NATIONAL ENERGY RETAIL LAW (SOUTH AUSTRALIA) (IMPLEMENTATION) AMENDMENT BILL

Introduction and First Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Manufacturing, Innovation and Trade, Minister for Mineral Resources and Energy, Minister for Small Business) (15:43): Obtained leave and introduced a bill for an act to amend the National Energy Retail Law (South Australia) Act 2011. Read a first time.

Second Reading

The Hon. A. KOUTSANTONIS (West Torrens—Minister for Manufacturing, Innovation and Trade, Minister for Mineral Resources and Energy, Minister for Small Business) (15:44): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

This Bill delivers on the Government's commitment to a national framework for regulating retailers and distributors who sell and supply electricity and gas to customers.

In June 2006 the Council of Australian Governments amended the Australian Energy Market Agreement to provide for (among other things), the national framework for energy access; and the national framework for distribution and retail services. This final component is known as the National Energy Customer Framework, here referred to as the Customer Framework, and consists of a package of Laws, Rules and Regulations.

A key component of this package of Laws includes the National Energy Retail Law, which as Honourable Members will be aware, passed South Australian Parliament as lead legislator for national gas and electricity legislation without amendment and received Royal Assent on 17 March 2011.

The purpose of this Bill is to apply the Customer Framework in South Australia. This framework provides national consistency for the sale and supply of energy to retail customers and therefore simplifies the regulatory regime for energy retailers and distributors. Further, the Customer Framework contains a wide-ranging suite of energy-specific consumer protections.

As a result, this Bill will see the regulation of non-price retail and non-economic distribution functions shift from South Australia's independent energy regulator, the Essential Services Commission of South Australia (here referred to as the Commission) to the Australian Energy Regulator.

Other jurisdictions which are part of the National Electricity Market, namely, Victoria, New South Wales, the Australian Capital Territory, Tasmania, Queensland and the Commonwealth will also introduce application Acts which apply the Customer Framework for the purposes of those jurisdictions.

Under the terms of the Australian Energy Market Agreement, it is a requirement that Ministerial Council on Energy unanimously agree each jurisdiction's Implementing Legislation, which includes this Bill to apply the Customer Framework in South Australia, and supporting Regulations, as well as any future amendments or additional Regulations made for the purposes of applying or modifying the Customer Framework in South Australia.

The Ministerial Council on Energy has agreed that relevant jurisdictions will introduce the Customer Framework progressively, noting that some transitional legislative arrangements will be required to appropriately manage the transition process. Furthermore, it has been agreed that jurisdictions will aim for a start date of 1 July 2012 for the Customer Framework.

A jurisdiction's application Act may, for transitional or other reasons, modify the application of various provisions of the National Energy Customer Framework for the jurisdiction. Further, certain provisions of the National Energy Customer Framework rely upon jurisdictional energy legislation for their full effect, for example, the operation of energy ombudsman schemes, guaranteed service level schemes, and social policy initiatives such as community service obligations. Therefore, the Customer Framework is intended to operate in parallel with jurisdictional energy legislation.

In most cases, South Australia will apply the Customer Framework provisions in full from the start date but there will be a small number of modifications to certain provisions that allow South Australia to continue certain existing arrangements.

Honourable Members will be aware that currently South Australia provides for retail price regulation. This Bill will allow for retail prices to continue to be regulated under jurisdictional energy legislation administered by the Commission.

Consistent with current legislation, the Bill will impose the obligation to offer to sell energy to small customers at a regulated price on prescribed retailers. It is intended that the current retailers with an obligation to offer to sell energy will be prescribed in the regulations.

In the circumstances of a deemed customer arrangement, such as a customer move in or carry over, or where a retailer is acting as the retailer of last resort, the Bill does not require the prescribed retailers to charge a regulated price. It is important to note that the Customer Framework only intends for customers to remain in a deemed customer arrangement until such time as the customer enters into a market contract with a retailer or elects to be subject to the regulated price.

To provide small business customers with similar protections to those that currently apply, the Bill provides for the prescription of a higher upper threshold than included in the Customer Framework for the purpose of defining a small electricity customer. It is intended that the current upper threshold of 160 MWh per annum will be prescribed. This provides continued access to the full suite of protections offered by the terms and conditions of a standard retail contract and regulated retail price to all small customers including small business.

