Emergency Management (Electricity Supply Emergencies) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 29 March 2017.)

The Hon. A. PICCOLO (Light) (15:57): Yesterday, I started to speak in support of this bill and I left off talking about the importance of the resources, having a gas resource in this state, and that part of this plan is to increase the availability of gas for energy to make sure we have a valuable reserve there to make sure we can provide the electricity which our state requires.

It is interesting because there is a parallel to this situation we find ourselves in today, and that parallel goes back to something the Minister for Investment and Trade mentioned earlier today, back to 1946. It is a very important parallel because it exposes the difference between our party, which has a policy to make sure we protect and provide power for our state, and a party which has no policy whatsoever.

Back in 1945, the then government of Sir Thomas Playford was having an arm wrestle with the South Australian Electricity Supply Company. The South Australian Electricity Supply Company had a monopoly in terms of power generation and distribution in this state back in those days. One of the things that concerned Sir Thomas was the availability of the resource at that time which was coal. The company said, 'No, we will maintain our profits by buying coal from interstate and keeping minimal reserves in the state in terms of power generation,' and therefore our power security was at risk even then in this state.

Sir Thomas made it very clear that he saw industrialisation of the state as an important employer. He saw the transformation of our state from an agriculturally based state to one which had a growing element of industry and employment in a growing urban society. The problem with Sir Thomas, apart from being a member of the Liberal and Country League of the day, which was a result of the merger of the Liberal Federation and the Country Party, was that he could see that having control over power in this state was important for the state. He could see that. He could see something in 1946 that the Liberal Party cannot see today. The Liberal Party cannot see why it is important for our state to have control of our energy sources, which is a key element of our plan.

At the time, Sir Thomas spoke to the company and said, 'You guys have to do a better job than this.' In the same way that we have a monopoly because the Liberal Party sold off ETSA so that we basically have a monopoly in this state, the Adelaide Electric Supply Company essentially said, 'Bugger off, Sir Thomas. We're a private company. We'll do what we like.' I understand that Sir Thomas was not a person you say no to easily and that he sometimes used his huge frame to make sure that people understood what he was talking about.

There was a bit of brinkmanship, so what did Sir Thomas do? He called a royal commission. He called a royal commission into the supply of energy in this state. In 1945, he appointed the Royal Commission on the Adelaide Electric Supply Company, made up of Supreme Court justice Geoffrey Reed, Professor Arthur Lang Campbell and John William Wainwright, who I think was the auditor-general of the day or a retired auditor-general.

This royal commission looked into how we could maintain a supply of energy that we required to industrialise the state. In other words, how could we create those blue-collar jobs and those industrial jobs that have been the hallmark of our state for the last 50 or 60 years? The commission reported in March 1945 and it recommended that the industry be nationalised. Sir Thomas agreed. There was an uproar amongst most of the Liberal Party members though, and particularly those in the upper house. You have to remember that in those days, to be a member of the upper house, you had to actually own some property.

Ms Cook: Wealthy.

The Hon. A. PICCOLO: You had to be quite wealthy. You had to own some property. Therefore, the upper house was actually controlled by quite a conservative party. Our upper house now is quite liberal compared with the upper house of those days. Sir Thomas then went to the federal government of the day, which was the Chifley Labor government, and asked Chifley for some money to nationalise the industry.

What did Chifley say? Chifley said, 'Of course we'll help you out. We understand why it's important to have an energy source. We understand why it's important to industrialise your state and to create jobs,' so he did. But, unfortunately, while Sir Thomas got the bill through the lower house with 29 votes to six, with every Labor Party person supporting Sir Thomas—the six against were Liberal Party members—the bill did not get through the upper house. On 7 November, the bill failed to pass the house in 1945 and was not put into parliament until 1946.

On 6 April 1946, Sir Thomas was able to twist a few arms in the upper house, the bill passed and ETSA was created. ETSA has been the backbone to make sure that we have an energy supply in this country. That was a key decision by a government of the day being pragmatic enough to do what is right for the state. If we fast-forward some years, the same Liberal Party then privatised ETSA, and that is the genesis of the problems we have today. There is only one thing worse than a public monopoly and that is a private monopoly, which has certainly been proven to be the case here. The private monopoly has put profit before people and, in this case, we have been on the receiving end of it.

What does this energy plan do? This plan ensures that we retain control or the energy sources in this state. Unfortunately, the Liberal Party has not learnt the lesson that one of their greatest premiers, Sir Thomas Playford, did back in 1946. I am surprised because, when the Liberal Party has debated this policy matter over the last few days, they have been talking about the past, but they seem to have not gone far enough into the past to learn what Sir Thomas told them many decades ago.

The fourth item is a proposal for battery storage and a renewable technology fund. That is very important. It is interesting because part of the Liberal Party actually supports that. They do support it. They have talked about the importance of storage and batteries, etc. In fact, they have a mickey mouse version of this as a partial policy, I think, where you actually put a 12-volt battery in everybody's house and that should help us get by. They actually do support this, but unfortunately they lack the vision to do it on the scale that is required for the state. That is another important element of this plan.

Another important part of the plan is to do two things: to attract new players in the market and to increase competition. This plan does that firstly by our being a party to the new gas-fired plant and, secondly, by bringing in other parties through the solar, battery storage and renewable technology front. We have also set ourselves an energy security target, which means that more gas is generated locally and more gas is available locally, and that in itself will put more downward pressure on the price of power.

It was interesting to note yesterday that the Liberal Party actually complained that the spot price of power had gone down and that the companies were not making super profits. One day they are complaining that consumers are paying too much and the next day they are saying that the companies are not making enough profits. You can understand why people are unclear about what the Liberal Party policy is. We have a plan: the Liberal Party has no policy. Moreover, this policy is starting to pay dividends.

I do not think it is unfair to say that South Australia, albeit perhaps under some tough conditions, has actually led the debate across the country, and there are changes right across the country as a result of what happened in South Australia and, importantly, as a result of the lead that the South Australia government has taken in tackling those issues. I have no doubt that governments in Victoria and New South Wales will be reviewing their energy policies and plans to make sure that they do not end up in the hands of, and at the mercy of, the multinational companies, as we did.

An important aspect of this plan is that we have maintained our commitment to renewable energy. It would have been very easy to back off. I have spoken to many people in my community, including businesspeople, who said that that was an important element. We have to move forward, we need to plan for the future and it is important that we have done that. This policy is also very important because it sends a very clear signal to the marketplace about where they should invest.

One thing has been quite clear of recent times, and I recall hearing this on the radio recently when the National Farmers' Federation spokesperson—and I would not have thought the National Farmers' Federation was one of those left-wing organisations—said that our energy policy at a national level is in chaos because at the national level, what the policy is depends on what day it is, and business need some certainty and some clarity to be able to invest.

It is a simple as that. Even if they do not like the policy, they actually know where they stand. The policy of the national government changes every day. There is a lack of certainty and therefore businesses are not investing. We are doing our best as a state government to ensure that there is a clear policy in this state and that business knows where to invest. That is very important.

Compare the announcement of this policy, and the way this policy and plan were prepared, to Globe Link. With this plan, there is engagement with the key players in the sector, the people we need to deal with to make it work. There was engagement from day one. It is clear from the comments we have received from business and others and from the non-government sector that there was clear engagement with this plan. This plan was worked in tandem with the rest of the state, and that is why it has received such favourable treatment.

Compare that to Globe Link. The Liberal Party prepared that policy with no consultation—not even with the Freight Council of South Australia, who are the people in the sector—and that is why it has never taken off. It just sits there on the side of the road waiting for somebody to pick it up again. It is an appalling policy. Globe Link is an indication of how this Liberal Party would be in government—no consultation and half-baked ideas that never take off. That is how they would run government. Compare that with what we have done. We have engaged with this policy. We have a plan which is supported, and the Liberal Party is so disappointed that this plan has strong legs under it.

This plan talks about standing up for South Australia. This plan is about saying South Australia comes first. I was listening to Matt and Dave on the radio the other day—I know I should wash my mouth out with soap—and they were talking to the Leader of the Opposition. The question they put to him was: 'Isn't this plan essentially what the Prime Minister is trying to do at the national level now—renewable energy with the Snowy II scheme, if that takes off?'

They asked him, 'Why is this plan bad for South Australia but reflects what your national leader is doing?' He could not answer the question. He avoided the question because he could not stand up for South Australia. He could not stand up for South Australia and say what is right for South Australia. The Leader of the Opposition has time and time again not stood up for South Australia.

The comment was made that we should not make this about renewable energy. Renewable energy is an important part of this plan—we do not hide from that. Renewable energy is a plan for the future and a plan to secure clean air for our children, our grandchildren and future generations. We are a government for the future generations: the Liberal Party represent the past. One day they want to go back to coal, the next day they want to do something else, and the next day they want to do something else again.

It is a little bit unfair of me to say that the Liberal Party do not have any renewable policies; I am sure they do. I am sure the Leader of the Opposition supports wind power because every morning he gets up, sticks his finger in the air and works out which way the wind is blowing to work out what the policy of the day will be. The extent of their wind policy is to work out which way the wind is blowing that day to see which way they will move and which way their policy will go and that, unfortunately, is an indication of how they would be in government.

We as a government have been disciplined. We as a government have made it very clear that we will do what is right by this state. For those reasons, this bill should be supported. It is an important part of this plan to make sure that we have secure energy, reliable energy, affordable energy and energy that is under the control of South Australians.

Ms COOK (Fisher) (16:12): At long last, I get to speak on the energy bill. I am supporting a raft of changes being made to our energy system. In the late nineties, the then Liberal government made the decision to privatise our energy market, exposing it to the bull and bear cycle of the free market which was more intent on delivering a profit to a few shareholders than on delivering a cheap, reliable and environmentally sustainable electricity supply to South Australians.

