Edited version of private ruling

Authorisation Number: 1011524369132

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Ruling

Subject: GST and supply of power to solar customers

Question

Can you use the energy data provided by the network operator to calculate your GST liability in respect of power supplies to existing and future solar customers with specific type of meters, for the purposes of section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST-Act)?

Answer: Yes.

You can use the energy data provided by the network operator to calculate your GST liability, in respect of power supplies to solar customers with specific type meters, for the purposes of section 9-40 of the GST Act.

Relevant facts and circumstances

You are a trading enterprise with industrial, commercial and residential customers. You are responsible for purchasing and retailing power to customers within your state. Your functions and responsibilities include energy trading, customer services, billing and payment processing.

You do not own any power stations or network infrastructure or assets. The network operator owns all meters connected to its network and is responsible for meter installation, operation, maintenance, reading and data provision.

You sell power to the customers under a set of standard terms and conditions approved by your state. You are obliged to issue invoices to a customer based on energy data provided by the network operator. In cases where you cannot obtain an actual meter reading from the network operator, you are obliged to issue an invoice to a customer based on estimated energy data provided by the network operator.

Buyback scheme

Under your state regulations, you are required to operate a buyback scheme. Under this scheme, you are obliged to purchase solar energy from your customers, who export surplus power generated by their solar generators.

If a customer participates in the buyback scheme, they will have two contracts with you:

· A power supply agreement (standard form contract), which provides for the sale of power to the customer by you; and

· A power purchase agreement, which provides for the sale of power by the customer to you.

Both contracts are regulated contracts and they have been approved by the state government.

Over a normal billing period, a solar customer will receive a tax invoice from you, which details both the sale of power to the customer and the purchase of power from the customer. Both transactions are calculated on the basis of energy data provided by the network operator from their meter and recorded separately on the customer's tax invoice.

Three phase solar customers comprise only a very small percentage of your total customer base.

As you do not own or operate the meters, you are reliant on the energy data provided by the network operator in order to invoice a solar customer, for both the power imported by the customer from the network and the power exported by the customer to the network.

To permit the import and export of power by a customer at a connection point, a single or a multi phase meter owned and operated by the network operator is required. With a single phase meter, the customer imports or exports power through the one phase. With a multi phase meter the customer imports and exports electricity over different phases.

A multi phase meter installed at a solar customer's premises is unable to record the import and export of power by the customer other than on a net basis for each interval. Therefore, with the use of a multi phase meter, you are unable to calculate the GST on the total amount of power you supply to a customer, other than on a net basis for each interval.

All current and future multi phase meters are owned and configured by the network operator to comply with the state metering code. However, compliance with the metering code does not mean the meters will comply with the GST Act.

The multi phase meters can be either interval or accumulation meters. In relation to both type of meters, customers will consume self generated power before surplus is exported into the network. Each meter has an import register to record power imported from the network and an export register to record the power exported to the network.

For a solar customer with multi phase power supply, the solar generator is connected to one of the phases. Depending on the amount of power consumed by the customer and the amount of solar power generated within an interval, one phase could be used to export surplus self generated power into the network and the two remaining phases can be used to import power from the network. However, the meter could only register either a net import figure or a net export figure for that interval using the import or the export register respectively.

In order to solve the issue of netting off of supplies flowing through different phases, a number of technological solutions have been suggested. Some of the solutions are given below.

One solution involves installing an additional meter to record the exact quantity of power generated and supplied to one phase by the solar generator. Generally, there is a multi phase meter connected to the multi phase supply.

This arrangement can record the exact quantity of power generated by the solar generator. However, it cannot record the total amount of power imported by the customer during the interval.

Another solution involves a separate single phase meter, connected to each phase of power supplied to the customer. This arrangement could record the exact quantity of power imported or exported by the customer through each phase separately for a given interval. Under this arrangement, the total import of power by the customer could be accurately recorded.

As the cost of new meters and other expenses will be passed on to the customer, this solution will be extremely expensive to the customer. Accordingly, it is not economically viable.

Lastly, the three inverter solution involves a single phase power generated by the solar generator that will be converted to a three phase supply.

