The climate is right for an energy sector CDR

James Arnott, Director, KPMG Law
Kate Marshall, Partner, KPMG Law

Retail energy prices, and the energy sector in general, remain the focus of sustained political attention. With its aim to improve consumer choice and facilitate greater competition, it is easy to see why the implementation of a consumer data right (“CDR”) in the energy sector may happen more quickly than initially anticipated.

The Australian Government’s proposed CDR framework, set out in the recently released Treasury Laws Amendment (Consumer Data Right) Bill 2018 (“CDR Bill”), will allow consumers to receive data relating to that consumer or to direct the transfer of that data to accredited third parties, such as comparison sites. The CDR aims to increase consumer value and competition through improving a customer’s ability to understand their energy use and negotiate better deals with a provider.

Rapid implementation timeframes

The Government is adopting a sector-by-sector approach to CDR implementation, with a CDR in the banking sector (in the form of the “Open Banking” reforms) anticipated to be in place by 1 July 2019.

While Open Banking is the focus of attention today (and creating a significant workload for banks, the energy sector won’t have long to learn from this experience. We expect to see an energy sector CDR of some form in place by the end of 2019 and perhaps earlier. This is an ambitious timetable and will require key stakeholders in the CDR scheme, including Treasury, the ACCC and Data61, to implement two industry CDRs essentially in parallel.

The CDR rules are critical

The CDR Bill establishes the draft framework for CDR regulation. However, details of the CDR scheme, including what data sets are covered and how they can be used, will be left to the sector specific “CDR Rules” to be developed by the ACCC.

Draft Open Banking CDR Rules are expected to be released in September 2018 and will help answer existing questions for the banking sector. It is not yet clear when the energy sector CDR Rules will be released.

Challenges and opportunities for the energy industry

Anticipating and influencing the direction of the energy sector CDR Rules will be critical for this sector. Lessons to be learnt from Open Banking may be limited given the differences in the industries and data sets.

If the June 2018 recommendations to the Council of Australian Governments (COAG) Energy Council are adopted, industry participants should anticipate an initial simplified CDR mechanism focussed on sharing electricity meter data and standing data. This will involve huge volumes of data and a central transfer model managed via the Australian Energy Market Operator (AEMO) which has real benefits for consumers and other participants. The proposed model is intended to allow for rapid implementation, and will likely reflect simplified consent and accreditation mechanisms for industry participants.

However, any energy sector CDR will ultimately have a broad application and there are numerous issues arising out of the CDR Bill that require immediate consideration. These include managing data accuracy in the context of large volumes of data and legacy systems, ensuring clarity on what needs to be shared particularly “value added” data and what level of data reciprocity will be adopted. Navigating the introduction of an energy CDR with specific consent, security and privacy requirements, which will be different from existing Australian Privacy Principles, will also require strong security controls and advanced data management systems.

We should not forget that increased access to consumer data through an energy sector CDR also creates a real opportunity for both incumbents and disruptors in the energy industry. Industry participants should be considering today how increased future access to third party consumer data sets could influence and improve their product and technology roadmap.

Get ready now

Implementation of an energy sector CDR will require industry-wide changes in data management processes and technology. Organisations who can best influence the CDR Rules debate, manage its implementation and use CDR as an opportunity to develop more innovative products for their customers will see a genuine competitive advantage.

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