The plan that our government has put forward is the biggest redesign of the energy market that we have seen. It will see South Australian power for South Australians. At its core, the plan will improve reliability and push energy prices down by delivering on the following goals:

building Australia's largest battery storage to help store the energy we get from the sun and wind to improve their reliability around environmental fluctuations. We should note that the announcement today around battery storage for the Riverland is fabulous and supports this;

building our own gas plant, owned and operated by the state government, which can come on line quickly to bolster the state's energy production, increasing our supply;

using the state government's electricity contract to attract new generation to South Australia, making more of our energy locally produced, keeping more jobs here in South Australia and of course putting pressure on the market;

taking back powers from the national regulator which has failed to deliver reliable energy to South Australia; and

incentivising local gas to provide more local jobs and ensure a necessary supply of this important transition fuel.

This is a balanced plan. Our energy security has been something that a number of members of my community have spoken to me about. Equally, my community wants us to focus on ensuring South Australia's target of net zero emissions by 2050 is achieved. Around the world, trillions of dollars have been invested in renewable energy. This is because renewable energy is fast becoming the cheapest way to invest in new electricity generation, and it does not create pollution that causes global warming.

By agreeing to the international agreement on climate change, known as the Paris Agreement, the Australian federal government has committed Australia to producing energy in ways that do not cause pollution. By the middle of the century, I want my children, my children's children, and so on, to live in a world that is clean and free of pollution and to see climate change stopped in its tracks. It is our future. It is the big picture. The opposition throws accusations at our government, at me, regarding us being ideologically obsessed with renewables as though this is some kind of insult. I will take that accusation ahead of being accused of living in the past and being ideologically obsessed with dirty coal. There is no such thing as clean coal.

With its abundant natural resources, South Australia has been leading Australia's efforts to clean up the electricity sector. The state's energy comes from a mix of renewable energy and gas, which produces much less pollution than electricity generated from coal. Renewable energy is good for jobs and the economy. Investment in renewable energy has seen more than $7.1 billion invested in the state, with more than 40 per cent being in regional areas. These investments have helped create new industries and jobs for South Australians.

As South Australia nears the target of generating 50 per cent of its electricity from renewables, the challenge will be to generate even more in a national market that is old and outdated. This is where gas can play a role as a transitional fuel. Watching the generation and supply graphics on our apps, as everybody does now in parliament, it is interesting to note that we have suddenly this week become a net exporter of energy and highly competitive on the national market.

Gas also has a role nationally as coal-fired generators close. In the past decade, nine coal-fired power stations have closed in Australia, including the Port Augusta power plant in South Australia. Australia's most emissions intensive power station, Hazelwood, in Victoria, has now closed its generators. This is occurring because most coal-fired generators are old, with two-thirds already being more than 30 years old and needing to be replaced.

As the preliminary report of a review into the National Electricity Market states, owner investors are exiting emissions intensive power stations as these reach the end of their designed lives. It has been clear from our consultations that no-one is contemplating investing in new ones, nor would financial institutions provide finance to do so. Given this uncertainty, the only way for new transitional generation to be built in South Australia is for the government to invest in building its new gas-fired power plant, as well as offering incentives for new operators to enter the market and supply the government's energy needs.

South Australia will continue to lead the way in the transformation of the next generation of renewable technologies. While the state government is working with the business community here to look to a financially viable alternative to coal production, with gas as a transition fuel being the most immediate and most available to South Australia, we have a Prime Minister who supports a price on carbon, then he does not, and whose only policy position now seems to be to bury his head in the sand and hope that it goes away.

But is that the position of the rest of the federal Liberal Party? No. Their Treasurer is obsessed with coal, brandishing it in parliament and extolling its virtues. They are the people the Leader of the Opposition would turn our energy policy to if he had his way. He thinks that they are the best people to handle our energy policy. It is hypocritical of the state opposition to call on us to reopen a coal generator in Port Augusta while the federal government brandishes coal in the parliament one week and then the next week the Prime Minister is refusing to supplement the operations of Hazelwood as it just is not a viable proposition.

It is not lost on the thousands of people who have been contacted by me and my team in the past few weeks through doorknocking, calling and talking to at shopping centres and parks, etc. In fact, the reception has been nothing short of incredible. I have not seen anything this positive in the two years I have been the local member, and even my experienced staff have been really surprised. When I sit in here and I listen to those opposite sometimes talking about this, I scratch my head and think that I must live in some parallel universe, where negativity constantly overtakes the positive and I completely misinterpret what I am being told because everything I hear from those opposite can be so negative.

But the message is so clear from my community. I have had people call out as they drive past me in the streets, 'Tell Jay to get them,' and, 'It's time we gave it back to them,' just to give a few lines that have been called out. Some of the other general input has included, 'At last, a positive move. Stop talking and just start doing it,' and, 'I love this plan. I'm so glad you're doing something about it. We can't wait for the federal government to act,' and, 'The worst thing about politics is the blame game, which transcends in privatised business, but what most people fail to understand is that governments and councils seek advice from experts and then decide what is the best solution for their residents.'

It is a 100-year sellout that the Olsen Liberal government has left us with. They have sold off not just for a generation but for more than the average lifetime. The Minister for Energy will be given strong new powers to direct the national market in case of an electricity supply shortfall. Ministerial direction includes the ability to direct generators to operate and direct the Australian Energy Market Operator to control flow on the interconnector. This will ensure that every available option is activated to maintain the state's electricity supply in an emergency situation or when market forces fail.

Drafting of new legislation will begin immediately. The minister's powers will be used as a last resort measure if the national market does not act in South Australia's best interests—and this has become highly evident. These are just some elements of our plan to help ensure our energy security and ensure that our energy sector is working in our interest. The message of support for this plan is clear from my electorate, and it was clear this morning at the railway station as I joined the Premier, ministers, other members of parliament and candidates who have already been selected to represent Labor at next year's state election. It was a very positive response. People were happy to see this being done and very supportive of our plan.

I am glad to hear that the opposition will be supporting this bill. I was thinking that it would be at their peril to ignore the need to support increased state control over our central services, and I was worried that they would not be able to bring themselves to put the opposing for opposing's sake mentality to one side and at least partly unscramble the Olsen government egg. This plan is for my family and your family, my community and your community. I commend the legislation and the plan put before us by the government. This will deliver a cleaner, more reliable and cheaper energy system.

Mr TRELOAR (Flinders) (16:22): I rise today to speak on the government's energy bill, which they introduced yesterday without any notice to the opposition. As whip, I must say that I found that somewhat disconcerting. Tradition in this place, or protocol at least, dictates that bills be on the table and the opposition has the opportunity to consider them for at least two weeks. In this case, the government broke convention. It concerned me. It certainly concerned our shadow minister.

In the end, all in all it is poor form. The cynical amongst us might suggest that the government simply did not want to get to the next item on the agenda, and that was child protection. The other thing I will say on this is that my office spoke with the Manager of Government Business's office just 20 minutes before the beginning of the sitting day Tuesday. There was no indication whatsoever that the government was going to put this bill to the parliament.

The introduction of this bill coincided with the release of the AEMO report, the summary of the 28 September statewide blackout. Concurrently, or at least during the same week, there was the announcement by the government of half a billion dollars' worth of expenditure into a government-owned gas-fired power station. Also this week, out of the blue it would seem, came the ENGIE announcement regarding the refiring of Pelican Point. I actually have a bone to pick with ENGIE about another matter, but I will get back to that.

We have seen today a motion of no confidence in the Premier and his government essentially around the $24 million that was asked for by the Northern power station to stay open. Really, more than anything, as the government well knows, it was about managing the transition away from coal-fired into renewables, which we have all said on this side we support. I suspect that the two were not related, but the irony was not lost on the people of Eyre Peninsula that the very day the stack came down at Port Augusta there was yet another outage in the Streaky Bay region. People did not blame that particularly, but the irony did not escape them.

The electricity supply problems began on Eyre Peninsula well before 28 September and still continue. In fact, I had a call left on my office phone overnight from a resident of Scale Bay, just south of Streaky Bay, who said that the power was out there yet again. By his calculations, that is the 13^th outage in the last 12 months. It is particularly problematic in areas around Streaky Bay, Ceduna and Elliston as they are essentially on the end of the grid.

That 28 September power outage obviously hit the state, but it particularly hit the bottom end of Eyre Peninsula. Even though I have spoken about it before, I would like to talk about it again. The three generators—and the Treasurer is well aware of this—that were supposed to be operating and backing up the power supply for Port Lincoln and southern Eyre Peninsula failed. They were all brought online. Two failed and the other one was taken offline after that failure. It meant that Port Lincoln and the bottom part of Eyre Peninsula was left in a much worse situation than it otherwise would have been.

Those generators are operated by ENGIE. To this day, we still do not have a reasonable explanation as to what happened there, although my understanding is that the Treasurer has instructed ESCOSA—which I suspect through a lot of this has its head in the sand, given that it is required to monitor the provision of essential services—to provide a report. That is impending and the people of Eyre Peninsula are keen to see it.

It also gave me the opportunity to communicate with my electorate. I sent out a survey form and had an overwhelming response from the electorate of Flinders. I received over 600 returns in postal form, which is quite remarkable and just shows how much an outage can affect the people themselves. It becomes a very political debate, but ultimately it is the people who go through the experience. I was then able to communicate back to my constituents.

I discovered that about 50 per cent of respondents had applied for the government's loss of power grant. Of the remaining 50 per cent, the reasons they did not apply included lack of communication and knowledge, the exceptionally short time frame to lodge and, of course, there was no phone or internet access, which in some cases extended for weeks. The ad hoc implementation of the grants meant that my office was in regular contact with the government unit responsible in an attempt to clear up some of the inequities experienced across the electorate. Poor management was reflected in a number of applicants who were not successful in obtaining assistance due to various reasons beyond their control.

In conjunction with the Port Lincoln mayor, Bruce Green, I wrote to ENGIE regarding the generators. As I indicated earlier, we have not had a satisfactory answer about that as yet. My question today is: should the power go off again, right now, would those backup generators be capable of providing electricity today, tomorrow, next week or next month? We do not know that. In fact, the locals have become very cynical about the reliability of the power supply. I know for a fact that just a few weeks ago, for the Port Lincoln Cup, the Port Lincoln Racing Club hired a generator for the day at a cost of $20,000 to the club. That is a lot of money to a sporting club. They hired a generator as a backup because they simply could not take the risk of a power outage on what is the biggest day of the year for them.

