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What you need to know to appoint an Embedded Network Manager?

Under the recently introduced regulatory changes, all property owners that operate embedded networks will need to appoint an Embedded Network Manager (ENM) before 31 March 2018 to avoid potential associated penalties and compliance actions. For those yet to appoint their ENM, the following will provide crucial information necessary to inform your decisions.

What is an ENM?

An ENM is an entity registered with the Australian Energy Market Operator (AEMO) that manages the market interface functions between market systems and embedded networks. To obtain registration, a potential ENM must provide proof of its capacity to bear the obligations that AEMO places on an ENM in the market.

AEMO maintains a list of accredited ENMs, which is available here.

Who needs an ENM?

All embedded networks within the jurisdiction of the Australian Energy Regulator (AER), with more than 30 tenancies within that EN, where those tenancies are either residential, small business, or large business customers, or where the local market rules imply the opportunity for tenants to access the market for a competitive offer.

This obligation does not extend to jurisdictions outside of the National Electricity Market (NEM), such as Western Australia and the Northern Territory. Nor does it extend to jurisdictions within the NEM where there is not legislation in place to support the right of tenants to elect to opt out of embedded networks. At the time of writing, this means that there is no direct obligation on embedded networks within Queensland or Tasmania to appoint an Embedded Network Manager.

Why does it matter?

The obligation for an Embedded Network to appoint an ENM is mandated and policed by the Australian energy Regulator (AER). The AER has an interest in any energy sale that occurs in Australia between third parties and maintains the power to levy fines on sellers of energy for breaches of the NER and their guidelines.

What are the key deadlines? 

The original intention of the AER and AEMO was to apply the requirement to appoint an ENM from the 1 December 2017. Due to delays related to the accreditation of ENM’s, the effective date for “active enforcement of compliance” with the requirement to have an ENM appointed was delayed to 31 March 2018.

More broadly, the AER has indicated that it may use the ENM compliance date as a trigger to widen the search for non-compliance with other obligations of owning and operating an EN.

How do you assess whether an ENM will satisfy your compliance requirements?

The ENM has two main obligations as the interface between the EN operator and the energy market. The first is to provide access to data within defined timeframes, and then maintain data relating to embedded networks and connection points within EN’s that have elected to exercise their right to choose their electricity provider. The second is to comply with any instruction for audit issued by AEMO.

The main sanction that AEMO has on non-performing or non-compliant ENM’s is to revoke both their accreditation and access to AEMO maintained market systems. To manage this risk, we suggest ENM’s are evaluated not only on the maturity of their systems and capability to maintain accurate, up-to-date data, but also the internal governance structures required to deliver on AEMO requirements.

This could include independent compliance and risk management, reporting to an active and independent Board, or the presence of a risk management culture, including evolved compliance management systems within the organisation you appoint.

What opportunities does an ENM present for my EN operation?

The role of the ENM as a facilitator of the AER’s competition policy is to be a reliable conduit of information to other market participants that are interested in selling their services to connection points within EN’s. In itself then, the ENM initiative is not likely going to have an impact on tenant retention rates or sales margins.

Elsewhere in the energy management scope, the ENM initiative presents a unique opportunity for EN owners to consolidate Child NMI market settlement data in order to reconcile Gate NMI credits from their energy retailer each month. This opportunity should be considered by EN owners when they are assessing the capabilities of independent energy reporting providers across their portfolio.

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