The Consumer Data Right and energy - what it means and what to do about it

In brief 9 min read

 Following close on the heels of the banking sector, Australia's energy sector will soon be required to grapple with the implementation of the Consumer Data Right (CDR). The ACCC has commenced consultation on how the CDR may apply in the energy sector, and a CDR bill has been introduced to parliament which, if passed, would likely see the first iteration of the CDR apply to the energy sector by mid-2020. Given data's central role in the energy sector, energy market participants should carefully consider what impact a CDR may have on their consumers, commercial arrangements, costs, data-sets, processes and policies in order to navigate the opportunities and threats presented by this change. Partner and Head of Innovation Anna Collyer, Associate Mark Leersnyder and Lawyer Sean Gilmartin report.

Key takeaways

• The CDR is coming to energy. There continues to be significant political and regulatory momentum behind the introduction of the CDR in the energy sector, which would allow consumers greater access to, and control over, their energy data. Subject to the passing of legislation, the ACCC's current timeline will see the CDR apply in the energy sector by mid-2020.
• Energy data is valuable and highly regulated. Improving consumer access to energy data, particularly data on how much energy a consumer uses and the price they pay for it, as well as the ability for consumers to easily transfer or make such data accessible to other authorised energy retailers or third parties, is considered an important step towards a more competitive energy market with more engaged consumers who are better equipped to optimise their energy buying decisions. The current regulatory regimes governing energy data are multi-layered, and the CDR will be another layer.
• Government is consulting on an energy CDR. The ACCC has released a consultation paper on how the CDR could work in the energy sector, and Treasury is considering which energy data-sets the CDR should apply to.
• The energy market should be preparing for the CDR. Energy market participants should  make the effort to understand the CDR and what it will mean for their business. This should include re-assessing their data holdings and data management approaches, and developing a strategy for how to make the most of the CDR's introduction. 

What is the Consumer Data Right?

In short, the CDR will allow consumers to access certain information held about, or related to, them by designated organisations, and direct that information to be transferred to accredited third parties with the consumer's consent (eg, other energy retailers or distributors, or entities that provide switching services).

The CDR regime will be established through changes to the Competition and Consumer Act 2010 (Cth) made by the Treasury Laws Amendment (Consumer Data Right) Act 2019 (Cth). The relevant bill has been introduced to Federal Parliament and is currently with the Senate Economics Legislation Committee for consideration. The Government has expressed a desire for the CDR legislation to be passed by April 2019.

Under the proposed CDR regime, the Treasurer may designate certain sectors of the economy as sectors to which the CDR applies (CDR Sectors). The banking sector will be the first CDR Sector to be designated, with the energy sector slated as the second. The Treasurer must consult with the ACCC and the Australian Information Commissioner prior to designating a CDR Sector. In turn, the ACCC must consult with the public and the Australian Information Commissioner, and report to the Treasurer on the implications of designating the sector as a CDR sector. However, under the transitional provisions of the proposed CDR legislation, the Treasurer will not be required to comply with this strict consultation process if it designates the energy sector prior to 1 January 2020. Among other things, the Treasurer's CDR Sector designation will specify the classes of information which are to be designated, and may specify certain classes of data for which data holders can charge a fee for the disclosure to, or use of by, another entity.

Once a sector is designated a CDR Sector, the ACCC must make rules governing the application of the CDR to that sector. Among other things, these rules can cover the disclosure, collection, use, accuracy, storage, security or deletion of CDR data, as well as the accreditation of data recipients and the designation of certain parties as CDR 'gateways'.

The proposed CDR legislation contains provisions which allow for CDR rules to be specified as 'civil penalty provisions', and creates criminal offences, including for misleading or deceiving conduct which leads another person to believe that a person is entitled to receive CDR data when they are not. The proposed CDR legislation also introduces a range of 'Privacy Safeguards' which apply to the CDR regime and impose a number of different obligations on data holders, accredited data recipients and gateways in relation to CDR data.

The role and regulation of data in the energy sector

The creation, sharing and use of data is widespread throughout the energy sector, and data is a critical component of Australia's energy markets. Among other things, data is used to bill customers, settle market payments between retailers, networks and generators, inform investment decisions, manage and optimise the technical characteristics of the electricity system, and guide regulatory intervention and policy development.

Unlocking the benefits of this data has been a key recommendation in a number of regulatory reviews in recent years, although progress has been perceived as slow. In particular, allowing consumers to access and use their energy data is seen as a key enabler for improving competition between retailers. Specifically, it's believed that by allowing consumers to understand their consumption patterns, they'll be able to better identify which retail offers suit their needs and make better decisions about how they use energy.

Although there are many forms of data in the energy sector, the most talked about – and most likely to be designated as 'CDR data' – is data which relates to how much energy customers use, and how much they pay for their energy.