The Customer Framework provides for the Australian Energy Regulator to establish a price comparison service to assist customers to compare, free of charge, energy retail offers. Customers of all participating jurisdictions will be able to use this service to compare offers.

While the Australian Energy Regulator has commenced development of the price comparator, the project is highly complex and there is a risk that a delay in its development could result in no price comparison service, or an incomplete service, being available to South Australian customers at the commencement of the Customer Framework.

Honourable Members will be aware that the Commission currently offers a price comparison service in this State. Accordingly, the Bill provides for the retention of this service. It is intended, however, that once the Australian Energy Regulator's service is complete, fully operational and meet South Australia's requirements, the Commission's service will expire and the national price comparison service will commence by local instrument. This will ensure that customers continue to benefit from the service and that there is no gap during the transition period.

The Bill provides for all existing energy customers to be transitioned to the new Customer Framework with minimal interruption to the customer, and ensures that customers and retailers will not be required to re-establish payment plans, security deposits or direct debit arrangements.

Therefore, the Bill provides that standing contracts and market contracts will continue and be transitioned to the Customer Framework without requiring customers to enter new retail contracts. The provisions of the Bill ensure that a customer currently subject to a regulated price continues to be subject to a regulated price under the new framework.

For South Australian customers currently on a default contract, the Bill provides that they will transition to a deemed customer retail arrangement under the Customer Framework, which, unlike the default contract, is a temporary arrangement that does not constitute an appropriate contract for sale. Retailers will therefore be required to contact these customers once the Customer framework commences to assist them to move to a standing contract or a market contract.

Equally, a contract between a distributor of electricity and a customer will be deemed to be replaced by the standard connection contract provided under the Customer Framework. For gas, this will mean that a new contract will be deemed to exist between distributors of gas and customers.

South Australian consumers will continue to have access to dispute resolution procedures, including the services of the Energy Industry Ombudsman of South Australia, under the Customer Framework. This Bill provides that any complaints involving a matter arising before the Framework comes into operation, and any disputes referred to the Energy Industry Ombudsman before the Framework starts, can proceed under the Customer Framework. To avoid doubt, the intention of these provisions is to ensure the Customer Framework's procedures for handling disputes and complaints can apply to these matters. The Bill does not intend that the Australian Energy Regulator will have a dispute resolution role in relation to these matters.

Honourable Members will be aware, that South Australian energy legislation provides a number of consumer protections applicable to small customers. In order to ensure that customers receive the same or enhanced benefits under the Customer Framework, the Bill provides for the retention of a number of these protections including South Australia's minimum standards of service for small customers in relation to written and telephone enquiries.

The Bill also includes additional limitations regarding the imposition of a fee for late payment of a bill in regard to a retail service received. While the Customer Framework already provides that a retailer cannot impose such a fee on a hardship customer, this Bill extends this prohibition on imposing a late payment fee to situations where a customer has lodged a complaint in relation to a bill. Furthermore, the Bill retains South Australia's current limitation that where a late fee is imposed, it must not exceed the reasonable costs a retailer incurs recovering the overdue amount.

The Government has not proposed, however, to modify or commence provisions in the Customer Framework where evidence suggests that current South Australian practice is meeting the needs of customers. This is the case of the small compensation claims regime which is currently offered by ETSA Utilities on a voluntary basis and compensation for wrongful disconnection which is currently managed by the South Australian energy ombudsman.

Whilst the Bill provides for the commencement of the Customer Framework small compensation claims regime, it is not the intention of the Government to proclaim the application of this provision unless the current voluntary scheme administered by ETSA Utilities ceases to meet the needs of South Australian consumers.

Honourable Members will also note that the Bill does not provide for the payment of compensation for wrongful disconnection. After extensive analysis of the area of wrongful disconnection, it was found that the current scheme of payment of compensation by South Australia's energy ombudsman provided sufficient incentive for systems to be in place to ensure the cases of wrongful disconnection were minimised in South Australia and where such cases did occur, that the impacted customer was provided appropriate compensation that was reflective of their loss.

