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The process of obtaining an electricity retail licence varies depending on the region. For example, in the Australian state of Victoria, the Essential Services Commission (ESC) has a separate guideline with significant differences compared to the Australian Energy Regulator (AER). In Ontario, Canada, the Ontario Energy Board (OEB) regulates electricity retail licences, while in the United Kingdom, the Office of Gas and Electricity Markets (Ofgem) is responsible for licensing electricity companies. Regardless of the region, there are typically specific requirements and criteria that must be met to obtain a licence, including demonstrating financial viability and the capacity to meet the obligations of a retailer.
| Characteristics | Values |
|---|---|
| Country | Australia, United Kingdom, Canada |
| Regulatory body | Australian Energy Regulator (AER), Essential Services Commission (ESC), Ontario Energy Board (OEB), Ofgem |
| Requirements | Organisational and technical capacity, financial resources and viability, suitability to be an energy retailer, compliance with industry codes, registration with Australian Energy Market Operator (AEMO), Australian Financial Services Licence (AFSL) for financial services, comprehensive financial forecast including scenario analysis |
| Application process | Online portal, email, postal mail |
| Fees | Application fee, annual registration fee, fee to become a market participant with AEMO, fees for joining ombudsman schemes |
| Timeframe | Varies, ESC takes significantly longer than AER |
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What You'll Learn
Retail authorisation criteria
The retail authorisation criteria for obtaining an electricity retail licence vary depending on the region. Here are the criteria for obtaining an electricity retail licence in Australia, the United Kingdom, and Ontario, Canada:
Australia:
According to the Australian Energy Regulator (AER), there are three main criteria that must be satisfied to obtain a retailer authorisation:
- Organisational and technical capacity: The applicant must demonstrate the organisational and technical capacity to meet the obligations of an energy retailer.
- Financial resources: The applicant must have sufficient financial resources to ensure financial viability and meet the financial obligations of a retailer. This includes providing a comprehensive financial forecast with scenario analysis.
- Suitability: The applicant must be suitable to become an energy retailer.
Additionally, applicants must also register with the Australian Energy Market Operator (AEMO) and consider obtaining an Australian Financial Services Licence (AFSL) if their business involves financial services.
United Kingdom:
In the UK, the Ofgem website outlines the following steps for becoming a licensed electricity company:
- Read the licence application guidance document: Before filling out the application form, applicants must read the licence application guidance document, which outlines the criteria used to decide whether to grant a licence.
- Submit the application: Applicants must submit a signed application form with all the required information and documentation, along with the specified fee.
- Application review: Ofgem will review the application for completeness and confirm receipt of payment. If any information is missing or further details are required, they will contact the applicant.
- Higher tier review: If the initial review raises further questions or concerns, the application may be processed through a higher tier (Tier 2), which may involve requesting additional information.
- Decision: Ofgem will decide whether to grant or refuse the licence. If the application is refused, reasons will be provided, and the applicant will have the opportunity to respond.
Ontario, Canada:
According to the Ontario Energy Board (OEB), the following criteria must be met to obtain an electricity retailer licence in Ontario:
- Licence requirement: As per Section 57(d) of the Ontario Energy Board Act, 1998, no person is permitted to retail electricity without a licence.
- Application fee: A non-refundable application fee of $1000 must be submitted for new electricity retailer licence applications.
- Annual registration fee: A licensee must pay an annual registration fee of $800 for each year of holding the licence.
- Compliance: Licensees must comply with the OEB's Retail Settlement Code, the Electricity Retailer Code of Conduct, and all other conditions set out in their licence.
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Application process
The application process for an electricity retail licence varies depending on the region. Here is an overview of the process in different places:
Australia
In Australia, the Australian Energy Regulator (AER) is responsible for issuing retailer authorisations. The National Energy Law mandates that anyone engaging in the retail sale of energy must obtain this authorisation. The AER maintains a public register of authorised retailers and applications.
To obtain a retailer authorisation, applicants must satisfy three entry criteria: organisational and technical capacity, financial resources and viability, and suitability to be an energy retailer. The AER's Retailer Authorisation Guideline outlines the application process and the additional information required. Applicants must submit a comprehensive financial forecast, including financial reports, ownership structure, and contractual arrangements. A declaration from an independent auditor or financial institution regarding the applicant's financial stability is also necessary.
Additionally, applicants must register with the Australian Energy Market Operator (AEMO) and consider obtaining an Australian Financial Services Licence (AFSL) if their business involves financial services.
United Kingdom
In the United Kingdom, Ofgem is the regulatory body responsible for licensing gas and electricity companies. Applicants must refer to the licence application guidance document before submitting their application. This guidance outlines the criteria used to grant a licence.
The application process involves downloading and completing the relevant licence application form, which includes information on the associated fees. The application must be signed and accompanied by all the necessary information, documentation, and payment. Ofgem will acknowledge receipt of the application and review it for completeness. If there are no issues, they will confirm receipt of payment. However, if information is missing or further details are required, Ofgem will request additional information.
