Guideline 5 (2022): Revocation of electricity or gas licences

The Essential Services Commission has power to revoke an electricity or gas licence under the Electricity Industry Act 2000 or the Gas Industry Act 2001. Without limiting the commission’s broad discretion to exercise this power, the commission’s general approach in deciding whether to exercise it is to:

• regard revocation of a licence to be a measure of last resort
• consider each case on its merits,
• provide the licensee with notice, and an opportunity to make representations, in relation to any proposed revocation.

Purpose and application

The commission’s power to revoke an electricity or gas licence is contained in section 29(3) of the Electricity Industry Act and section 38(3) of the Gas Industry Act respectively. This power may be exercised in relation to any licence issued under the Electricity Industry Act or the Gas Industry Act (including, for example, any electricity or gas retail licence).

The purpose of this guideline is to provide guidance on the scope of the commission’s revocation power and the commission’s general approach in deciding whether to exercise that power.

The commission’s revocation power may be exercised where a licensee has requested or consented to the revocation of its licence. However, this guideline focuses on the exercise of that power in the absence of such a request or consent.

Scope of revocation power

Section 29(3) of the Electricity Industry Act and section 38(3) of the Gas Industry Act each provide that the commission may revoke a licence in accordance with the procedures specified in the relevant licence conditions.

The commission has a broad discretion to exercise this revocation power and is not restricted to exercising that power only in prescribed circumstances.

Nevertheless, in exercising the power, the commission:

• must seek to achieve its statutory objective of promoting the long-term interests of Victorian consumers
• must have regard to the matters set out in sections 8 and 8A of the Essential Services Commission Act 2001, including, for example, the price, quality, and reliability of essential services,
• is subject to the general principles and limits of administrative decision-making, including the principles of procedural fairness.

Commission’s general approach

The commission recognises that revocation of a licence is a serious matter and may result in far-reaching consequences for the relevant licensee.

As such, in deciding whether to exercise its revocation power, the commission will:

• regard revocation of a licence to be a measure of last resort
• consider each case on its merits,
• provide the licensee with notice, and an opportunity to make representations, in relation to any proposed revocation.

Measure of last resort

The commission regards revocation of a licence to be a measure of last resort, regardless of whether the commission is exercising its revocation power as a form of compliance or enforcement action.

As stated in the commission’s Compliance and Enforcement Policy, the commission will exercise its power to revoke a licence as a form of compliance or enforcement action only in the most severe instance or in repeated serious instances of non-compliance.

Similarly, in circumstances where revocation is not considered as a form of compliance or enforcement action, the commission will explore alternative forms of action that may be appropriate to address the issue(s) at hand before considering revoking a licence.

Consideration of each case on its merits

As outlined above, the commission must have regard to a range of matters related to its statutory functions.

In this context, the commission will consider all relevant circumstances before deciding whether to exercise its revocation power based on the merits of each particular case. For example, the commission may consider any of the following:

• the engagement that the commission has had with the licensee
• the general conduct of the licensee
• any action taken by the licensee to address the relevant issue(s)
• the potential impact on customers and other stakeholders should the licence be revoked or not be revoked
• any past or present enforcement action taken against the licensee
• any past or present non-compliance by the licensee with a legal requirement
• the views of other regulator(s) where relevant.

The specific circumstances considered by the commission will vary in each particular case and are not limited to the above considerations.

Revocation process – procedural fairness

Prior to deciding whether to revoke a licence, the commission will:

• engage with the licensee as soon as possible about the relevant issues
• provide notice (first notice) to the licensee that the commission is proposing to revoke the licensee’s licence, specifying the basis for such proposal
• provide the licensee with an opportunity to make representations on the matter, and
• consider any representations made by the licensee.

The timeframe and manner in which the representations must be made will be specified in the first notice referenced above. Such representations could relate to, for example, why the licence should not be revoked and how the licensee intends to address the relevant issues.

If the commission decides to revoke a licence after considering any representations made by the licensee, the commission will provide a revocation notice to the licensee that confirms the revocation and specifies the basis for revocation. The licence will then be revoked on the effective date of revocation specified in the revocation notice.

The above process is subject to any applicable procedures specified in the licensee’s licence.

Circumstances where revocation may be appropriate

The Electricity Industry Act and Gas Industry Act provide the commission with a broad discretion to revoke a licence where it considers it appropriate to do so. This gives the commission the flexibility it needs to be responsive to circumstances as they arise.

The following are circumstances where revocation of a licence may be appropriate:

• repeated non-compliance with one or more of the following:
  • enforcement action under Part 7 of the Essential Services Commission Act
  • a licence condition
  • a requirement of a Code of Practice
  • a statutory requirement
  • a decision, direction, determination, or arrangement made by, or agreed with, the commission, another regulator, or the Minister
•  non-compliance that has resulted or could have resulted in a severe and material impact on its customers or trust and confidence in the Victorian energy market
• non-compliance by a licensee that is fundamental to the performance of the licensed activities, including:
  • a retailer failing to maintain a Use of System Agreement with relevant distributors^[1]
  • a retailer failing to maintain electricity/gas purchase agreements or be appropriately registered with Australian Energy Market Operator (AEMO)^[2] 
• any information provided by a licensee, including in its application for its licence, to the commission is found to be grossly false or misleading
• the right of a retail licensee to acquire electricity or gas from the wholesale electricity or gas market (as applicable) is suspended or terminated, thus triggering a ‘retailer of last resort’ process^[3]
• the commission is aware of events that materially impact, or would likely materially impact, a licensee’s ability to remain financially viable to undertake the licensed activities, such as where:
  • the licensee is in administration, receivership, or liquidation, or
  • has ceased to carry on business.

In relation to the last example set out above, the commission encourages licensees to immediately engage with the commission if they become aware of any such events.

In each case, the commission reserves the right to decide to revoke a licence based on the circumstances in each case. Further, the circumstances set out above are not exhaustive and the commission may consider it is appropriate to revoke a licence in other circumstances.

After a licence is revoked

After a licence is revoked, the commission will ensure that notice of the revocation is published in the Government Gazette and on the commission’s website as soon as possible.

Revocation of a retail licence triggers the ‘retailer of last resort’ process under the Electricity Industry Act or the Gas Industry Act (as applicable), provided that this process has not already been triggered.^[4]

The retailer of last resort (ROLR) process ensures that arrangements are in place to ensure supply of electricity and gas continues to consumers.^[5] It is part of this process that previous licensees of revoked retail licenses must comply with a notice requesting for relevant customer information from them if they have such information.^[6]

This guideline has been approved for publication by the commission pursuant to section 13 of the Essential Services Commission Act 2001. The information is for general guidance only, it does not constitute legal or professional advice. Because it is intended only as a general guide, it may contain generalisations, you should obtain professional advice if you have any specific concern.