RENEWABLE ENERGY (ELECTRICITY) AMENDMENT REGULATION 2012 (NO. 8) (SLI NO 290 OF 2012) EXPLANATORY STATEMENT

Section 161 of the Renewable Energy (Electricity) Act 2000 (the Act) prescribes, in part, that the Governor-General may make Regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Act, as amended by the Renewable Energy (Electricity) Amendment Act 2010 (the Amendment Act) establishes the Renewable Energy Target (RET) scheme to encourage electricity generation from eligible energy sources. The RET is designed to ensure that the equivalent of at least 20 per cent of Australia's electricity supply is generated from renewable sources by 2020. From 1 January 2011, the RET has operated as two parts - the Large-scale Renewable Energy Target (LRET) and the Small-scale Renewable Energy Scheme (SRES).

Under the Act, wholesale electricity purchasers ('liable entities') are required to contribute to the RET in proportion to their share of the national wholesale electricity market. The Act provides for the creation of renewable energy certificates by renewable energy generators and for installations of small generation units (SGUs) such as rooftop solar photovoltaic (PV) systems, and solar water heaters. One certificate generally represents one megawatt-hour (MWh) of electricity from eligible energy sources. The Act also provides for assistance in the form of partial exemption certificates (PECs) for electricity used in activities that are defined to be emissions-intensive and trade-exposed (EITE), such as aluminium smelting and the integrated production of lead and zinc.

Under the SRES component of the RET, the Solar Credits mechanism prescribes additional upfront support to households, businesses and community groups that install SGUs by multiplying the number of Small-scale Technology Certificates (STCs) able to be created for eligible installations. The certificate multiplier factor applied through Solar Credits, hence the level of upfront support available, reduces over time, reflecting the declining costs of rooftop solar PV systems.

The Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) provide an administrative framework to implement the Act in relation to power station accreditation, eligibility requirements for renewable energy sources, eligibility requirements for solar water heaters and SGUs, calculation methods for determining the number of certificates and a compliance monitoring and enforcement framework to support the integrity and smooth operation of the RET scheme for participants.

* implement the Government's decision, announced on 16 November 2012, to bring forward the phase-out of the Solar Credits mechanism by six months. The Solar Credits mechanism applies a multiplication factor of two to the number of certificates created for the first 1.5 kilowatts of generation capacity of SGUs installed before 1 July 2013. The Regulation prescribes arrangements to preserve legally binding contracts for the supply of SGUs that were entered into prior to 16 November 2012 and particular evidentiary requirements are met;

* prescribe matters for the Clean Energy Regulator to consider in determining whether or not an applicant for registration or a person currently registered under the RET is a "fit and proper person";

* prescribe a new EITE activity, the production of nickel, and modify particular parameters used in calculating the amount of partial exemption applicable for an existing EITE activity, printing and writing paper manufacturing; and

* make minor technical amendments, including in relation to submission of audited reports as part of the partial exemption process for EITE activities, and methods for the lodgement of documentation required under the RET scheme.

Policy guidance around the Regulation, concerning the phase-out of the Solar Credits multiplier, is included in Attachment A.

The Renewable Energy (Electricity) Amendment Regulation 2012 (No. 8) reflects the outcomes of comprehensive consultation by the Department with the public and stakeholders in assessing activities for eligibility as EITE activities primarily under the Jobs and Competitiveness Program (the Program). The eligibility requirements are the same for EITE activities under the RET scheme.

The Department of Climate Change and Energy Efficiency (the Department) commenced a formal process for defining and determining the eligibility of EITE activities in February 2009 and has involved stakeholder workshops to assist in the creation of appropriate definition and boundaries for activities. The process also involved the approval of activity definitions by the Minister for Climate Change and Energy Efficiency for the purposes of data collection and publication on the Department's website. Audited data has been submitted to the Government on the basis of the approved activity definitions. Relevant industries that submitted data to the Government for the formal assessment of respective activities were consulted in regard to the drafting of the definitions to be included in the Regulations to ensure that the structure of the definitions generally reflects the conduct of the activities generally.

The policy framework for determining the eligibility of EITE activities for assistance under the Program was originally developed in 2009 and has been used to establish the eligibility of activities defined to date under the Renewable Energy Target (RET) scheme under the Act. The process for assessing activities and defining the technical aspects of the activities, including setting assistance rates and allocating baselines, is outlined in the paper titled Establishing the eligibility of activities under the Jobs and Competitiveness Program (which is available from the Department's website www.climatechange.gov.au).

The Department also conducted a targeted consultation with key stakeholders on draft regulations to prescribe matters that the Clean Energy Regulator is to consider in determining whether or not an applicant for registration or a person currently registered under the RET is a "fit and proper person". This consultation was undertaken during early November 2012 and feedback helped to inform the final regulations.