Ontario, Canada
In Ontario, Canada, the Ontario Energy Board (OEB) is responsible for electricity retailer licensing. The OEB has implemented an online portal for filing licence applications. Each licence application requires a non-refundable application fee of $1000 for new applicants. Licensees must comply with the OEB's Retail Settlement Code and the Electricity Retailer Code of Conduct, as well as any other conditions set out in their licence.
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Application fee
The application fee for an electricity retail licence varies across different regions. In Ontario, Canada, for instance, a non-refundable application fee of $1000 is required for new applicants, while those seeking to renew their licence pay a fee of $200. Additionally, an annual registration fee of $800 is charged to electricity retailers.
In Australia, there is no application fee payable to the Australian Energy Regulator (AER) for a retail authorisation. However, applicants must provide a comprehensive financial forecast, including interim financial statements, bank statements, ownership structure, and contractual arrangements. The AER will also require declarations from the CFO or CEO of the applying entity.
In the United Kingdom, the application process for a gas and electricity licence involves submitting a signed application form with the required information and documentation, along with the specified fee. Applicants are advised to refer to the licence application guidance document to understand the criteria used to grant a licence.
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Additional requirements
The requirements for obtaining an electricity retail licence vary depending on the region. For example, in the Australian state of Victoria, there is a separate set of guidelines and significant differences in the process compared to other states. Here are some additional requirements to consider when obtaining an electricity retail licence:
- Registration with Energy Market Authorities: In Australia, unless selling energy through an embedded network, registration with the Australian Energy Market Operator (AEMO) is required. Simultaneously, an application for retail authorisation with the Australian Energy Regulator (AER) should be made.
- Financial Requirements: Applicants must provide a comprehensive financial forecast, including scenario analysis. The AER will examine financial reports, interim financial statements, and bank statements. Additionally, the AER requires declarations from the CFO or CEO and an independent auditor or financial institution regarding the entity's financial health.
- Compliance with Industry Codes: Applicants should familiarise themselves with relevant industry codes, such as the Retail Settlement Code and the Electricity Retailer Code of Conduct, as set out by the Ontario Energy Board (OEB).
- Application Fee and Annual Registration Fee: A non-refundable application fee is typically required when submitting a licence application. Additionally, an annual registration fee must be paid for each year the licence is held. These fees vary depending on the region and specific energy market regulations.
- Application Process and Documentation: Applicants must carefully review the licence application guidance document provided by the relevant energy regulator, such as Ofgem in the UK. The application should be duly completed and signed, including all necessary information and documentation, as outlined in the application regulations.
- Timeframe for Assessment: The time taken to assess licence applications can vary. In Victoria, Australia, the Essential Services Commission (ESC) typically takes significantly longer to assess applications compared to the AER.
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Exemptions
In certain situations, a retailer authorisation is not necessary or appropriate, and a person or business may be exempt from the requirement to have one. These situations are referred to as 'exempt selling'.
For example, in Australia, if you are selling energy but it is not your core business, the cost of obtaining authorisation outweighs the benefit to customers, or when an insignificant amount of energy is being sold. Other examples include retirement villages, caravan parks, and bodies corporate/owners' corporations who buy electricity from an authorised retailer and then 'on-sell' it to tenants or residents.
In the UK, the Electricity Act 1989 (amended by the Utilities Act 2000) allows electricity companies who meet certain criteria to be exempt from having an electricity generation, transmission, distribution, or supply licence.
If you are eligible for a deemed exemption, you do not need to apply for one but must abide by the conditions attached to the relevant class of exemption. If you are eligible for a registrable exemption, you must register your energy-selling activities.
Even if exempt, you must still comply with obligations that are applicable to your category of exemption. For example, if you are an exempt electricity seller, you must comply with the relevant clauses of the Energy Retail Code of Practice. If there are fewer than 10 residences/tenants, you may still be sold and supplied electricity via an embedded network, but the seller and supplier are not required to register.
It is important to note that an exemption will not always be appropriate. If energy selling is your main business, you are selling to large numbers of customers, or selling in multiple states and territories, you will likely need a retailer authorisation.
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Frequently asked questions
The Australian Energy Regulator (AER) has outlined three entry criteria that must be satisfied to obtain a retailer authorisation: organisational and technical capacity, financial resources and capacity, and suitability of the applicant to be an energy retailer. The AER also requires applicants to provide a comprehensive financial forecast and a written declaration from an independent auditor.
The UK's Ofgem has a licence application guidance document that outlines the criteria used to decide whether to grant a licence. Applicants must send a signed application, relevant information and documentation, and payment of the fee.
The Ontario Energy Board (OEB) has launched an online portal for filing licence applications. Applicants must submit a non-refundable application fee of $1000 for a new electricity retailer licence.
Yes, in most cases, a licence is required to sell electricity.
Yes, there are some situations where a retailer authorisation is not necessary or appropriate, and a person selling energy may be exempt from the requirement to have an authorisation.
