National Electricity Law, Rules and AER Enforcement: 2026 Penalty Framework
How the National Electricity Law and Rules are enforced by the AER, including the three-tier civil penalty regime and recent enforcement outcomes.
The National Electricity Law and Rules
The National Electricity Law (NEL) forms the foundation of the national electricity system. It is set out in the schedule to the National Electricity (South Australia) Act 1996 and applied as law in each participating jurisdiction. The NEL establishes the legal framework for the operation of the National Electricity Market. [do not call register obligations]
The National Electricity Rules (NER) provide the detailed operational rules for the electricity market. These rules are made under the NEL by the Australian Energy Market Commission (AEMC). The AEMC is also responsible for making the National Gas Rules and National Energy Retail Rules.
Australian Energy Market Operator (AEMO) operates the wholesale National Electricity Market under the NEL and NER. The overall framework is overseen by Energy Ministers via the former COAG Energy Council successor body.
The AER's role
The Australian Energy Regulator (AER) has a key role in ensuring compliance with the National Electricity Law (NEL), National Energy Retail Law, National Gas Law, and their respective regulations and rules. This responsibility includes monitoring, investigating, and enforcing adherence to these frameworks. The AER also regulates network revenue allowances and approves retailer authorisations. consumer data right in energy initiatives may also fall under this oversight.
To guide its actions, the AER publishes a Compliance and Enforcement Policy, which details its enforcement priorities. This policy provides transparency regarding the AER’s approach to upholding the integrity of the energy market.
The AER’s activities are publicly reported in its annual Compliance and Enforcement Report, providing accountability and demonstrating its commitment to market oversight. The AER also collaborates with the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) to address broader energy market conduct issues.
Civil penalty tiers (2023 framework)
The Statutes Amendment (National Energy Laws) (Penalties and Enforcement) Act 2020 established a framework of civil penalties. This framework comprises three tiers, designed to reflect the severity of non-compliance with the National Electricity Law and Rules.
Tier 1 carries the highest potential penalty for corporations. The maximum penalty is the greater of $10 million, three times the benefit obtained from the non-compliance, or 10% of annual turnover. Tier 2 penalties are capped at $1,435,000, with an additional daily penalty of $71,800 applying for continuing breaches.
Tier 3 represents the lowest level of civil penalty, with a maximum penalty of $170,000. A daily penalty of $14,400 applies where breaches continue. The Australian Energy Regulator indexes the penalty amounts every three years, commencing 1 July 2023.
Recent enforcement outcomes
The Australian Energy Regulator (AER) utilises various enforcement mechanisms to ensure compliance with the National Electricity Law, Rules and associated regulations. These include issuing infringement notices, pursuing court action, and securing enforceable undertakings. Infringement notices are typically applied to less serious breaches and do not require involvement from the Federal Court.
In 2025-26, the AER received $1.089 million from Alinta Energy, representing the value of 15 infringement notices issued for overcharging Centrepay customers, a breach of the National Energy Retail Rules. Separately, the Federal Court ordered CAM Engineering and Construction to pay a $250,000 penalty for failing to join the Energy and Water Ombudsman NSW scheme.
The AER maintains a public register detailing enforcement matters, providing transparency regarding compliance actions taken. Enforceable undertakings are frequently employed to obtain commitments from businesses to improve compliance and provide remediation to affected consumers.
Frequently asked
Does the AER enforce energy laws in Western Australia and the Northern Territory?
Largely no. WA and the NT operate separate electricity markets and have their own regulators. The AER's NEL/NER jurisdiction covers NSW, Victoria, Queensland, SA, Tasmania and the ACT.
What is the difference between a Tier 1 and Tier 3 penalty?
Tier 1 applies to the most serious breaches (e.g. market manipulation) and carries up to $10 million, 3x benefit, or 10% turnover. Tier 3 applies to less serious technical or administrative breaches and is capped at $170,000 per breach.