 of the Act, the registered corporation must then undertake analysis of the energy use of various operations in line with its plan and identify cost effective opportunities to use energy more efficiently. The registered corporation will be required to make assessments in relation to the involvement of people during the assessment process, the information and data collected during the process, and opportunity identification.14 2.4 Reporting on assessments Part 7 of the Act requires that the registered corporation will make available to the public a report containing a description of how the corporation carried out its proposal, the results of carrying out the proposal and the response of the business to those results15. The corporation will be free to make decisions on the opportunities identified as part of its normal business decision making process and will not be forced to implement measures in which it does not see value. Regulations will specify the timing of the report, the form it should take, its manner of publication and other content details. 2.5 Compliance and verification Under Part 8 of the Act, corporations will need to comply with verification activities including participant liaison, desktop checks and company visits designed to ensure that the large energy using corporations have registered and met key program requirements16. Where the Department believes that a large energy using corporation is wilfully not meeting with program requirements it may undertake audit activities to ensure compliance17. 3. ENERGY USERS The Act requires registration where the controlling corporation's corporate group meets the energy threshold. In order for corporations to determine if the Act applies to them, they will need to consider whether their corporation is a controlling corporation or whether their corporation is part of a controlling corporation's corporate group.

12 13 14 15 16 17 s.15. s 15. Commonwealth, Energy Efficiency Opportunities - Draft Industry Guidelines (2006) p 35. s 22. Commonwealth, Energy Efficiency Opportunities - Draft Industry Guidelines (2006) p 58. Ibid p 59.


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3.1 Which Corporations will be a controlling corporation?

A corporation will be deemed to be a `controlling corporation' and therefore be required to register if that corporation: · is a `constitutional corporation', (that is; a body corporate that is a trading corporation or a financial corporation formed within the limits of the Commonwealth, within the meaning of the Commonwealth Constitution); · does not have a holding company incorporated in Australia; and · is not excluded because its main activities include the generation, transmission and distribution of gas or electricity.18 Under this definition, sole corporations, holding companies, listed companies and foreign owned corporations may all be deemed controlling corporations. 3.2 Who is the controlling corporation's corporate group? The definition of corporate group is designed to respond to complex corporate structures and to catch large energy users who operate through project specific subsidiaries. Therefore, in calculating whether the controlling corporation's corporate group meets the energy use threshold, the energy use of the controlling corporation itself together with the following corporate structures may need to be included: · subsidiaries; · joint ventures; and · partnerships.19 Subsidiaries A subsidiary will not be excluded from the group unless: · it has two (or more) holding companies; and · one holding company is not a member of the group; and · the holding company which is not a member of the group controls the composition of the subsidiary's board or can cast or control the casting of more than half the maximum votes at a general meeting of the subsidiary.20 A subsidiary will also be excluded if its main activities include the generation, transmission and distribution of gas or electricity.21

18 19 20 21 s 7. s 8(1). s 8(3). s 8(4).


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Joint ventures and partnerships The corporate group includes any joint venture or partnership of which a group member is a participant, where: · the group member has been nominated as the responsible entity for the joint venture or partnership; or · no entity has been nominated as being the responsible entity for the joint venture or partnership (that is, the joint venture / partnership has failed to nominate a responsible entity.22 If joint venturers or partners fail to nominate a reporting entity, the energy use of the partnership or joint venture will count towards each of the joint venturer's or partners controlling corporation's groups' energy use thresholds. It is expected that joint ventures and partnerships will nominate a responsible entity in order to minimise compliance costs for the joint venturers or partners respectively. Only energy used in Australia is included for the purpose of determining the controlling corporation's group's energy use. It is expected that regulations will be released shortly providing more specific detail as to how businesses involving franchises and business involving leased premises should define their energy use. 4. CONCLUSION The Act has been criticised by some parties as a hollow attempt to improve energy efficiency. For example, the Australian Greens argue that corporations should be required to implement the savings they identify and that without mandatory implementation there will be no accountability and little improvement in energy efficiency. Nevertheless, while the Act stops short of imposing obligations on large energy using corporations, it is a clear step in the right direction towards a low emissions future.

22 s 8(5) and 8(6).