Given the market sensitivities around the early phase-out of the Solar Credits multiplier, and given that the regulatory arrangements to preserve rights in SGU supply contracts in place before 16 November 2012 are based closely on arrangements put in place in mid-2011 (when the phase-out of Solar credits was previously brought forward), the relevant regulations were informed by stakeholder feedback to the Department and the Clean Energy Regulator concerning the impacts of the reduction of the Solar Credits multiplier in mid-2011.

A statement of compatibility with human rights for the purposes of Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is set out at Attachment C.

General policy guidance on the arrangements to be made through the Renewable Energy (Electricity) Amendment Regulation 2012 (No. 8), concerning early phase-out of the Solar Credits mechanism

On 16 November 2012, the Commonwealth Government announced the early phase-out of the Solar Credits mechanism under the small-scale component of the Renewable Energy Target (RET) scheme, to strike the appropriate balance between easing upward pressure on electricity prices and supporting households and suppliers who install solar photovoltaic (PV) systems.

The Solar Credits mechanism provides additional support for those installing small generation units (SGUs) such as small-scale solar panels, wind and hydro-electricity systems by multiplying the number of small-scale technology certificates (STCs) that these systems would usually create under the Small-Scale Renewable Energy Scheme component of the RET. Solar Credits applies to the first 1.5 kilowatts (kW) of system capacity installed for systems connected to main electricity grids and up to 20 kW of capacity for off-grid systems.

Recognising the declining cost of solar photovoltaic (PV) systems, the certificate multiplier factor was designed to phase out over time. Under the rules in force on 16 November 2012, a multiplier factor of 2 applies to eligible SGUs installed before 1 July 2013.

Following the early phase-out of Solar Credits, effective from 1 January 2013, eligible installations of small-scale generation systems will continue to receive support under the RET, with solar PV systems benefiting from the existing arrangements that enable the creation of STCs based on the amount of solar electricity the systems would generate over 15 years. As part of the 16 November 2012 announcement, the Government indicated that where legally binding contracts were made prior to 16 November 2012 for eligible SGUs installed on or after 1 January 2013 but before 1 July 2013, it would put in place arrangements in the Principal Regulations to enable the Solar Credits multiplier of 2 to apply to these installations, under certain conditions.

The arrangements reflect the Government's policy intent that parties to a legally binding contract, made in good faith prior to 16 November 2012, under which a SGU is supplied and installed on or after 1 January 2013 but before 1 July 2013 at a particular address, can avoid being financially disadvantaged by the regulatory amendment to phase out the Solar Credits multiplier.

The arrangements made under the Principal Regulations specify the contractual circumstances and related documentary requirements governing eligibility to create STCs through Solar Credits under the multiplier of 2 for systems installed on or after 1 January 2013 but before 1 July 2013.

The Regulation puts arrangements in place with the intent that to be eligible, contracts for the supply and installation of a SGU at a particular address must have been entered into before
16 November 2012 and be legally binding on all parties on and after that date.

The term 'contract' is not defined but has its ordinary legal meaning whereby all of the requirements necessary for the formation of a binding contract between two or more parties must be satisfied. The Regulation requires that the contract had been entered into, that is, an offer to supply and install a particular SGU at a particular address, and under particular pricing arrangements and that offer accepted before 16 November 2012. The parties must be legally bound to proceed with the contract on and after 16 November 2012, and any event that is a precondition to the contract must have happened before 16 November 2012.

As such, the Regulation excludes any contracts which as of 16 November 2012 had not yet become legally binding on the parties. This excludes from eligibility any contracts with a cooling-off period, either statutory or explicitly included in the contract, where the cooling-off period remained in place on 16 November 2012 or later. The Regulation also excludes from eligibility any contracts that include a 'condition precedent' (which describes a condition, obligation or event that must come to pass before the contract is considered legally binding), where that condition has not been met before 16 November 2012. Further details on legally binding contract conditions and eligibility are provided in Attachment B.

The arrangements are intended to protect parties to a legally binding contract for the final "retail-level" transaction for the supply and installation of a SGU. These parties would generally be a solar panel retailer and a home owner. Consequently the Regulation also requires that the contract be specifically linked to a particular address, and that the person who becomes the owner of the unit after installation must be a party to the contact. Contracts between system wholesalers and retail suppliers, or bulk supply contracts with builders or residential developers where system addresses are not specified are not intended to be eligible under the arrangements.

The Regulation also recognises that a legally binding contract can be formed in writing or orally. The contract, therefore, may be comprised of:

• a single document comprising both offer and acceptance that is signed by both parties and clearly dated, setting out all the terms and conditions;

• for example, a written contract drawn up by the SGU retailer and signed by all relevant parties, which includes the intended owner and address of the installed unit and outlines the unit specifications, price, general terms and conditions and date the contract was made.

• a series of related documents that together comprise offer and acceptance, identifying the parties and setting out all the terms and conditions including relevant contract dates;

• for example, a chain of written documentation (which could include letters, faxes and/or emails), between all relevant parties, which includes the intended owner of the installed unit, where an offer is made and accepted for the supply and installation of a specific unit at a particular address at an agreed price and related terms.