We were pleased to welcome the state Liberal leader, Steven Marshall, to Port Lincoln after the outage. We heard from community and business leaders, and the Leader of the Opposition was informed not only about the power outage but also about the ramifications that unreliability and high prices are having on future investments into Eyre Peninsula, a very important regional part of this state. I have also met with Telstra to discuss contingencies for extending our backup power supply for mobile and land lines, because once there is an extended outage communications go out as well. When you drill down, the loss of communication was just as distressing, if not more so, than losing the electricity for many people, particularly older people.

More recently, as our power supply problems have been experienced state and nationwide, remembering that our outages on Eyre Peninsula were being experienced for a period of time well before 28 September, we have seen the issue escalate onto the national agenda. In hindsight, I believe Eyre Peninsula was, to coin a phrase, 'the canary in the coalmine' for the rest of the state and the rest of the country.

The DEPUTY SPEAKER: A canary in a coalmine?

Mr TRELOAR: I like it, a canary in a coalmine. Is that—

The DEPUTY SPEAKER: This is the badge, the canary badge.

Mr TRELOAR: It is nice to make that connection, Deputy Speaker.

The DEPUTY SPEAKER: I am simpatico.

Mr TRELOAR: Prime Minister Malcolm Turnbull visited Port Lincoln in January—that actually coincided with the Tunarama—and consolidated our power problems, our very regional power problems, on the national stage. We are still hearing about Port Lincoln in the federal parliament, with stories from community members and business owners he met. As I said, his visit coincided with the Tunarama, which gave him the opportunity to meet many, many people. I also met with federal energy minister Josh Frydenberg this week, and that gave me the opportunity to put Eyre Peninsula's perilous energy case forward once again onto the national stage.

This week, the Premier conceded that 15 years of failed Labor policies would cost taxpayers more than half a billion dollars, having forced the closure of 540 megawatts of cheap base load power at Port Augusta. We all understand that it did not have a long-term future, and that has been put to the parliament today by the opposition, but it was a critical part of the transition period, rather than have it just chopped off and there be no transition period at all. We find ourselves in exactly the position we are in.

The Weatherill government is now proposing to spend $360 million on 250 megawatts of stand-by power. Nowhere that I can see in this plan is the problem of South Australia's lack of cheap base load power addressed. It certainly does not deliver cheaper electricity to South Australia; in fact, from my perspective it does not guarantee reliable services to Eyre Peninsula either. There is no one single solution to our energy security.

The state Liberal Party has proposed part of its energy policy, which we will take to the 2018 election. Power must be reliable and affordable with investment and return on investment. There must be a National Electricity Market with a broad generation mix, balancing demand and supply. I firmly believe that in South Australia, at present, we are out of sync with the rest of the country.

The AEMO report we have all been scouring for the last few days—all 277 pages of it; it is quite a read—has 19 recommendations. There is something in it for everyone but, ultimately, the AEMO report suggests that the blackout was inevitable because of the settings that were contained within the grid. As I said before, I can only suggest that somebody has been asleep at the wheel, particularly in relation to the management of the grid itself. The AEMO report talks about the grid stabilisation and, from my perspective, long-term it is not just about power generation but also about the security of the grid and the extremities of the grid—which I suspect have had minimal maintenance over the last few years.

The main transmission line into Eyre Peninsula remains an issue. ElectraNet runs a main line down from Port Augusta to Whyalla, down to Yadnarie near Cleve. It then branches out and goes west to Wudinna and on down south to Port Lincoln. In the short term, that is the most critical thing for the power supply onto Eyre Peninsula. I know that over the past few years ElectraNet has been working towards the duplication or replacement of that transmission line.

They have not had a business case put in front of them to justify it as yet, but obviously the energy situation in this state is a moving feast. It changes day by day, week by week. I am hopeful that Electranet will be provided with a case to improve the transmission line into Eyre Peninsula for future and impending markets, for the growth of the region, for increased population and possibly even for the export of electricity out of the region into the national grid.

Mr ODENWALDER (Little Para) (16:35): I rise to support the Emergency Management (Electricity Supply Emergencies) Amendment Bill that gives the minister some power hitherto unavailable over the electricity market and the players in the electricity market. I know that this minister at least will use those powers wisely and judiciously, and I hope that other ministers will into the future. I understand also that the opposition will be supporting the bill; I certainly hope that is the case, but it means that I will be making a slightly amended version of my speech.

Over recent weeks as I have gone around to train stations and shopping centres, when I knock on doors and talk on the telephone to people in Elizabeth, I talk to them about the electricity system and the problems we have experienced in recent times. They are giving me one message loud and clear, and that is: stop talking about it and fix it. When they hear about the energy plan that the Premier and the energy minister have put together, the response is overwhelmingly positive. I have not been in this place as long as some, and I certainly was not around for the debates when the Liberal Party sold our power assets, but like the member for Fisher, I have never seen a response to a government policy initiative quite like this. As I said, it is overwhelmingly positive.

On the doorsteps, I hear nothing but praise for the way the Premier took the federal minister to task at that infamous press conference because—surprise, surprise—people expect their leaders to lead and they expect their leaders to put South Australia first. The response to our plan has been so positive, in fact, that part of me hopes the opposition continues to talk it down. There is a hope that they will continue to come into this place to talk down renewable energy because the more they talk it down, the more they kowtow to Canberra and to coal interests, and the more they talk down renewables, they demonstrate that they are on the wrong side of history.

Recent events have clearly shown us that the National Energy Market is not working for South Australia. It is a system that has shown itself to be very good at making money for large energy companies, which is fine and I support markets as a matter of principle, but when the operation of a market works in direct contradiction to the needs of its customers, as the National Energy Market has consistently shown to have done in recent times, it is up to political leaders to act. That is what the Premier and the energy minister have done. They have put the needs of South Australian energy consumers ahead of the profits of energy companies and ahead of a blind adherence to free-market ideology.

This is about seizing back control of our energy system. But more than that, we are unashamedly committed to renewable energy and we are also committed to jobs in South Australia, and I am personally committed to jobs in northern Adelaide. That is why the focus of this plan is not only to put downward pressure on prices, it is not only to stabilise the system, it is not only to make sure that the lights stay on so to speak, it is about creating jobs and business opportunities in the markets for emerging technologies.

A key element of this plan, aimed at least partly at creating investment opportunities and jobs in renewable energy, storage and other emerging technologies is the renewable technology fund and the commissioning of large-scale battery storage. The idea is first of all to provide the state obviously with large-scale storage for renewable energy so that power is available when it is needed, but importantly this is just part of a $150 million fund—$75 million in loans and $75 million in grants to support renewable energy projects. I understand that there was an announcement today—or there will be an announcement forthcoming, so I will not speak too much about the battery.

But as well as modernising the grid and looking to the future, this is all about supporting private innovative companies and entrepreneurs and in turn supporting local jobs. In this context, I was really pleased to officially open the Polaris Centre Energy Speed Networking forum at the Fluid Solar House in Elizabeth Vale. Before I speak about this event, I might reflect a little on the Fluid Solar House itself because it is quite a remarkable place and I am really proud that its backers have chosen Elizabeth as the home for this world-class building. Fluid Solar House is a multiuse off-grid office building housing the innovation grid, which is a smart tech and renewable energy coworking space.

It is basically a solar thermal-powered building, completely off the grid, or it will be completely off the grid as of this week, I understand. Fluid Solar technology supplies about 70 per cent of demand for the building energy demand, using a 150 kilowatt rooftop concentrating solar thermal collector array and a 4,200 kilowatt hour thermal energy storage system. The remaining electricity demand is provided by rooftop PV and, interestingly, a battery pack, together with a wind turbine.

As I said, this building is completely off grid. It is proof that, given the right environment and, crucially, when it is coupled with storage, renewable energy works and is worth investing in. For governments, it is worth creating the conditions for this investment to take place. I could go on about this building and I will speak more about it at a later date, including the many design features that make it so efficient. So, I was really pleased to visit the house again and particularly to open this renewable energy business networking event organised by the Polaris Centre. It brought together many great businesses, including many from northern Adelaide, that are doing wonderful things in renewable energy, energy efficiency and energy solutions.

I will name some of the businesses that participated because it was really well attended. These included: Elwa; University of South Australia; Down to Earth Sustainable Solutions; Nexgen Energy Pty Ltd; Maximum Lighting and Energy Solutions; Redflow; Cminus; J Glazing; Dematec Automation; Redivivus; EEA Pty Ltd; Enpro Envirotech; CSS; Century Engineering; Mayfield Industries; Suntrix; Interception Design and Construct; 360 Evolve, which has an amazing virtual reality set-up that enables you to explore energy efficiencies in your own home or in your business; Seed Consulting; KT Projects; Just Glorious; SA Power Networks; Steven Zilm Solar and Electrical; Anbar Energy; Lauthier-Wendt; Schneider Electric; The Solar Project; and Accumulus Energy.

It was really well attended and all these people are contributing in one way or another to the future of renewable energy in this state. The main message I got from these businesses was that there is a future in renewable energy. In fact, it is the future of energy and they are very keen and willing to continue working on and investing in renewable energy technologies. The renewable energy fund, together with our energy security target, will create the environment where these businesses can flourish and make our state a centre for this type of technology and the advanced manufacturing jobs that will result from this investment.

This government, despite the efforts of some of those opposite and of other conservative voices, is not afraid of renewable energy. We have nothing to fear from renewables. It is my view that, along with storage technology and perhaps nuclear power, renewables are the future of energy provision worldwide. It is my view that there is a particularly big future for advanced solar and solar thermal technology. We are seeing solar power in its various forms surging in Australia.