The Government has also been conscious of the impact of the new Customer Framework on energy businesses. At the time of the sale of the electricity distribution business, arrangements were put in place that provided that the distributor could enter into an agreement with a small customer to limit the liability of the distributor associated with a failure to supply electricity done or made in bad faith or through negligence. Accordingly, it has been necessary to modify the Customer Framework to retain this provision.

I advise the Honourable Members that the Bill also provides some transitional provisions to assist energy businesses to transition to the Customer framework. In particular, the Government recognises that the creation of a Retailer of Last Resort scheme for gas requires the development of extensive automated systems for seamless operation of the scheme. The scheme to be established under the Bill therefore provides for a relaxed approach to timeframes associated with the scheme until June 2013 when it is expected all relevant parties will have undertaken the work necessary to automate all relevant systems.

The Bill also provides the State electricity distributor with transitional support in relation to the requirement to notify customers of planned interruptions. Currently, the distributor is not required to provide prior notification of a planned interruption of less than 15 minutes to the customer and it is the intention under the Bill to continue this provision until the electricity distributor's next regulated revenue period commencing in 2015.

Honourable Members will also note that the Bill includes amendments to the National Energy Retail Law. A small number of important amendments have been identified as necessary to clarify the operation of the National Energy Retail Law or to correct or clarify minor drafting issues. The need for and form of these amendments have been agreed by all participating jurisdictions and are included with this Bill in South Australia's capacity as lead legislator. The Bill will make these nationally agreed amendments prior to the commencement of the Customer Framework, and the amendments will apply to all participating jurisdictions.

The Bill amends the National Energy Retail Law to clarify the way in which a partnership should be dealt with under the retailer authorisation framework. The amendments include provisions to allow applications to be made by two or more persons jointly, to enable a retailer authorisation to be held jointly by two or more persons, and to clarify that a change to a person constituting a partnership is taken to be a transfer of the retailer authorisation requiring approval of the Australian Energy Regulator.

The Bill also clarifies that where a distributor has a standard connection contract for large customers approved by the Australian Energy Regulator, the distributor may move existing large customers from the old deemed standard connection contract to the new contract and must give notice to those customers.

The Bill clarifies the relationship between retailer authorisation and market registration, and makes clear that registration with the Australian Energy Market Operator is only required if it is required under the relevant national electricity and gas regimes.

The Bill provides the Australian Energy Regulator with a limited discretion in its decision to issue a Retailer of Last Resort notice.

The Australian Energy Regulator's power to obtain information will be extended to any powers that the national regulator takes under the National Energy Retail Regulations or under participating jurisdictions' application Acts. Other amendments are also set out in the Bill to correct or clarify minor matters to improve the clarity of the National Energy Retail Law.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause provides for the short tile of the Act.

2—Commencement

The measure will be brought into operation by proclamation.

3—Amendment provisions

Part 2 of this measure will amend the National Energy Retail Law (South Australia) Act 2011. Part 3 will amend the National Energy Retail Law (which is set out in the Schedule to the Act).

Part 2—Amendment of National Energy Retail Law (South Australia) Act 2011

4—Insertion of Parts 5, 6 and 7

This clause sets out a series of provisions that are to apply in connection with the operation of the National Energy Retail Law (the NERL) in relation to this jurisdiction. In particular, the following provisions will be included in the National Energy Retail Law (South Australia) Act 2011.

Part 5—Implementation of national law in South Australia

Division 1—Preliminary

15—Preliminary

Section 15 makes it clear that the application of the National Energy Retail Law in this jurisdiction is subject to the operation of these new provisions.

Division 2—Application of law—electricity

16—Application of law—electricity

Section 16 will ensure that the NERL will, in relation to electricity, only apply to electricity supplied via the interconnected national electricity system within the meaning of the National Electricity Law. It will also be possible to exclude a particular area of the State from the operation of the NERL in South Australia.

Division 3—South Australian arrangements

17—Consumption thresholds

Section 17 will allow the Governor to prescribe consumption thresholds for business customers (rather than relying on thresholds prescribed by the National Regulations).