• an oral agreement which may include a documentary component or be exclusively oral;

• for example where an offer is made in writing or verbally, and accepted by phone or handshake. In this case it can be reasonably expected that written confirmation recording what the parties have agreed to and when it was agreed, would follow shortly after the agreement is struck;

The person entitled to create certificates under the arrangements in respect of a particular SGU installed at a particular address must be able to demonstrate that the contract in respect of that unit meets the eligibility requirements. The Regulation specifies the documentation requirements to be complied with, which would depend on whether the contract was in written or oral form before16 November 2012.

To avoid placing an undue administrative burden on the person creating certificates under the arrangements, the Regulation would not oblige the person to provide the contract documentation along with their application to create certificates, but instead oblige the applicant to provide, prior to applying to create the certificates, statutory declarations under the Statutory Declarations Act 1959 (the Act) including to the effect that they possess the requisite documentation.

Statutory declarations are written statements declared to be true in the presence of an authorised witness. Under the Act, a person who wilfully makes a false statement in a statutory declaration is guilty of a criminal offence equivalent to perjury and is punishable by fines or jail, or both.

Noting that a legally binding contract can be formed in writing or orally, two separate rules around provision of documentary evidence are provided:

This basic rule would apply where the person who is entitled to create certificates under the arrangements possesses documentation demonstrating that a legally binding written contract was entered into before 16 November 2012. This documentation could be:

• a single document that includes both offer and acceptance that is signed and dated by both parties, setting out the terms and conditions of supply including address and expected date of installation as well as pricing arrangements; or

• a series of verifiable related documents (letters, emails, faxes, written forms), all clearly dated prior to 16 November 2012, that together include offer and acceptance, setting out the terms and conditions of supply including address and expected date of installation as well as pricing arrangements.

Before applying for the certificates on the on-line certificate registry administered by the Clean Energy Regulator (CER), the entitled person would need to obtain and provide to the CER a statutory declaration stating that the person possesses a copy of the legally binding contract or of the series of related documents that together form the legally binding contract, entered into before 16 November 2012 for a particular SGU installed on or after 1 January 2013 but before 1 July 2013.

The Regulation would also oblige the entitled person to verify in the statutory declaration that the parties to the contract were legally bound to proceed with the contract on and after
16 November 2012, that if the contract was conditional on any event happening, the event happened before 16 November 2012 and that the owner of the unit was a party to the contract.

To assist the CER in undertaking any required assessment of the application to create certificates under the arrangements, the Regulations also specify that the entitled person must describe the pieces of contract documentation, set out the following information and certify that the information comes from the contract documentation:

Finally, the Regulation also specifies that the entitled person's statutory declaration must certify that the person can provide the contract documentation at the request of the CER.

Examples of types of verifiable documentation that could contribute to demonstrating compliance are outlined in Attachment B.

In regard to the size, make and model of a SGU, there is often some form of component substitution or variation with the actual installed SGU due to unforeseen circumstances, including supply and demand constraints.

Acknowledging this fact, it is intended that small variations to components, make and model, and system size would be acceptable as indicating the installed system for which certificates are being applied for is, for the purposes of these transitional arrangements, the system indicated in the agreement.

The Supplementary Rule - written documentation evidencing the existence of an oral contract.

In circumstances where the legally binding contract made before 16 November 2012 may be oral, for example where an offer is made in writing or orally and accepted by phone or handshake (with written confirmation usually following some time later), the proposed Regulations would reflect a supplementary rule.

In light of the difficulty and administrative expense inherent in demonstrating the existence and particularly the timing of an oral contract, and to address the high risk of false claims, where the agreement is oral the Regulation specifies documentation is to clearly demonstrate that the contract existed and that it was made before 16 November 2012.

To allow reasonable time after 16 November 2012 for this confirming documentation to be produced, the Regulations stipulate this confirming documentation must have been created, and be clearly dated, no later than 21 December 2012.

Under the Regulations, the person who is entitled to create certificates is required to provide the same statutory declaration under the supplementary rule as that specified under the basic rule.

In addition, for an oral contract, before the entitled person can apply to create certificates under the arrangements, the person must also obtain and supply to the CER signed statutory declarations from each party to the contract (one being the owner of the unit after its installation). The declarations are to set out the following:

• the date the contract was entered into (which, to meet eligibility requirements, must be before 16 November 2012);

Where the supplementary rule applies, the Regulation also specifies that a statutory declaration under this rule would not be required from a party to the contract where that party is the person applying to create the certificates. This removes the need for the eligible person to sign two statutory declarations that would in effect contain the same information.

Following the submission of the required statutory declaration(s) to the CER under the basic or the supplementary rule, the Regulation enables the CER to request any other information or documents that it may require to ensure it can verify information provided in the statutory declarations and be satisfied that the application provided by the person entitled to create certificates under the arrangements is valid.