We heard the Minister for Transport yesterday, in his excellent contribution to this debate, talk about the success of our rooftop solar program, which has led to a huge take-up of PV solar technology: 130,000 households across the state, as well as businesses and public buildings. The Climate Council's recent report, State of Solar 2016, states:

In 2017 over 20 new large-scale solar projects will come online. A further 3,700 MW of largescale solar is in the development pipeline (roughly equivalent to three coal-fired power stations).

It goes on:

Australia is expected to reach over 20GW of solar PV in the next 20 years, equivalent to about a third of Australia's current total power generation capacity.

Solar and battery storage for households and businesses is already gaining traction in Australia—with more than 6,500 households installing the technology. Uptake is expected to triple in 2017.

Large-scale developments such as the Lakeland solar and battery storage project and the Kidston solar and pumped hydro project (both in North Queensland) are demonstrating the potential of combining large-scale solar and energy storage technologies.

Finally, they point out:

The Victorian Government is seeking expressions of interest to build a large-scale battery storage facility in western Victoria to improve grid stability.

We believe that this plan will mean real economic opportunities for businesses and entrepreneurs in this state. We want South Australia to lead the way in attracting investment in these new industries and, in turn, create new jobs to replace those of the old manufacturing sector. In particular, for those of us who live in the northern suburbs, we hope it will fill in some of the gaps left by the departure of the automotive sector.

I commend this bill as part of the government's broader energy plan, and I know that the people of South Australia support this plan, too, as well as the leadership shown by the Premier and the energy minister in responding to the failure of the energy market.

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (16:44): I want to thank every member of the house for their contributions, and I pass on my thanks to the opposition. I know it is unorthodox to introduce legislation and demand its passage and debate immediately, but I can honestly say that I can think of no more urgent issue than making sure that we can avert the type of occurrences that have occurred in this state when we had generation sitting idle, no apparent emergency evident until that generation was not available and South Australians were load shed.

Our emergency powers contemplate an emergency unfolding. They contemplate a situation where the emergency has occurred, and there are examples in a complex electricity system that require judgement and, in the words of Matt Zema, being able to anticipate events before they occur and acting so that you do not need to declare emergencies. It is very difficult to know what would have occurred on the day of the September blackout if I had had the power before an emergency unfolded to constrain the interconnector.

Constraining the interconnector on the South Australian border would have led to more thermal generation being on on our side of the border. The Australian Energy Market Operator claimed that there was no credible contingency that the interconnector would be lost, even though they set those contingencies. I had a different opinion. I contacted AEMO on the day of 28 September to ask them: is it prudent to constrain the interconnector? They felt that their hands were tied because there was no credible contingency. My view that day was very simple. They are the ones who decide the contingencies. They are the ones who decide whether they are credible. That can be changed.

The idea that the Australian Energy Market Commission must develop a cookbook-style set of rules with recipes for AEMO to follow according to every situation that might be foreseeable is ridiculous. We expect the market operator to be able to assess every single individual occurrence and make an assessment. There have been four times that South Australians have lost power since the September blackout. Each one of those occasions was different. It is very difficult, in a complex electricity market, to build rules that can adapt and give you a set of criteria and write instructions on what to do depending on the situation.

I have to say this to the shadow minister: if you truly aspire to be the energy minister in a new Liberal government, these powers give the state more sovereignty. The idea that we cannot constrain interconnection from competitors interstate for our own security—not to give a competitive advantage to South Australian generators, but to secure our system—is ridiculous. Of course we should have that power, the same way we should have to close a road to avoid people driving through it so they do not get flooded, just as we would say it is important to change trading conditions to prevent certain events occurring that may risk life.

I have to say that I already have the powers I am seeking now if an emergency is declared. I can actually intervene, declare a state of emergency and, of course, have these powers. It only makes common sense, given what we have been through, to now say, 'Do we require these powers to avoid heading into a state of emergency?' It is not as simple as saying that the Governor must obey whatever the executive tells him in Executive Council. The Governor must be satisfied, and we, as his ministers, must be truthful in advising him. If there is no emergency as defined under the act, we cannot call a state of emergency. We need to be able to satisfy ourselves that an emergency has occurred.

There are nuances throughout the current legislation, but it is unacceptable that the state must operate under a continued state of emergency as called on by the federal energy minister, Mr Frydenberg, who said, 'Just declare a state of emergency.' You need to have the criteria in place under the act to do so. You cannot govern a state that is in a perpetual state of emergency just so you can have powers of direction over the National Electricity Market. That is absurd.

The most important point I want to make before we enter into committee, if the house is amenable to this debate, is this: I believe the threat of our intervention is just as powerful as an intervention. Companies knowing that there is a possibility that the state will exercise its sovereignty to secure its system despite the market signals, despite what the market may be attempting to do—whether it is gaming the market or whether it is taking advantage of rules and current operations—knowing that the state has the power to do this is enough of an incentive to ensure that this will not ever occur again. The idea of South Australians being load shed when there is sufficient capacity to meet needs and the market decides it is best not to, or intervenes too late, surely justifies this legislation.

I do not know what the opposition have planned in another place. The government is not up for compromising. This is a fundamental piece of our plan. If the opposition have amendments that improve the legislation, that improve our powers, that make it easier to operate, then we will consider them, but if they are there to stifle the government's ability to intervene, if they are there to try to make this policy fail, then we will oppose them.

We are wanting the opposition to act responsibly within the state's interests, and it is a big test for them. The test for them is this: if they truly believe that they are going to be the government within the next 12 months, they will support this legislation. If they think they might lose, they will vote against it or try to amend it in a way that makes it unworkable. We will soon find out. I commend the bill to the house.

Bill read a second time.

Sitting extended beyond 17:00 on motion of Hon. A. Koutsantonis.

Committee Stage

In committee.

Clause 1.

Ms CHAPMAN: My questions relate to the establishment of the new regime which amends the Emergency Management Act 2004 and does not purport to deal with any other legislation. My question is: why has the government not, in introducing this regime, amended the Essential Services Act 1981?

The Hon. A. KOUTSANTONIS: I am advised that the government was advised that housing these powers in the Emergency Management Act has certain advantages over alternative options such as the Essential Services Act and Electricity Act, including definitional and consistency advantages as well as existing provisions which complement the policy objectives of these powers.

Ms CHAPMAN: Who provided that advice?

The Hon. A. KOUTSANTONIS: The Crown Solicitor's Office.

Ms CHAPMAN: When was that advice sought?

The Hon. A. KOUTSANTONIS: The Crown has been involved throughout the entire contemplation of the government's Our Energy Plan. They have been giving the government advice. I do not know the exact date on which we sought the particular advice. It has been developed organically as we have been going through this process. They have been providing advice to the government the whole way through. They are an integral part of government advice. We do not really generally make decisions without crown law advice.

Ms CHAPMAN: I am not suggesting that you would, minister. The reason I ask is that, according to the published material on the plan the Premier had provided on 14 March, there was an indication that the development and drafting of the bill was to then commence from that date. My simple question is: in going down this line, using this model, when did you receive the advice that any use of, or amendment to, the Essential Service Act 1982 was not going to be part of that, or was a less reliable process to go through?

The Hon. A. KOUTSANTONIS: I find the question confusing because it misunderstands the process the government goes through in developing policy. Fundamentally, it misses the point in that the government consults regularly with crown law. We make organic decisions and, until a final decision is made, that policy is still in contemplation mode. Finding the exact date when that advice was received, my guess is (but I have to check) that we would have received multiple pieces of advice about potential legislative forms.

It might have been: do we bring in completely new, independent legislation creating this power, or do we amend existing acts? Probably there would have been advice on the merits of both of those, and the cabinet would have formulated its decision. I do not have the exact date and I do not think it is really relevant for these proceedings.

Ms CHAPMAN: Is it the intention of the government to proceed to repeal the Essential Services Act of 1981 if it is of no use?

The Hon. A. KOUTSANTONIS: No.

Ms CHAPMAN: In respect of the Essential Services Act 1981, in the time that the minister has been the Minister for Energy, has he ever exercised the provisions of section 3 of the act and declared a period of emergency in circumstances that have arisen or are likely to arise that have caused or are likely to cause interruption or dislocation of an essential service in this state?

The Hon. A. KOUTSANTONIS: Under these currently, I am advised that under the Essential Services Act the last time this was proclaimed was on 29 September 2016, and it was the Governor who had the powers, not the minister.

Ms CHAPMAN: And what were the circumstances under which that declaration was used?

The Hon. A. KOUTSANTONIS: It was after the system black.

Ms CHAPMAN: For how long did the period of emergency continue?

The Hon. A. KOUTSANTONIS: I do not have that information at hand, but I understand it was extended. I do not know what was the minimum period that we had it in place, but there was an extension. I can get that information between the houses for the member.

Ms CHAPMAN: Can I just clarify this, because on the day of the blackout—I assume we are talking about September 2016, the day the statewide blackout went down—the Premier was seated where you are and came over to me to say, 'We've got a major problem. Do you agree to the parliament being closed down so that we can attend to it?' He needed to attend a state emergency management meeting, which I understood to be under the Emergency Management Act 2004, not under the Essential Services Act 1981. I wish to be absolutely clear.

The Hon. A. KOUTSANTONIS: I am advised that we used the Essential Services Act to declare that electricity was an essential service to give powers of direction by the Governor over those essential services in South Australia.

Ms CHAPMAN: In relation to the latter then, was the direction in relation to the proclaimed essential service also applied under section 4 of the Essential Services Act at the time of the September 2016 outage?

The Hon. A. KOUTSANTONIS: Is the opposition asking if we issued directions under section 4 or if we—I am not quite sure what the question means.

Ms CHAPMAN: There was a declaration of a period of emergency—we have established that—and you used the Essential Services Act to do it for a time unspecified, which may or may not have been extended. Under section 4, a direction can be issued in relation to a proclaimed essential service. My question is: did you issue any directions in respect of that incident or at any other time?

The Hon. A. KOUTSANTONIS: I can advise the house that the Australian Energy Market Operator was issued two directions: (1) not to operate the spot market, and (2) to maintain the expected rate of change of frequency of the South Australian power system in response to the non-credible coincident trip of both circuits of the Heywood interconnector when the power system is in a secure operating state or at below three hertz per second.