Energy data, including its measurement, use, storage, security and its ability to be shared, is highly regulated. Intertwined with the energy data regulatory landscape are complex commercial and contractual arrangements which can also influence the ability of parties to use and share energy data. The diagram below shows some of the current sources of energy data regulation in Australia.

Figure 1 - Sources of energy data regulation and control

Understanding how the existing energy data arrangements will be impacted by the CDR is an important step for policymakers, regulators and market participants in considering how to manage the CDR's implementation.

How and when will the CDR apply in the energy sector?

Various reviews by Australian governments, the Productivity Commission, the ACCC, the AEMC and the COAG Energy Council have supported the adoption of the CDR in the energy sector. Most recently, the ACCC released a consultation paper on the implementation of the consumer data right in the energy sector.

In its consultation paper, the ACCC foreshadows that an important component of the CDR regime in the energy sector, given there already some rights for individuals to access their energy data, will be ensuring that accredited data recipients can access designated energy data sets. While acknowledging that Treasury has not finalised which data-sets should be subject to the energy sector CDR (and noting the potential for further consultation), the ACCC identifies possible data-sets which may be designated as CDR data in the energy sector, including certain NMI standing data fields, metering data, customer provided data, billing data, retail product data and distributed energy resources register data.

The ACCC also suggests that designated data holders might include electricity retailers, distributors, AEMO, government-provided energy comparator services, and metering businesses (Data Holders).

The key question the ACCC asks in its consultation paper is which of the following three data access models the energy sector CDR should use:

1. Australian Energy Market Operator (AEMO) centralised model – data would be collected from Data Holders by AEMO (which is likely to involve broader data sets than what AEMO currently holds), held centrally by AEMO, and made accessible to accredited data recipients by AEMO on request;
2. AEMO gateway model – all requests for access to, or transfer of, energy data would be made to AEMO acting as centralised pipeline, which will pass such requests to the relevant Data Holder. The Data Holder has the obligation to verify consent and the accredited data recipient, but AEMO would have responsibility for collecting relevant energy data from Data Holders and making it available to accredited data recipients; or
3. Economy-wide CDR model – relevant data would continue to be held by individual Data Holders, and must be made accessible to consumers, or transferred to accredited data recipients by Data Holders on request, without the involvement of AEMO.

Submissions on the ACCC's consultation paper are due to the Commission by 22 March 2019. In particular, the ACCC is seeking stakeholder views on the criteria that should be used to determine a preferred model, the advantages and disadvantages of each model, and the likely implementation and compliance costs under each model.

The ACCC consultation paper also indicates the CDR is intended to commence in the energy sector in the first half of 2020, and that Treasury is undertaking work in relation to the energy sector's designation as a CDR Sector.

What does this mean for energy market participants?

With clear regulatory and policy momentum behind improving consumer access to data, it seems likely the key questions for the CDR's implementation in the energy sector are 'when' and 'how', rather than 'if'. In light of this, we see the three key actions for energy market participants (including regulators and governments) as being:

• Engage with the CDR's development. Energy participants should develop a strong understanding of what the CDR regime will mean for their organisations. They should look to participate in consultation processes to help ensure the CDR regime reflects the realities of the sector, while also providing a strong and cost effective foundation for the sector to improve consumer outcomes. The designation of the banking sector as a CDR Sector may provide some lessons for the energy sector given Treasury and the ACCC's emphasis on interoperability between CDR Sectors, although there will also be significant differences.
• Take stock of existing energy data holdings, rights and obligations. Energy market participants should carefully consider what energy data they currently hold or require, why they hold it, how it is held, who it is collected from and provided to, how it is regulated, how its collection and use is paid for, and how value is derived from it.
• Develop an energy data strategy in light of the CDR. Based on an understanding of the proposed CDR regime and the data they hold or require, energy market participants should develop a strategy to maximise the value of energy data and minimise the risks associated with the implementation of the CDR in the energy sector. For example, energy market participants could consider the following questions to inform such a strategy:
  • What will the costs associated with managing CDR data be (including in complying with the Privacy Safeguards and developing access and transfer mechanisms), and how can we structure our data-sets and data management practices to minimise these costs?
  • What are the competitive threats that may arise as a result of consumers being able to direct that CDR data be provided to third parties, and how can we ensure our product offerings remain competitive in this new environment?
  • Should we seek to become an accredited data recipient, and, if so, how can we use the information access pathways afforded by the CDR regime (with our customers' consent, and in compliance with the regime) to develop new products and services?
  • What data governance processes and procedures will be need to be created or updated to deal with the CDR?
  • Upon which elements of the CDR regime should we be seeking to make submissions to ensure the regime achieves its desired outcomes in a cost effective manner?
  • What sort of provision should we be making for CDR data in the contracts we are entering into now?
  • Are there any aspects of our current regulatory and operational arrangements which may prevent us from taking full advantage of the opportunities presented by the CDR regime?

We expect that energy market participants who make early progress on these actions will be well placed to comply and make full use of the energy sector CDR when it is implemented in the first half of 2020.