Treatment of electricity derivatives

In line with the Government’s earlier commitments, any decision taken by the Minister in relation to either the making of regulation or consent to an ASIC rule will also involve the Minister for Resources and Energy where that decision relates to the energy sector.

The Australian Government has also committed to considering whether ASIC may be required by regulation, made under the new section 901J, to consult with energy regulators and relevant bodies prior to making any derivative transaction rule.

This paper seeks comment on a draft regulation at Attachment A that would require ASIC to seek the views of the Australian Energy Markets Commission (AEMC) prior to making a derivative transaction rule relating to an electricity derivative, if the rule is about a matter connected with the AEMC’s functions.

Several processes are currently under way that are directly relevant to the use of OTC derivatives in the energy market.  The AEMC has been asked to provide advice to the Standing Council on Energy and Resources (SCER) on the resilience of the financial relationships and markets that underpin the operation of the National Electricity Market (NEM).  It is expected that this advice will be developed in the first half of 2013.

The Government will consider whether it is appropriate to impose mandatory requirements in relation to electricity derivatives after the AEMC’s financial resilience review has been completed.