The CHAIR: Are you referring to section 4 in this act or in another act?

Ms CHAPMAN: No, another act.

The CHAIR: We are really getting off clause 1.

Ms CHAPMAN: That is why we are getting to the decision of the government to proceed under the current—

The CHAIR: How many questions do you think you might have on clause 1?

Ms CHAPMAN: I am happy to do them on several, but probably half a dozen or so. Were the directions you just referred to of AEMO or of your government?

The Hon. A. KOUTSANTONIS: It was made of AEMO. The Attorney-General issued instructions to the Australian Energy Market Operator to suspend the spot market and to maintain a rate of change of frequency, as I described in my earlier answer.

Ms CHAPMAN: With regard to the entities that received notice of that direction, did they cooperate and ensure that they were undertaken?

The Hon. A. KOUTSANTONIS: Yes, and they were required to do so.

Ms CHAPMAN: Regarding the three incidents since that time, which largely relate to load shedding occasions when there have been power outages, was there either an emergency declaration prepared or a direction issued?

The Hon. A. KOUTSANTONIS: First, the other events were not all load shedding. I understand only one was. The others were events of tree limbs taking out power lines and causing transmission or distribution disruptions. There were no other instructions issued and I think no emergencies were declared.

Ms CHAPMAN: Is there any reason why not?

The Hon. A. KOUTSANTONIS: I am advised that the ability to use the Essential Services Act in advance of an interruption of essential services in the state is limited by the requirement for the Governor to form the opinion that circumstances have arisen that are likely to cause an interruption to electricity. This is a significant test to satisfy, hence the government is seeking the more general powers of direction.

Ms CHAPMAN: On the occasion of September 2016, was any request made to AEMO to undertake the decisions subsequently issued by the direction or were they just served with a direction?

The Hon. A. KOUTSANTONIS: We consulted with AEMO prior to giving the directions. They were well aware of them in advance, and then we issued them.

Ms CHAPMAN: In the consultation, did you ask them to do the things that were ultimately in the direction or not? Did you just tell them 'We are going to be issuing a direction and this is what the terms of those directions are going to be'?

The Hon. A. KOUTSANTONIS: Following the restoration of power on 28 and 29 September last year, AEMO felt that they could no longer suspend the market and wanted to return the market. That would have required a direction from us to suspend the market, which we issued to them. They felt that they did not have sufficient powers in place under the current regime to maintain a certain rate of frequency monitoring within the system, and we therefore issued them a direction.

Ms CHAPMAN: Were the directions you issued on the night of the blackout, the other two, also at their request?

The Hon. A. KOUTSANTONIS: I am advised that the directions were issued after the restoration of power.

Ms Chapman interjecting:

The Hon. A. KOUTSANTONIS: Sorry? There were only two instructions.

Ms Chapman: They were both after the restoration.

The Hon. A. KOUTSANTONIS: They were both after the restoration of power because, if my memory serves me correctly—and I stand to be corrected—AEMO wanted to re-establish a spot market relatively quickly and felt that either they did not have either the power or that it was unnecessary to suspend it.

We felt the prudent thing to do after a system black was to suspend the market to reassure the public and stabilise markets very quickly. Then we were very concerned about stabilising the system given that, in my opinion, a non-credible contingency had occurred. I was very concerned about the operation of the system, given that something had occurred that should not have occurred. Through our advisers, we came up with a plan to make sure that AEMO, through our directions, would maintain the system in a certain way to stabilise the system to minimise the chances of another system black.

Ms CHAPMAN: The only directions that were issued were after the reconnection of the power and in a circumstance where AEMO was not going to be taking a direction or action that you thought was prudent or appropriate. Therefore, in this consultation you had with them they presumably made that clear, and in the government's opinion that was not appropriate and therefore you indicated you would issue the direction. Is that how it happened?

The Hon. A. KOUTSANTONIS: I think it is a relatively good characterisation of what occurred, other than to say that AEMO were very comfortable with the directions that we issued. Let's be clear about this. AEMO is not some independent market operator that is appointed by the government to act independently. They are a company with shareholders, I should explain to the committee. They are surrounded by lawyers—lawyers to defend their actions and lawyers ready to pounce on their actions.

The suspension of the spot market is a relatively serious market action to occur, as is the direction on the rate of frequency change to be stabilised and maintained. It is much easier for AEMO to have that direction imposed on them, rather than for them to formulate this opinion on their own. Because we are an external body, and if we have a state of emergency declared, then we are able to issue these directions. It protects AEMO as well as the other participants in the market.

Ms CHAPMAN: Because this is the only example that is being used, and I am happy to use this as the sum exploration as to how this operates, in that circumstance AEMO's judgement was a certain way forward, the government's judgement was a different way and, whilst AEMO were not prepared to follow that route, they were happy for you to issue a direction in some way to protect them against any adverse retrospective assessment of whether or not they had done the right thing. In other words, they were happy to be enveloped by your direction, almost as a protection.

The Hon. A. KOUTSANTONIS: I suspect that is part of the answer. I think the other part is that they felt that whether or not they thought that suspending the spot market was a good idea, they also felt they did not have the power to do it under the circumstances. Power had been restored. Other than transmission lines being damaged, I think most of the generators in Adelaide, other than the Port Lincoln generators, were operational. They were not reporting large-scale damage through the lightning strikes. We were very concerned about what damage had occurred on our generation assets.

I think that there is a bit of the scenario you are contemplating, but I also think that the other part is that, whether or not it was a good idea, they felt they did not have the power to do it. We were able to step in and make the decision for them.

Ms CHAPMAN: I think you would understand that they would have the power to do it. If they did it, though, they might have been subject to some complaint by the shareholders or those whom the determination might adversely affect. Is that a better assessment?

The Hon. A. KOUTSANTONIS: I think the better explanation is that at the time, after power was restored, they felt they did not have the power under the current framework to suspend the market.

Ms CHAPMAN: In progressing with a suspension of the spot market, via your government's direction, that was able to be achieved. Were there any consequences from that? Has there been any action or claim for damages or anything of that nature as a result of that?

The Hon. A. KOUTSANTONIS: No, not that I am aware of.

Ms CHAPMAN: Having done that, and having used the Essential Services Act to do it in the circumstances you describe, why is it necessary for you to produce this new model under a different piece of legislation when the one time you needed to use it you did that and it all worked?

The Hon. A. KOUTSANTONIS: There are a couple of reasons. Firstly, I believe that we could have prevented or minimised the risk of a system black had there been an intervention earlier. I remember the day of 28 September very well because my father-in-law was in hospital. He is a strong smoker, member for Colton. He was doing it very tough and I went to see him. I was hearing the reports of the wind and the storm front moving through South Australia, and I was very concerned about powerlines and transmission lines being taken out because, when these lines are taken out quickly, the system seeks the energy that is being demanded of it and it can cause surges.

A system black had been at the top of my mind for a long time, especially during the bushfire season. I remember calling AEMO and asking them, 'Is it prudent to constrain the interconnector in South Australia in advance of this storm heading through the Mid North and coming to Adelaide?' to make sure that we had as much thermal generation on as possible. The response I had from AEMO was that they felt that the system was secure and that there were no credible contingencies for any loss of the interconnector or any other form of generation.

My mind at the time, before question time that day, was very clear. If I had had the power to constrain that interconnector, I would have constrained it before the storm hit, not draw power out of Melbourne but constrain the power coming in, which I have the power to do, despite the misunderstanding of some in the media about my ability to direct Victorian generation, which I cannot do and I do not seek to do. All I was attempting to do was send a larger market signal here to have more generation on.

Constrict the interconnector and you would immediately have seen more units at Torrens on and immediately more units at Osborne on and immediately more units at Pelican Point on. We could have directed maybe the second unit on and had a lot more inertia and synchronous power in the system to withstand those shocks if we did suddenly lose transmission lines through what was being touted as a very large storm. I note that some of the wind speeds we went through on that day were equivalent to some of the cyclonic winds in Queensland yesterday.

I was very concerned about it so, yes, I think that if I had had the power before the emergency was there I could have used that power to, at the very least, constrain the interconnector so that losing it would not be a credible contingency. I would have had more thermal generation on in the state and we could maybe have withstood the shocks to the system. We still would have lost power at Olympic Dam and we still would have lost power in Port Lincoln because transmission lines were damaged and so were those generators. Things still would have occurred, but we might have avoided a system black.

Ms CHAPMAN: Prior to 2 o'clock on the day, you asked AEMO to do certain things which, in your judgement, would have assisted the management of the event that was about to occur. They declined. You formed the view that that should have occurred and you would have exercised the powers if you had the power to do it. My question is: when did you form the view that AEMO's judgement on this issue was wrong and who informed you for the purposes of making that judgement?

The Hon. A. KOUTSANTONIS: First of all, it was not in terms of me seeking them for instructions. I was asking them questions, things like: is it prudent to constrict the interconnector? I formed in my mind that it had not worked when the lights went out and that obviously the policies AEMO had put in place to avoid a system black had failed, evidently, because we were in a system black. I have worried about a system black.

In fact, all energy ministers worry about a system black. New South Wales nearly had a system black a few weeks ago during the heatwave. They ran their system insecurely for a period of time and that could have potentially spiralled out of control as well. My view on this at the time was that I was asking questions like, 'Is it prudent?' I was being reassured by AEMO, the market operator, that it was okay. Up until then, they had not let us down. Up until then, I had no reason to question their judgement. I accepted their judgement on this, but the subsequent action was a system black.

AEMO did not set out to cause a system black, but for the reasons they have set out in their four reports there were things that they did not know about that occurred; that is, the software settings alongside generation that did not allow for more ride-through events to be contemplated within that type of generation. They did not believe the loss of the interconnector was a credible contingency on the day. They claimed that it was not a credible contingency. We did lose the interconnector that day. All the measures they had in place that they thought could happen failed and the system went black.