If this arrangement is technically feasible, the existing multi phase meters could accurately record the total amount of power imported or exported by the customer through the phases. However, this technology is currently not available in the market. Even if it becomes available in the future, it is predicted that the cost of such an inverter will be prohibitively high and will not be economically viable.

Reasons for the decision

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply is *connected with Australia; and

(d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST free or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

Section 9-40 of the GST Act states:

You must pay the GST payable on any taxable supply that you make.

Based on the facts provided, the solar generators connected at customer connection points are configured in such a way that the customer first consumes their self generated power. If during a particular interval the self generated power is not sufficient for the needs of the customer, the customer will draw in the balance from the network. When excess power is produced by a solar generator during an interval, the customer exports it to the network.

In order to calculate your GST liability in respect of the supplies of power to a solar customer with a multi phase meter, it is necessary to ascertain the total amount of power imported by the customer for a billing period. That is the power consumed by the customer in addition to the power produced by their solar generator. As mentioned above, in respect of such customers at the present time, it is not possible to accurately record the total amount of power imported by the customer through multi phases. The meter can only record the net import amount after netting off the supplies through the three phases over each interval.

Currently there is no economically viable solution to record the exact amount of power imported by such a customer for a billing period. The tax invoice issued to the customer currently records a credit for the amount of solar power exported by the customer and records your charges for the amount of power imported by the customer.

Our view on the power supplies to a multi phase solar customer

When a solar customer imports power from the network, you make a supply of power to the customer and satisfy paragraph 9-5(a) of the GST Act. The supply is made in the course or furtherance of an enterprise that you carry on and you satisfy paragraph 9-5(b) of the GST Act. The supply is connected with Australia as the network is located in Australia and paragraph 9-5(c) of the GST Act is satisfied. Our records indicate that you are registered for GST and therefore, paragraph 9-5(d) is satisfied. The supply of power from the network is not a GST-free or an input taxed supply under any provision of the GST Act. Therefore, when a customer imports power, you make a taxable supply of power and incur a liability to pay GST.

Having given consideration to the facts of your case, we advise that in respect of your solar customers, whose power importation and exportation (if any) is measured using multi phase meters, you can use the meter readings provided by the network operator for calculating your GST liability for the following reasons.

Only a very small proportion of your customer base use multi phase meters. Under your state legislation, you are obliged to bill a customer based on power meter readings provided by the network operator.

Although the power flowing through different phases gets netted off, the net figure recorded by the meter for a given interval corresponds to the configuration of the solar generator. That is, if the customer consumes more power than what is generated by the solar generator within an interval, the customer imports the balance from the network. If the solar generator produces excess power during a particular interval, that excess is exported to the network. For each interval, the three phase bi-directional meter accurately records the net import or export of power.

Reconfiguring the affected meters would not be viable as there are memory limitations in the meters and to assess any change in the configuration, there will be additional meter reading costs. The increase in meter reading frequency will double the meter reading fee applied to each customer and create a different network tariff for this class of customers.

The cost to replace the affected meters will be extremely high. This would also require significant funding, administration costs, time and significant disruption to customers.

In the event that you are required to incur these additional metering costs, you will need to reassess the viability of continuing the buyback scheme for existing multi phase meter customers and for new customers.

You consider that the options available to you to rectify the situation are prohibitively expensive. The costs associated with the implementation of any solution would need to be borne by your customers. Any changes to pricing would need to go through regulatory approvals.

If you could not commercially justify incurring the significant meter costs and were required to cease the buyback scheme for three phase bi-directional metered customers, this would have a material impact on the existing customers, who have made significant investments in small scale renewable energy systems. It will potentially reduce the future uptake of such systems within the state.

The technological solutions explored above to solve this problem are either currently not available in the market or prohibitively expensive. Any additional expenses will have to be borne by the relevant customers.

It is not possible to rectify the netting off of supplies through different phases by multiplying the meter readings with a calculated factor. It will be arbitrary and will be quite difficult to explain to the customers. In addition, metering is governed by the state metering code. Under this code, billing needs to be based purely on meter readings. Adjusting the meter readings with a calculated factor is not permitted.

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