Acknowledging that the process for creation of certificates is often completed in bundles at one time, for example where a person may be entitled to create certificates for multiple small generation units, only one statutory declaration is required under the arrangements where the basic rule has been met for all relevant installed units.

Under these circumstances the signed statutory declaration would still clearly identify all installed units relevant to the application to create certificates and include all the required information listed in the Regulation for each unit.

However, where the supplementary rule applies, the relevant statutory declarations will be required from the person entitled to create certificates and all parties to the contract, as outlined above, for each installed unit.

Existing regulatory powers/requirements around provision and retention of documentation.

The record-keeping powers under Section 160 of the Renewable Energy (Electricity) Act 2000, (the Principal Act) require, inter alia, that a registered person (this would include a person creating certificates under the basic or supplementary rules) must keep, for at least 5 years after creating or obtaining them, records that record and explain all transactions and other acts engaged in, or required to be engaged in by the record-keeper under the Principal Act. This obligation extends to all relevant contract documentation, including that cited in statutory declarations made under the basic or supplementary rules.

In addition, Part 11A - Information Gathering Powers - of the Principal Act empowers the CER to obtain information and documents relevant to the operation of the Principal Act.

Details of the Renewable Energy (Electricity) Amendment Regulation 2012 (No. 8)

This section provides that the title of the Regulation is the Renewable Energy (Electricity) Amendment Regulation 2012 (No. 8).

This section provides for sections 1 to 3 and Schedule 1 to the Regulation to commence on the day after registration on the Federal Register of Legislative Instruments; and for Schedule 2 to commence on 1 January 2013.

This section provides for Schedules 1 and 2 to the Regulation to amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).

Item 1 inserts new regulation 3L pursuant to subsection 30A (5A) of the Act, to provide the Clean Energy Regulator (CER) with matters which must be considered in determining if a person is a fit and proper person to be registered under the Act.

The Renewable Energy (Electricity) Act 2000 (the Act) prescribes (in Division 2) that a person must be registered prior to being able to create Renewable Energy Certificates (RECs) under the Renewable Energy Target (RET) scheme.

In 2011, the Act was amended (at section 11(2A) and 30A (5A)) to prescribe powers for the CER to refuse an application for registration to create certificates, or suspend the registration of a registered person if the CER is satisfied that the applicant or the registered person is not a fit and proper person. The intended effect is to deter unscrupulous people from entering the scheme, and prescribes legislative power to the CER to exclude registered persons whom it considers not to be a fit and proper person.

The Act requires that in determining if a person is a fit and proper person, the CER must have regard to matters specified in the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) and may have regard to such other matters as the CER considers relevant.

The CER already has a power under section 30A of the Act to refuse or suspend the registration under the Act of a person the CER considers not to be a fit and proper person. This regulation is intended to clarify and guide the CER by specifying matters the CER must consider as part of its consideration of whether or not a person applying for registration, or a person already registered under the RET, is (or remains) a fit and proper person. This regulation also more clearly aligns the CER's consideration of fit and proper person status for the purposes of the RET scheme legislation with similar considerations for the purposes of other legislation, such as the Carbon Credits (Carbon Farming Initiative) Act 2011, administered by the CER.

Regulation 3L prescribes matters to which the CER must have regard in respect of applications to be registered under the RET scheme.

Subregulation 3L (1) sets out matters applying to all applicants, whether individuals or corporate bodies, and subregulation 3L (2) sets out additional matters applying to applicants who are executives of corporate bodies.

Paragraph 3L (1) (a) sets out matters relating to an applicant's history in respect to convictions for offences relating to dishonest conduct, the conduct of a business, making misleading statements in an application, and making or producing false or misleading statements or documents.

The matters specified at paragraph 3L (1) (b) reflects whether an applicant has breached the Act, the Australian National Registry of Emissions Units Act 2011, the National Greenhouse and Energy Reporting Act 2007, or the Carbon Credits (Carbon Farming Initiative) Act 2011 or any regulations under these Acts, which are administered by the CER.

The matters specified at paragraph 3L (1) (c) reflect whether an order has been made against the applicant under section 76 or section 224 of Schedule 2 to the Competition and Consumer Act 2010, or a corresponding foreign law. These provisions generally relate to restrictive practices and the imposition of pecuniary penalties for certain business practices. The certain business practices include: unconscionable conduct, unfair practices, unsolicited consumer agreements, lay-by agreements, proof of transactions and itemised bills, prescribed requirements for warranties and repairers, safety of consumer goods and product related services, information standards, and substantiation notices.

The matters set out at paragraph 3L (1) (d) relate to an applicant's standing in respect to energy efficiency schemes operated in New South Wales and Victoria. These two schemes operate a formal accreditation/ registration process. The nature of energy efficiency and renewable energy schemes is such that there may be commonality of persons participating in both sectors.