Ms CHAPMAN: That is very different from what I understood you to say earlier, and that is that, if you had had the powers, you would have exercised them. It is one thing to say in hindsight that it seemed a number of their judgements or their views as to how they would get through this event were in error and that perhaps other decisions should have been made. Had you formed the view yourself before 2 o'clock on that day that AEMO should be acting in a different way or had you relied on them at that stage because there was nothing else you had and no other information? And, if you did have other information which caused you to form a judgement that the information you were given was wrong, who did you get it from and why did you not act on it?

The Hon. A. KOUTSANTONIS: I had no power to intervene, other than to call a state of emergency, but of course a state of emergency did not exist, so I could not have called it and used any of those powers as this was before the storms wreaked any havoc and before there was any damage done to property. It was just weather advice and nothing had actually happened. People were on stand-by. We had emergency crews on stand-by. We did the right thing and checked with the national market operator about the ability for our infrastructure to withstand such a belting and they said we were okay.

With hindsight, we would have acted. The learnings from a system black are very clear. Again, these are learnings. Systems evolve. You do not set rules at a point in time and then forget them. As matters occur, as in the United States after Hurricane Sandy, there have been learnings. There have been changes to legislation, changes to regulation and changes to practice. It is the same with a system black. We had the system black, hence the Our Energy Plan. The measures in here are to ensure that the system is secure, stable, affordable and reliable.

A cornerstone of this plan is to give me, or any energy minister, the ability to intervene early on the advice of the offices that will regulate it—my energy markets division, AEMO and others—on what is prudent to do. AEMO can see the bus coming, but sometimes they just do not have the rules or the ability to act early enough. Neither do we. That is why this legislation is vital, to give us the ability to act earlier, in advance, with more prophylactic measures to make sure that if the state is about to enter a massive wind event or bushfire, we can act. With Hurricane Debbie in Queensland, thermal generation—

Ms Chapman: You will have to seek leave if you are going on.

The CHAIR: On that point, you did say six more questions. I am not sure if the member for Stuart has any questions.

Ms CHAPMAN: I am sure he has a lot, but we are getting speeches in response.

The CHAIR: This is nearly finished then?

Ms CHAPMAN: I hope so. With the benefit of hindsight, let's go to the September event. You say that if you had had these powers you would have acted. What would you have done and whose advice would you have obtained for the purposes of forming the judgement to act?

The Hon. A. KOUTSANTONIS: If we were facing the same conditions, I would have constrained the interconnector and directed generation in South Australia on.

Ms CHAPMAN: Whose advice would you have drawn on or relied on for the purposes of forming that judgement, or is it just something you make a decision on yourself?

The Hon. A. KOUTSANTONIS: I would have drawn on the advice of my agency. My agency would have consulted with the market operator and any other relevant operator. For example, we would talk to ElectraNet, we would talk to SA Power Networks, we would talk to the generators, I imagine. We would talk to the entire industry in South Australia about the prudent path forward.

Ms CHAPMAN: In a weather event, you are going to talk to the entire industry of South Australia?

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: When you consulted with AEMO on the September occasion, is it your understanding that they had consulted with ElectraNet and others?

The Hon. A. KOUTSANTONIS: I do not know; you would have to ask them.

Ms CHAPMAN: Did you ask them?

The Hon. A. KOUTSANTONIS: No.

Ms CHAPMAN: That is what I thought.

The CHAIR: Member for Stuart. You are still on clause 1, I presume.

Mr VAN HOLST PELLEKAAN: Yes. Minister, you said that if you had these powers you would consult with the entire industry about how to use them. When we were given a briefing by your advisers, we were told that nobody in the industry had been consulted about this bill. You have explained to the house that you have had crown law advice but that not one other player in the entire industry has been consulted about this bill in advance of bringing it to the parliament. Why is it that nobody has been consulted?

The Hon. A. KOUTSANTONIS: First of all, this is the government's response. Secondly, private operators in a private market do not like any interference from anyone. Thirdly, we said there had been no formal advice. There has been plenty of informal consultation with the operators.

Mr VAN HOLST PELLEKAAN: Regarding that informal consultation with the operators, are the operators comfortable with what you are proposing?

The Hon. A. KOUTSANTONIS: I do not care, and I will tell you why I do not care. Because when a market decides it is better for them to leave generation off and South Australians go without power, they are not treating electricity as an essential service. My responsibilities are to the people of South Australia, not to people headquartered in Sydney or anywhere else.

Mr VAN HOLST PELLEKAAN: Why did you seek their advice then?

The Hon. A. KOUTSANTONIS: Because it is prudent to negotiate with people. It is prudent to talk to people. That is why I believe it is important to have these powers because, unless I have these powers, the market will continue to operate in the way in which it has operated, which means that if it is cheaper and more efficient for them to send South Australians without power to maintain system security, rather than doing everything they could to keep power on, including maintaining a certain 'spot price' in the market, then that is what they would want—no action. Of course, no private operator likes being told by the government what to do.

Mr VAN HOLST PELLEKAAN: I understand that, but my question was: why did you seek their informal advice, given that you said you did not care what it was going to be, that you do not care what the advice is? If you were going to do what you wanted to do regardless, why did you seek the advice?

The Hon. A. KOUTSANTONIS: I get that you are trying to verbal me. That is not what I said. I said that I do not care what their views are on this because this is the most important thing that we are doing—

Mr VAN HOLST PELLEKAAN: So why did you seek their advice?

The Hon. A. KOUTSANTONIS: Because it is how I work. I always talk to the industry. I talk to the gas industry, I talk to the mining industry, I talk to the energy industry, I talk to all of them. They all know me. They all know how I work.

Ms Chapman: But do you listen?

The Hon. A. KOUTSANTONIS: Well, I don't ban gas, so I do listen. Do you?

Mr VAN HOLST PELLEKAAN: Minister, you said that if you were to have these powers in a situation as described in the act, you would seek advice. You gave us a lot of information about your thoughts on 28 September. Information received under a freedom of information request shows a short series of emails. I do not have the whole context, but from what I have on paper in front of me it appears that you were advised (and I will not say by whom just to leave that off the record for now) that 'even with the current weather conditions, we don't expect this to be an issue'. This is at 11 o'clock in the morning on 28 September. I am trying to get to the bottom of where you would get the advice from.

The Hon. A. KOUTSANTONIS: I do not know the context of the question.

Mr VAN HOLST PELLEKAAN: The context of the question is that you said that if you assumed the powers available under this act, if the act were there, you would seek advice from a whole range of people with regard to what decisions to make and how to use it. You have told us that you do not particularly care what the commercial side of the industry would want; that would not be most important in your mind. You have said that you would seek advice from your department, from a range of other people you could get. That is the context. The question is this. I have received under freedom of information a series of emails in which, late in the morning of 28 September, you were advised by one of your most senior advisers that 'even with the current weather conditions, we don't expect this to be an issue'.

The Hon. A. KOUTSANTONIS: I do not know who that email is from. It could have been someone reporting what AEMO had said. I do not know. I will have to wait and see.

Mr VAN HOLST PELLEKAAN: I would be happy to say—

The CHAIR: Order! I do not even understand what 'this' means in 'we expect this'.

Mr VAN HOLST PELLEKAAN: If you are happy, I am happy; I would just prefer to leave other people out of it. There is an email here from your Chief of Staff, Jarrad Pilkington, at 11.06 on 28 September 2016 that says, 'Even with the weather conditions, we don't expect this to be an issue,' 'this' being concern about the electricity system.

The Hon. A. KOUTSANTONIS: To who?

Mr VAN HOLST PELLEKAAN: I can go through it all: to Vince Duffy with a cc to Tom Koutsantonis, Rebecca Knights, Paul Heithersay and Don Russell.

The Hon. A. KOUTSANTONIS: I do not know what question he was answering, whether it was advice from AEMO. I do not know; I have to check. Again, as I said, hindsight is a wonderful thing. The energy plan is born out of the experiences of the system black. There are learnings and we are implementing those learnings. Quite frankly, this legislation is about ensuring that those learnings are implemented, and this is one of the most vital pieces of that implementation.

Ms CHAPMAN: Who else did the minister get advice from on that day to form his view that he would have acted if he had the power to act?

The Hon. A. KOUTSANTONIS: I suppose I have to say that after the system black it was pretty obvious that we should have intervened earlier, but we did not have the power. It is pretty obvious and self-evident. What the opposition is actually asking me is: if I had formed the opinion beforehand that the system was definitely going to go black, why did I not act? Even if I had thought that, I do not have powers to do anything about it. That is why we are here today.

Mr van Holst Pellekaan: That is not the question.

The CHAIR: I am not sure how the question relates to the bill, if that is not the question.

Ms Chapman: He wants more powers, that's why.

Mr VAN HOLST PELLEKAAN: The question was: if you had these powers, what advice would you access to use them? You are a human like all of us, you do not know everything and you will need advice. You have explained your view about industry advice. There is an example of your closer departmental and ministerial advice which on the day, it appears, would not have led to your taking up those powers. If you had those powers, what other advice is out there that you would access?

The Hon. A. KOUTSANTONIS: Taking an email and saying, 'This is our view of the day,' you do not know what informed that email. You do not know why Mr Pilkington had come to that view and you do not know what advice he had received, yet you are posing a question as if that was our thinking.

Ms Chapman: We are just asking you.

The Hon. A. KOUTSANTONIS: Yes, and I am answering it. I sat quietly while you were asking me questions, so you can sit quietly while I answer them.

There are learnings. I take advice from Vince Duffy, who is my executive director, and from Rebecca Knights, who is in energy markets. These are two of the most talented and respected public servants in the government. They know the energy markets better than most. I would take advice from AEMO. I would take advice from the chair of AEMO and the CEO of AEMO. I would talk to the owners of the relevant power stations about their ability to start or not start, and I would talk to ElectraNet about the ability to constrain the interconnector and then we would act, and we would act in the interests of South Australians pure and simple.

What happened on 28 September should not ever happen again. System black is a complete failure of the electricity market. It is one of the darkest days in the history of AEMO, and I think they agree. System black should never be an option. Load shedding is the last resort, and we are implementing measures to make those even more remote.