18—Standing offer prices

Section 18 will allow the Governor to prescribe an entity or entities that will be taken to be designated retailers for the purposes of the NERL (SA). The requirement to make a standing offer to small customers will only apply in relation to an entity prescribed under this section. The standing offer price that will apply under this scheme will be a price fixed by the Commission under section 36AA(4a) of the Electricity Act 1996 (in the case of electricity) or section 34A(4a) of the Gas Act 1997 (in the case of gas) so that such a price will continue to be regulated under jurisdictional energy legislation.

19—Small market offer customers

It has been decided not to apply section 31 of the NERL in South Australia.

20—Price comparator

Section 20 is relevant to the operation of section 62 of the NERL. This provision will require the Commission to maintain a price comparator on a website. The purpose of the price comparator is to allow a small customer to compare the standing offer price available to the customer and market offer prices that are generally available to classes of small customers in South Australia. It will be possible, by regulation, to bring this scheme to an end and instead apply section 62 of the NERL (SA), under which the price comparator is established by the AER.

21—Retailer of last resort scheme

Section 21 sets the standing offer price for a retailer of last resort.

22—Small compensation claims regime

Part 7 of the NERL will apply from a date to be fixed by proclamation.

23—Minimum standards of service for customers

Section 23 will allow the regulations to prescribe minimum standards of services for customers or customers of a prescribed class.

24—Late payment fees

Section 24 relates to late payment of fees.

25—Immunity in relation to failure to supply electricity

Section 25 will allow a distributor of electricity to enter into an agreement with a small customer to vary or exclude the operation of section 316 of the NERL (SA), subject to the provisions of the regulations.

Division 4—Miscellaneous

26—Application of Essential Services Commission Act 2002

27—Delegation by Minister

28—Extension of AER functions and powers

Sections 26, 27 and 28 set out provisions that relate to various matters of administration of the scheme.

29—Regulations

Section 29 is a regulation-making power for the purposes of this Part.

Part 6—Validation of instruments and decisions of AER—energy retail laws

30—Validation of instruments and decisions made by AER

31—AER—authorisation of preparatory steps

Sections 30 and 31 ensure that certain acts or steps undertaken by the AER for the purposes associated with bringing the NERL into operation since the enactment of the National Energy Retail Law (South Australia) Act 2011 are valid in all respects.

Part 7—Transitional provisions

32—Interpretation

33—Conditions—exempt entities

34—Customer contracts—electricity

35—Customer connection contracts—electricity

36—Customer contracts—gas

37—Customer connection contracts—gas

38—Complaints and dispute resolution

39—Provision of information and assistance by Commission

40—Transitional regulation-making power

Sections 32 to 40 (inclusive) relate to various transitional matters.

Part 3—Amendment of National Energy Retail Law

5—Amendment of section 76—Formation of deemed AER approved standard connection contract

This clause amends section 76 of the NERL. The amendment will address the situation where the AER approves a new AER approved standard connection contract for a particular class of large customers where those customers are already on a deemed standard connection contract. In such a situation, the provision will provide that the relevant customers will be taken to have been moved from one contract to the other.

6—Substitution of section 88

This amendment will clarify the need to apply for a retailer authorisation or status as an exempt seller under the NERL independently of any requirement under the NEL or the NGL.

7—Amendment of section 89—Applications

8—Insertion of section 96A

9—Insertion of section 104A

These amendments will expressly allow a retailer authorisation under the NERL to be held jointly by 2 or more persons and allow the AER to regulate any charge in the membership of a relevant partnership or joint venture.

10—Amendment of section 107—Power to revoke retailer authorisation

This is a consequential amendment.

11—Amendment of section 132—Designation of registered RoLR for RoLR event

12—Amendment of section 136—Issue of RoLR notice

13—Amendment of section 139—Publication requirements for RoLR events

Currently, the NERL does not allow the AER a discretion as to whether or not to issue a RoLR notice on the occurrence of a RoLR event. In certain circumstances, it would be appropriate not to issue a notice due to the nature of the event. A series of amendments establish a scheme under which the AER will have such a discretion.

14—Amendment of section 187—Making of claims

This amendment corrects a minor error in the drafting of the NERL.

15—Amendment of section 204—Functions and powers of AER (including delegations)

16—Amendment of section 206—Power to obtain information and documents

These amendments clarify the ability of the AER to act under the National Regulations and, in appropriate cases, the Rules or an application Act.

Debate adjourned on motion of Dr McFetridge.