Paragraph 3L (1) (e) requires the CER to consider the applicant's standing in respect of membership of, or accreditation by, a "clean energy organisation". It is not the intended that this regulation provide a disincentive for persons or firms to join, become accredited by, or sign onto codes of conduct developed by organisations meeting the definition (in subregulation 3L(3)) of a "clean energy organisation". As such, paragraph 3L (1) (e) requires consideration of whether an applicant for registration under the RET has applied for membership of or accreditation under a "clean energy organisation". While the CER is not required to have regard to why an applicant has not sought or been granted accreditation by, or membership of, a clean energy organisation, this is likely to be a relevant consideration that the CER may have regard to in determining whether an applicant is a fit and proper person. (Paragraph 11 (2A) (b) of the Act allows that, in addition to these specified matters that the Regulator must have regard to, the CER may have regard to "such other matters (if any) as the CER considers relevant.")

• having a constitution and operating a scheme that accredits or prescribes membership to persons who install or supply small generation units (SGUs) or solar water heaters, and/or create or trade in small-scale technology certificates (STCs) created under the RET scheme; and

• having a code of conduct that is binding on members or persons accredited by the organisation; and

• that monitors compliance with the code of conduct and is empowered to take action against a member or accredited person for a breach of the code.

While less formal schemes, with for example non-binding codes of conduct, are not intended to be covered by this Regulation, it is envisaged that whether a person is a signatory to such a code of conduct would also be a relevant consideration that the CER may have regard to under paragraph 11 (2A) (b) of the Act in determining whether an applicant is a fit and proper person.

The Clean Energy Council and the REC Agents Association Inc are given as examples of organisations complying with the above requirements. Other organisations, such as the Australian Solar Council, may develop accreditation schemes and codes of conduct and as such may meet the requirements of a 'clean energy organisation' for the purposes of regulation 3L.

Paragraph 3L (1) (f) requires consideration of whether the applicant is insolvent (in the case of an individual) or is an externally-administered body corporate (in the case of a body corporate) under the Corporations Act 2001.

Subregulation 3L (1) also requires consideration of whether the applicant has breached a foreign law that corresponds to those referred to in Paragraphs 3L (1) (a), (b) and (c) as well as, in the case of a body corporate, certain conditions specified in Subparagraph 3L (1) (f) (iii).

Subregulation 3L (2) applies the same matters as detailed in respect to individuals in Paragraph 3L (1) to corporate applicants. Subregulation 3L (2) includes the additional considerations of an executive officer being disqualified by a foreign court, from being a director of a body corporate or being concerned in the management of a body corporate.

It is intended that applicants will be required to consent to a police check and to provide sworn statements (on request) about their fit and proper person status. In appropriate cases, the CER may rely on the checks, when conducted, and the statements when determining whether the person is fit and proper, without engaging in further examination of the issue. This is to ensure that an appropriate balance is struck between the objective of enhancing consumer protection and the need to ensure efficiency in the administration of the Regulations.

Item 2 creates a new Division 2.5A before Division 2.5 that, pursuant to subsection 30A (5A) of the Act, sets out matters to which the CER must have regard in respect of the fitness and propriety of persons already registered under the Act.

Regulation 20CL requires the CER to apply the same matters detailed in new regulation 3L, as described above, in its consideration of whether persons already registered under the RET are fit and proper persons.

It is not intended that this Regulation require the CER to assess whether all persons registered under the Act prior to the commencement of these Regulations are fit and proper persons. Such a requirement is considered to be excessively burdensome for the CER and an unnecessary impost on the approximately 6,900 currently registered persons. It is expected that should the CER, in the normal course of its work, come across evidence that a registered person may not (or may no longer be) be a fit and proper person, then the CER will formally consider whether the person is a fit and proper person, having regard to the matters set out in regulation 3L. This is not intended to preclude the CER taking any steps it considers prudent, efficient and effective to identify and monitor information relating to whether or not persons registered under the RET scheme remain fit and proper persons.

Item 3 inserts new Subregulation 22UA (3) to allow the use of an audit report provided under paragraph 603 (1) (b) of the Clean Energy Regulations 2011 so long as this report satisfies, in all material respects, the requirements in subdivision BA of the Principal Regulations for audit reports provided with applications for partial exemption certificates, the prescribed person gives the CER written notice that the person intends the report to be used for the purpose of meeting the obligations under subdivision BA and the notice is given before 28 February 2013. This is intended to allow a prescribed person to seek to use an audit report under paragraph 603 (1) (b) of the Clean Energy Regulations 2011 for the purpose of meeting obligations under subdivision BA, by notifying the CER in writing prior to 28 February 2013.

This subregulation is intended to address in timely manner, immediate risks of the duplication of audit costs for emissions-intensive trade-exposed (EITE) industries when complying with both the RET scheme and Clean Energy Regulations 2011. Further amendments are intended to be made prior to 31 March 2013 that set out the circumstances under which audit reports provided under paragraph 603 (1) (b) of the Clean Energy Regulations 2011 can be used to meet obligations under subdivision BA. These further amendments will be informed by the Climate Change Authority's final report on the review of the RET and feedback from industry consultation. These further amendments would not interfere with the operation of this subregulation.