The CHAIR: Before we go on, the table are looking through the bill and it does appear that you are already on clause 8 because you are asking about the minister's powers. I think we should be moving on from clause 1.

Mr van Holst Pellekaan interjecting:

The CHAIR: Well, and powers. If you want to have an argument with us that is okay, but what we are saying to you is that we think that we have moved off clause 1.

Mr VAN HOLST PELLEKAAN: Can I ask one more question?

The CHAIR: On clause 1?

Mr VAN HOLST PELLEKAAN: Yes, ma'am.

The CHAIR: One more question and then we are moving to clause 8 because that is where we are up to.

Mr VAN HOLST PELLEKAAN: No, clause 2.

The CHAIR: What is on clause 2?

Mr VAN HOLST PELLEKAAN: I will ask that question in a minute. Minister, I have only a small amount of information to share with you about this communication because that is all I get under freedom of information, but you got the gist of it. Were you given any different advice by any of those other senior people, anybody else other than the advice I have here, which is that it all looks okay?

The Hon. A. KOUTSANTONIS: I have to say that trust and faith in the system work when the system works well. Leading up to system black, my faith in the market operator was almost completely undentable. Matt Zema, a South Australian from the Coonawarra, was a close friend and someone whose passing I mourned terribly. I felt very sad for him and his family, especially his son. Matt Zema was someone who had complete faith in the system. I trusted the people he had mentored and brought into the system, so when they said to me, 'All is okay,' I trusted them.

Now, after the awful experience of that trust, I have very different views about how the market operates and in whose interests it operates. I suppose the learning here for me is like that of any minister in any government, Labor, Liberal or any government around the world: you are continually learning and adapting to the situations in front of you. As people change and personalities change, so do modes of operation.

Now that Matt is gone, Audrey is there and she will make different decisions. She will run AEMO her way. As board members change, cultures change, things change. What we are doing is protecting the state because I cannot allow control rooms in Sydney or boards based in Melbourne to let South Australia go black ever again.

The CHAIR: We have finished with clause 1 and the next question was on clause 2.

Mr VAN HOLST PELLEKAAN: But the question was: did you receive any different advice from your advisers on the day?

The Hon. A. KOUTSANTONIS: Different advice from what? To what AEMO had told me? To how we were thinking?

Mr VAN HOLST PELLEKAAN: The advice that I read out to you before from one of your senior people saying, 'It will all be okay.'

An honourable member interjecting:

The CHAIR: Order! That has nothing to do with the title. Where does your question fit? The question you were asking was about—

Mr VAN HOLST PELLEKAAN: A logical train of response to the minister's answers.

The CHAIR: Where is your question in this bill? Where does it fit? You tell me where you would like it to fit? It does not fit in clause 1.

Ms Chapman interjecting:

The CHAIR: It does not fit in clause 1.

Mr VAN HOLST PELLEKAAN: I am happy to go to clause 2 and come back to this under a different clause.

Clause passed.

Clause 2.

The CHAIR: This one is going to fit into the commencement; is that correct?

Mr VAN HOLST PELLEKAAN: Yes, ma'am. Minister, given the urgency with which the government has brought this bill to the house, if it were to pass in the other place how soon after that would you commence this bill by proclamation?

The Hon. A. KOUTSANTONIS: Immediately; that is how urgent it is. The moment it passes both houses of parliament it will be going immediately to the Governor to proclaim it.

Clause passed.

Clause 3 passed.

Clause 4.

Mr VAN HOLST PELLEKAAN: Clause 4 is pretty straightforward. It provides that 'Objects and guiding principles' are for 'making provision for declarations relating to electricity supply emergencies'. The next clause makes it pretty clear what is an 'electricity supply emergency—see section 27B'. I am not hoping to jump ahead, but I am looking at that and there is nothing that I have picked up in the core parts of 27B about when this would be implemented that makes an emergency a necessity. The core bit of when you would adopt these powers is, for example, if a community is disrupted to a significant degree, or if there is a real risk that they may be disrupted to a significant degree, from lack of supply of electricity, but that does not talk about emergencies.

Can you explain for the committee your intentions with the bill with regard to emergencies? Keep in mind that there is significant disruption, probability and actuality, versus risks that result from that—the risk of it happening versus the risks that come from it happening. As I read this bill, you could assume those powers, with the risk of a supply shortfall being very real. There is nothing in the bill that says that that must lead to the likelihood or expectation of some sort of emergency as a result of the shortfall.

The Hon. A. KOUTSANTONIS: Again, this is a very different way of thinking. What I am trying to do here is be prophylactic. If there is a real risk that there will not be supply, if there is a real risk that there will be an interruption, I can act. Hopefully, there is not a disruption and there is not a break in supply because we have acted. What occurs now is that you get market signals to attempt to avoid these things.

The system has to try to guess whether winds will be sufficiently strong enough to take down power lines, whether or not we are heading to a very high hot peak demand day, whether or not we will reach that peak, and whether we have enough time to intervene. The power of this is for me to make an assessment that a disruption of a significant degree, or a risk that there will be a significant disruption, does not occur, so we can intervene early. That is why this clause is there.

Mr VAN HOLST PELLEKAAN: I understand that, but as part of that assessment, would it be necessary to reasonably expect that some form of emergency would come from the electricity supply disruption, or is it all about only electricity supply disruption?

The Hon. A. KOUTSANTONIS: As far as the purposes of this are concerned, for an emergency I assume what you are asking is: is it a significant degree of disruption? People going without power is a significant disruption. We want to avoid that. That is why I will have these powers. If you are saying that this is not just in the matter of there being a bushfire, strong wind events or floods, that it could just be that it is 45º and a generator has decided that a dropped spanner means that they cannot turn on and the price stays at $14,000 rather than new generation coming on and dropping the price to $180, what I will be doing is making sure that that significant disruption does not occur by using these powers to intervene early and making sure that South Australians do not go without power.

Mr VAN HOLST PELLEKAAN: This is really critical to the whole thing. I am not suggesting that it should be one way or the other, but it is important that everybody with an interest in this understands. When contemplating using this power, where would you draw the line about a significant emergency? You can imagine a town of 200 people that is going to be out of power for some reason. Presumably, that is not a significant emergency, as important and as much of a disruption as that might be for the people who live there. Obviously, at the other end of the scale, if it was all of metro Adelaide, that goes without saying. As a minister potentially using these powers, where would you decide that the significant disruption kicks in?

The Hon. A. KOUTSANTONIS: Given what happened with the September blackout, I think South Australians are at the point now where they believe that there should never be an interruption to power under any circumstances. Whether or not we can guarantee that is very, very difficult. My personal view is that whether you are in a town of 200 people or whether you are in a city of 1.5 million people without power makes no real difference. It depends on the reason. If there is a raging bushfire that is cutting people off, that is one thing; that is a different scenario. You would not make them maintain power through scrub that could set a bushfire starting in another direction.

Mr van Holst Pellekaan interjecting:

The Hon. A. KOUTSANTONIS: I am not saying you are saying that; I am just giving you my thinking. However, if it is the market deciding that it is cheaper and more efficient to load shed these people, rather than to turn on other generation or constrain the interconnector to have more generation turned on, then we will act. Every scenario will be different. As I said earlier, with the four blackouts that we have had, including the September blackout, every scenario has been different.

There is not one unique event that occurs that causes blackouts. These things are fluid and they change. That is how difficult the job is for the Australian Energy Market Commission in setting rules, because if they are trying to find recipes to fit every single situation that occurs, life has a way of doing things that makes the scenarios that appear very hard to find a recipe to fit that scenario. So you need to have discretion. I am giving us another arm of discretion, so if AEMO cannot do it under their rules, we can.

Mr VAN HOLST PELLEKAAN: Essentially, would it be fair to say that it is complete discretion and there really are no guidelines? It would be completely at the discretion of the minister any time there is a reasonable expectation of a supply disruption of any sort that might have any range of consequences. That is what this bill seeks: complete discretion under any circumstances where it could be reasonably forecast that a disruption would occur.

The Hon. A. KOUTSANTONIS: No, it is not. I think we are both pushing on an open door here. There is a threshold that has to be reached, and the threshold is under 27B(1) of the act, which provides:

If it appears to the Minister, on reasonable grounds, [and there are definitions of 'reasonable'] that the supply of electricity to all or part of the South Australian community is disrupted to a significant degree, or there is a real risk that it may be disrupted to a significant degree, the Minister may declare an electricity supply emergency.

That is the threshold. If it reaches that threshold, I can act.

Ms CHAPMAN: I have a question while we are on clause 4—Objects and guiding principles. Further down there is going to be a requirement to provide information which relates to what we are about to amend, and that is to add in a declaration relating to electricity supply emergencies under this clause. Have you ever exercised your power pursuant to section 6 of the Essential Services Act to require information on which you might then rely to make this declaration?

The Hon. A. KOUTSANTONIS: I will have to check whether or not we can exercise that discretion under the act, but my advice is that we have a relationship with most parties and they provide information voluntarily. Again, it is another example of having the powers under the act and not having to exercise them, but it being there garners a level of cooperation.

Ms CHAPMAN: Section 7—Profiteering, of the Essential Services Act, gives you the right to fix a maximum price in respect of an essential service. Have you ever exercised that?

The Hon. A. KOUTSANTONIS: I am not aware of having done that but it sounds tempting.

Clause passed.

Clause 5 passed.

Clause 6.

Mr VAN HOLST PELLEKAAN: Clause 6(1) provides:

It is the intention of the parliament that this act apply within the state and outside the state to the full extent of the extra-territorial legislative capacity of the parliament.

In the advice you have sought from crown law, or anywhere else, are there any situations or examples where the powers that this act envisages would not be able to be enforced, or directions that you might potentially like to give may not be enforceable? What I am asking is, given all the advice the minister would have received from crown law and others, are there any situations the minister is aware of where the objectives of the act may not be able to be fulfilled because organisations, potentially in other states or territories or somewhere like that, would not be obliged to comply?

