A review is underway to investigate whether changes should be made to the Retailer of Last Resort scheme to protect customers in the event that a retailer goes out of business.
 
The Australian Energy Market Commission (AEMC) today released a consultation paper outlining key focus areas for the first stage of the self-initiated review. This includes issues involving the transfer of the failed retailer’s contracts to the retailer of last resort to prevent costs being passed on to customers.
 
Under the Retailer of Last Resort scheme, if an energy retailer goes out of business or ‘fails’, its customers are automatically transferred to a new energy provider as a ‘Retailer of Last Resort’ to ensure that customers' energy supply is maintained.

In recent months, record wholesale prices have placed additional pressures on retailers operating in the energy market, resulting in the collapse of seven authorised retailers and triggering Retailer of Last Resort events.  

While customers are transferred, designated Retailers of Last Resort are currently unable to access the hedging contracts of the failed retailer. These contracts have value and would ordinarily provide insurance against high electricity spot prices or be used to manage supply of gas purchased for customers. 
 
As part of the first stage of the review, the AEMC is seeking stakeholder feedback on whether changes can and should be made to energy laws and rules to minimise the risks Retailers of Last Resort face and the costs customers incur in the event of retailer failures. 

The AEMC is specifically gathering information about the benefits, risks and practicality of solutions to enable electricity and gas retailers to access the contracts they need, including any legal barriers to solutions proposed. The Commission is also looking into retailer behaviour during volatile market conditions.
 
Submissions to this consultation paper are due on 10 November 2022, with a stage one final report expected in February 2023. 

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