Items 4, 5 and 6 substitute subregulations dealing with lodgement of particular statements with the CER, to stipulate that these statements, (energy acquisition statements, large-scale generation shortfall statements, and small-scale technology shortfall statements respectively), must be lodged electronically except where electronic lodgement is not reasonably possible. In the latter case, lodgement must be by post. Two examples of circumstances where electronic lodgement may not be reasonably possible are prescribed as - a major natural disaster or other large-scale emergency.

This change to the lodgement requirements will help streamline administrative processes for entities providing the statements and for the CER in processing them.

Item 7 inserts in Schedule 6 to the Principal Regulations a new Part 48, comprising 3 divisions which together define the activity 'production of nickel' as an EITE activity, including the scope of the activity, its emissions-intensity classification and electricity baseline. The inclusion of the production of nickel in the Principal Regulations as an EITE activity will enable partial exemptions from liability under the RET scheme to be provided in respect of electricity used in undertaking this activity.

Subregulation 740 (1) prescribes that the production of nickel is the chemical and physical transformation of either or both of: nickel bearing inputs into intermediate nickel products, primary nickel products or cobalt products; and intermediate nickel products into primary nickel products or cobalt products.

Each producer conducting the activity during the baseline period for assessing the eligibility of the activity used a different method to process mineralised nickel ores and low grade nickel waste products into primary nickel products. It is intended that all of the alternative processes used during the baseline period will fit within the activity description. In addition to the differing production methods used, not all producers conducted the entire activity. Some producers processed nickel ores and low grade nickel waste products to saleable intermediate products, some producers processed intermediate products to final nickel and cobalt products and some producers conducted the full process.

The inputs of this activity are nickel bearing inputs and intermediate nickel products. The outputs of this activity are intermediate nickel products, primary nickel products and cobalt products.

The activity does not include the upstream mining of mineralised nickel ores or the production of low grade nickel waste input products. Further, the activity does not include the downstream processing of the relevant products or the processing of any by-products from the production of integrated nickel or cobalt products, other than as specified in the activity.

Subregulation 740 (2) set out the meaning of "cobalt products", "intermediate nickel products", "nickel bearing inputs" and "primary nickel products".

Cobalt products are defined to mean cobalt hydroxide where the concentration of cobalt is equal to or greater than 65 per cent with respect to mass; and cobalt where the concentration of cobalt is equal to or greater than 99 per cent cobalt with respect to mass.

• nickel matte where the concentration of nickel is equal to or greater than 64 per cent nickel with respect to mass;

• mixed nickel-cobalt hydroxide precipitate where the concentration of nickel is between 42 and 47 per cent (inclusive) with respect to mass;

• basic nickel carbonate where the concentration of nickel is between 40 and 45 per cent (inclusive) with respect to mass; and

• nickel sulphide concentrate where the concentration of nickel is between 11 and 29 per cent (inclusive) with respect to mass.

Nickel bearing inputs are defined to mean mineralised nickel ores (including laterite or sulphide) and low grade nickel waste products that require equivalent processing to mineralised nickel ores.

• basic nickel carbonate where the concentration of nickel is equal to or greater than 50 per cent nickel with respect to mass;

• nickel oxide where the concentration of nickel is equal to or greater than 78 per cent nickel with respect to mass; and

• nickel where the concentration of nickel is equal to or greater than 98 per cent nickel with respect to mass.

Regulation 741 prescribes that the production of nickel is classified as a moderately emissions-intensive activity. This has the effect that electricity used in the activity as defined is eligible for a partial exemption from RET liability at the moderately emissions-intensive rate.

Regulation 742 prescribes that the electricity baselines for calculating the amount of a liable entity's partial exemption for the production of nickel are:

• 9.29 megawatt-hours (MWh) per tonne of 100 per cent equivalent nickel contained within primary nickel products produced from mineralised nickel ore or low grade nickel waste products;

• 6.45 MWh per tonne of 100 per cent equivalent nickel contained within nickel intermediate products produced from mineralised nickel ore or low grade nickel waste products that are not subsequently transformed into primary nickel products at the same facility;

• 2.84 MWh per tonne of 100 per cent equivalent nickel contained within primary nickel products produced from nickel intermediate products not produced that have not been produced at the same facility; and/or

• 8.89 MWh per tonne of 100 per cent equivalent cobalt contained within cobalt products.

Subregulation 742 (2) prescribes that the nickel mentioned in subregulation 742 (1) must have been produced by carrying on the activity (as defined by regulation 740) to be eligible as a relevant product. The nickel must be of saleable quality (as defined in regulation 22C of the Principal Regulations).

Items 1, 2 and 3

Items 1 to 3 of this schedule implement the Australian Government's decision, announced on 16 November 2012, to bring forward the phase-out of the Solar Credits mechanism under the small-scale component of the Renewable Energy Target (RET) scheme by six months to 1 January 2013.

As part of the 16 November 2012 announcement, the Government indicated that where legally binding contracts were made prior to 16 November 2012 for eligible small generation units (SGUs) installed on or after 1 January 2013 but before 1 July 2013, it put in place arrangements in the Principal Regulations to enable the Solar Credits multiplier of 2 to applies to these installations, under certain conditions.

Following the early phase-out of Solar Credits, eligible installations of SGUs will continue to receive support under the RET, with solar photovoltaic (PV) systems benefiting from the existing arrangements that enable the creation of small-scale technology certificates (STCs) based on the amount of solar electricity the systems would generate over 15 years.

Items 1 and 2 modify existing regulation 20AA and item 3 inserts new regulation 20AAA, to implement the early phase-out, and arrangements for contracts put in place before 16 November 2012.

More specifically, items 1 and 2 modifies subregulation 20AA (1) and subparagraph 20AA (3) (a) (i), and item 3 inserts new subregulation 20AAA (1) to stipulate that the Solar Credits multiplier only applies to a SGU installed at eligible premises before 1 January 2013, or on or after 1 January 2013 and before 1 July 2013 in the circumstances set out in new subregulations 20AAA (2) to 20AAA (7).

Paragraphs 20 AAA (2) (a), (b), (c) and (d) together prescribes that the contract must be for the supply and installation of a SGU, where a party to the contract was the owner of the unit after it was installed, and that the contract was entered into and legally binding on all parties to the contract before 16 November 2012.

The Regulation excludes any contracts, which as of 16 November 2012 had not yet become legally binding on the parties. This excludes from eligibility any contracts with a cooling-off period, either statutory or explicitly included in the contract, where the cooling-off period remained in place on or after 16 November 2012.

The Regulation also excludes from eligibility any contracts that include a 'condition precedent' (which describes a condition, obligation or event that must occur before the contract is considered legally binding), where that condition has not been met before 16 November 2012. Such a condition could have the effect that the contract doesn't legally bind the parties until, for example, formal finance or local planning approval has been obtained.

To be clear, contracts which have not yet become legally binding before 16 November 2012, including for example where a specified cooling period has not expired or where other pre-conditions for the contract coming into force have not yet been met before 16 November 2012, these contracts are not eligible under the transitional arrangements.

However, where legally binding contracts have been entered into before 16 November 2012 and include "conditions subsequent" that is, circumstances under which a party may later withdraw (usually incurring some form of cost - for example if delivery requirements are not able to be met or if permission to connect to the grid is not provided), these contracts would be eligible provided they satisfy the other requirements.

Paragraph 20AAA (2) (e) prescribes the particular matters that must be identified in the contract documentation, namely:

• the date the contracted was entered into, which must be before 16 November 2012;

• the identities of each party to the contract, which must include the owner of the unit following its installation as a party to the contract;

In regard to subparagraph 20AAA (2) (e) (iv) which refers to the size, make and model of a SGU identified in the contract documentation, there is often some form of component substitution or variation with the actual installed small generation unit due to unforeseen circumstances, including supply and demand constraints. It is intended that small variations to components, make and model, and system size is acceptable as indicating the installed system for which certificates are being applied is, for the purposes of these transitional arrangements, the system indicated in the contract.

Paragraph 20AAA (2) (f) prescribes that the person entitled to create STCs for the installed unit, who typically would either be the owner of the installed unit or another person to whom the unit owner has transferred the right to create the STCs, must meet the specified requirements in subregulation 20AAA (3) before creating the STCs for the unit.

Subregulation 20AAA (3) prescribes the requirements that must be met by the the person entitled to create STCs for the installed unit, before creating the certificates, to demonstrate that the contract in respect to that unit meets the conditions for eligibility under subregulation 20AAA (2).

To avoid placing an undue administrative burden on the entitled person to create certificates utilising the arrangements, subregulation 20AAA (3) does not oblige the entitled person to provide the full documentary evidence along with their applications to create STCs, but instead obliges the entitled person to provide one or more statutory declarations under the
Statutory Declarations Act 1959 (the Act) including to the effect that they possess the requisite documentation. Statutory declarations are written statements declared to be true in the presence of an authorised witness. Under the Act, a person who wilfully makes a false statement in a statutory declaration is guilty of a criminal offence equivalent to perjury and is punishable by fines or jail, or both.

Paragraph 20AAA (3) (a) prescribes that the person entitled to create STCs for the installed unit must have in their possession the required contract documentation identifying the matters mentioned in paragraph 20AAA (2) (e). Subregulation 20AAA (7) defines what contract documentation means for written and oral contracts.

Paragraph 20AAA (3) (b) requires that the person entitled to create STCs for the installed unit must provide the Clean Energy Regulator (CER) with a statutory declaration:

• describing the contract documentation, for example by listing and briefly outlining the nature of each document demonstrating the eligibility of the contract;

• confirming that the person can provide this documentation if requested by the CER;

• verifying that the parties to the contract were legally bound to proceed with the contract on and after 16 November 2012;

• verifying that if commencement of the contract was conditional on any event happening, the event happened before 16 November 2012; and

• verifying that the owner of the unit after it was installed was a party to the contract.

Subparagraph 20AAA (3) (b) (iv) and (v) together assist the CER in undertaking an assessment of an application to create certificates under the Regulation, by requiring the entitled person to include in the statutory declaration a statement regarding the contract documentation information specified in paragraph 20AAA (2) (e) and a statement that the information identifies the relevant matters.

Paragraph 20AAA (3) (c) prescribes that in circumstances where the contract is an oral contract the person entitled to create STCs for the installed unit must obtain and supply to the CER signed statutory declarations from each party to the contract (one being the owner of the unit after its installation) verifying that a legally binding contract was entered into before 16 November 2012 by setting out and certifying the same matters as outlined in paragraph 20AAA (2) (e).

Paragraph 20AAA (3) (d) enables the CER to request any other information or documentation in order to satisfy itself that an eligible legally binding contract that meets the conditions outlined in subregulation 20AAA (2) was in place prior to registering STCs for an installed small generation unit under the Regulation.

20AAA (4) and 20AAA (5) enable the entitled person who has the right to create STCs for more than one small generation unit installed under one or more written contracts to provide one statutory declaration under paragraph 20AAA (3) (b) encompassing all relevant units.

Under these circumstances the signed statutory declaration is to clearly identify all installed units relevant to the application to create certificates as well as include all the required information listed in paragraph 20AAA (3) (b) for each unit.

However, where SGUs have been installed on the basis of oral contracts, separate relevant statutory declarations will be required from the entitled person as outlined in paragraph 20AAA (3) (b), for each installed unit.

Subregulation 20AAA (6) prescribes that where the entitled person to create STCs is also a party to an oral contract, they will not have to sign a second similar statutory declaration under
paragraph 20AAA (3) (c), as the required information is to be provided through the entitled person providing a statutory declaration under paragraph 20AAA (3) (b).

Subregulation 20AAA (7) defines the meaning of the term 'contract documentation' in relation to written and oral contracts for the purpose of the Regulation.

For written contracts, contract documentation consists of written documents that set out the terms and conditions of the contract and evidencing the offer and acceptance of those terms and conditions before 16 November 2012.

Typically this would comprise a single written document such as a contract drawn up by the SGU retailer and signed by all relevant parties, which includes the intended owner and address of the installed unit, outlines the unit specifications, price, general terms and conditions and date the contract was made. However, contract documentation could also consist of a series of verifiable related documents, all clearly dated prior to 16 November 2012 that together include an offer and acceptance, setting out the terms and conditions of supply including address, expected installation date and pricing arrangements.

Examples of pieces of verifiable documentation that could contribute to demonstrating the existence of a legally binding contract in place before 16 November 2012 include:

• a written quote, including terms and conditions, for a particular system to be installed at a particular address before 16 November 2012;

• written proof that a monetary deposit was paid (e.g. bank debit/credit note, credit card debit or cheque clearance document) before 16 November 2012;

• applications dated before 16 November 2012 to relevant retail/distribution service providers seeking to connect a particular system to the grid at a particular address; or

• other time-stamped communications (which may be letters, emails, faxes, quotes and confirming orders, dated before 16 November 2012) between the unit supplier and owner of the installed unit confirming the agreement, price and address to install the unit.

For oral contracts, the term 'contract documentation' means written documentation that was created and clearly dated before 22 December 2012, evidencing the existence of the legally binding contract before 16 November 2012. This documentation, which would typically be a document from the supplier to the purchaser confirming details of the agreement, is to clearly identify and include as a minimum the following information:

• the date the contracted was entered into, which must be before 16 November 2012;

• the identities of each party to the contract, which must include the owner of the unit following its installation as a party to the contract;

The pre-22 December 2012 cut-off date is set to allow reasonable time after 16 November 2012 for this confirming documentation to be produced.

Item 4 inserts new subregulation 649 (2A) after subregulation 649 (2) to add a new EITE sub-activity eligible for assistance under the RET scheme - the production of pulp from recovered paper under the printing and writing paper manufacturing activity.

The subregulation prescribes that the electricity baseline for calculating the amount of a liable entity's partial exemption for the production of pulp from recovered paper is 0.824 megawatt-hours per total air dried tonne (assuming a 10 per cent moisture content) of equivalent pulp from recovered paper that is used in the process of manufacturing printing and writing paper; and produced by carrying on the printing and writing paper activity (as defined by clause 647) to be eligible as a relevant product.

Commonwealth Numbered Regulations - Explanatory Statements