The Hon. A. KOUTSANTONIS: I am advised there will be some real life scenarios where we may have to direct people who are outside South Australia. For example, the AEMO control office is in Western Sydney, so we would have to direct people in regard to their operation in South Australia while they are based in Sydney. I am advised that we have the power to do that.

There are also some other real-life scenarios where the physical location of some poles and wires coming into South Australia are based in Victoria. In effect, we would never direct people to make a change to the energy mix in other jurisdictions, just South Australia, but those people may be physically based, when making those decisions and directions, somewhere else.

Mr VAN HOLST PELLEKAAN: Thank you, minister, I have got that. Perhaps I can reword it more usefully. Have you been advised of any situations where the extraterritorial legislative capacity of this parliament would not be sufficient to give those types of directions?

The Hon. A. KOUTSANTONIS: I am advised no, that the parliament does have that power to make extraterritorial laws to have an impact on individuals outside South Australia.

Ms CHAPMAN: My understanding is that because AEMO, and in fact a number of the generator companies, are headquartered outside of South Australia, the purpose of this section is to be able to capture them to the extent either of their operations here or the effect they may have in respect of the electricity network here. Is that the purpose of you introducing this?

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: The advice you have had on this is from the Crown Solicitor's Office?

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: And are you satisfied that the addition of this clause is sufficient to give you power to impose a binding direction in respect of the generators and/or AEMO because they are the ones who have been identified in the Premier's statement about who he wants to affect here?

The Hon. A. KOUTSANTONIS: Yes.

Sitting extended beyond 18:00 on motion of Hon. A. Koutsantonis.

Clause passed.

Clause 7.

Mr VAN HOLST PELLEKAAN: I am probably exposing some lack of knowledge here, but clause 7, insertion of section 26AA reads:

Except as provided in section 26, if an electricity supply emergency has been declared under Division 6, no direction may be given under this Division of a kind that could be given under Division 6.

Could you tell me what that means?

The Hon. A. KOUTSANTONIS: If the state has declared a state of emergency, I am advised, and the state controller is making directions, he cannot make directions of the kind I could make in that situation so there are not contradictory orders being given about the electricity supply.

Clause passed.

Clause 8.

Ms CHAPMAN: This is the provision that sets up the new model of who this is to apply to, how it is to work and generally when an electricity supply emergency is in operation. My first question is: apart from AEMO and an electricity generator and a retailer, is there any other party you propose that you would be issuing a direction against?

The Hon. A. KOUTSANTONIS: No.

Ms CHAPMAN: When you issued the direction in September 2016 against AEMO, albeit under another act, did you issue a direction against any other party?

The Hon. A. KOUTSANTONIS: I am advised no.

Ms CHAPMAN: Is there any reason then, if you are proposing to manage the commercial market, and AEMO is part of that structure as a body relevant to its operation, why the terms of this emergency arrangement—that is, to intervene and require a spot price or some other anti-profiteering regime—are that we should not specify that that be the limit of whom you could direct in these circumstances, namely AEMO or a generator or a retailer?

The Hon. A. KOUTSANTONIS: In division 6, under 27A, the bill is clear that I can only give directions to market participants, and the market participants are listed.

Ms CHAPMAN: Had you received any advice as to whether you should have any other party to direct?

The Hon. A. KOUTSANTONIS: I would like to direct you, but unfortunately I do not have that luxury.

Ms CHAPMAN: In relation to the declaration, I think you explained in an answer to another question about what you saw as the threshold, which is basically when you form the view that it is necessary, you can do it. There are not any qualifying criteria, there is just your determination if, on reasonable grounds, a risk exists. We have been through that section. Apart from the capacity to direct for the purposes of price during an emergency and to avoid making money that we have referred to already today which you would see as unreasonable, is there any other circumstance where you consider that you would be needing to direct either a generator or a retailer or AEMO?

The Hon. A. KOUTSANTONIS: It is very hard to give these hypothetical scenarios the justice the house deserves because every scenario is different. In my mind, and I think in the agency's mind, the main powers would be to direct AEMO to direct generation on or to suspend the spot market in the case of something potentially occurring or to direct generation on. I also have powers under another act to move gas around the state to make sure there is sufficient pressure in pipes to start generators.

I really cannot give you the hypotheticals of where else we would use it. Something may occur that we have not contemplated, but if we have the powers in place, we can deal with it then, but it is certainly not me trying to usurp the market. I do not want to be issuing directions every single day. I want this to be the last resort; that is certainly where my mind is at with this. Given that we have pretty wideranging powers under the Gas Act, you do not see me sending that many directions around now. I think this act will be used more as a general conversation with a retailer or AEMO that will not require a direction.

Knowing that it is there I think will have sufficient force within the market to make sure that any behaviour that might not be advantageous to customers in terms of supply—not in terms of price but in terms of supply—should smooth out any of the wrinkles. I cannot give you the hypothetical scenarios you are looking for because I have not really contemplated any other ones, other than constricting the interconnector to make sure we have as much generation on as possible or directing generators on if they are mothballed, not participating in the market or sitting out of the market and waiting.

Ms CHAPMAN: So, essentially, to ensure that there is sufficient generation, you would want to have that power to say, 'I want you to turn this capacity on,' to cover an anticipated weather event or some other circumstance which, on your advice, could affect the supply itself—in other words, there would be an interruption to service—and/or that restricting of the power supply could cause a huge spike in the price, of which there might be another problem.

The Hon. A. KOUTSANTONIS: Restricting the interconnector is not about price.

Ms CHAPMAN: I did not say that. The generator.

The Hon. A. KOUTSANTONIS: I would see my powers as giving the system more redundancy. By constricting the interconnector, rather than it being on maximum importing to South Australia, you would obviously have more generation on in South Australia to meet demand and the interconnector would be reserve headroom to call into the system to stabilise it.

I am not trying to be anticompetitive here. I am not trying to crowd out Victorian or New South Wales generators. What I am attempting to do is to secure the system for continuity of supply because when we lose supply people can die. It is dangerous not having electricity, so it is important that we do everything we can. That is the way I am contemplating this act. That is the way we have drafted the act. It is not necessarily about trying to take out anticompetitive behaviour or market manipulation, although that might be a consequence of these powers. The intent of the act is to make sure that we have the ability to secure supply when necessary, when the market fails to do so.

Ms CHAPMAN: Have you contemplated that the directions will also be to the Technical Regulator or do you think you have enough power under his or her act to do that?

The Hon. A. KOUTSANTONIS: No, there is no power to direct the Office of the Technical Regulator in this act.

Ms CHAPMAN: But he has a specific piece of legislation under which he has to give an annual report to the parliament and he has to take instruction from you. You have power to direct in any event.

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: In relation to liability, there is a protection from liability clause later on in the bill. I forgot to ask you, in relation to us accepting this new model under clause 8, whether you have received legal advice as to whether that protection is sufficient to protect the state against a claim by a generator and/or AEMO if they considered that there was some mala fides, negligence or recklessness in the direction.

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: Was that by the state Crown Solicitor's Office?

The Hon. A. KOUTSANTONIS: Yes.

Ms CHAPMAN: Have you conferred with any of your colleagues, ministers for energy, also in the system—that is, in New South Wales or Victoria—in respect of whether they would have any concerns about you progressing with a direction power of this nature?

The Hon. A. KOUTSANTONIS: I would like to keep my conversations with my colleagues between us. I think it is fair to say that they are watching with interest to see how this plays out. I know that the Minister for Energy in Victoria is watching very, very closely. I know that Mr Frydenberg has his views and I have discussed our plan with him. I think the sense amongst the COAG Energy Council is that they all agree that something needs to be done. I do not know their views or whether or not they agree with our package, but I get the sense that they all understand that we need to act, and we are. They act in their state's interest: I act in ours.

Ms CHAPMAN: Of those, you have discussed it with the energy minister of Victoria and Mr Frydenberg. Are they the only two?

The Hon. A. KOUTSANTONIS: As I said to you earlier, I am not going to talk about who I have consulted with on this because it is fair to say that the COAG Energy Council, regardless of party affiliation, is a very collegiate group. We work very well together. Politics is left at the door and we work constructively, so I do not like revealing conversations that we have had, other than to say that I think they are all watching with interest to see how our reforms impact the market. But I am acting in the state's interest. I am not really interested in whether this is approved or not approved by New South Wales, Queensland, Victoria or Tasmania because I am the Treasurer and energy minister of this state, and I only care about this state.

Ms CHAPMAN: Well, I am the member for Bragg and I am a member of this parliament and you are asking us to approve this bill, so I think it is reasonable for us to know whether in fact the state is going to face litigation or objection at COAG or in relation to any challenge to the validity of legislation—hence, my question.

I am not asking for the details of conversation with colleagues around Australia who are involved in our system for electricity sharing in the national market, but I am interested to know: have any of them at this stage—and they may not have, with only two days' notice of even viewing this bill, because I am assuming they did not see the bill before we did—indicated any concern about your capacity to make a direction that may adversely impact on their supply or price?

The Hon. A. KOUTSANTONIS: First, the advice from the Crown is very clear: this is a constitutionally valid piece of legislation that we have every right to introduce. Second, new section 27C provides:

(4) The Minister must, to the extent that it is reasonably practicable to do so in all the circumstances (and having regard to the urgency of the situation) consult with a market participant the subject of the proposed direction under this section before giving the direction.

(5) In giving a direction under this section, the Minister must, to the extent that it is reasonably practicable to do so, take reasonable steps to avoid unduly interfering with the operation of the national electricity market, the National Electricity Rules and the National Electricity Law.

We are a sovereign state, we are entitled to introduce this legislation and we are entitled to protect our citizens.

Mr VAN HOLST PELLEKAAN: With regard to giving notice if a declaration is made, 27B(3) provides that it must be published in a manner and form determined by the minister. What potentially would that be? What would your intention be? How would you let people know?

The Hon. A. KOUTSANTONIS: We are seeking as much discretion as possible depending on the situation. It could be quite urgent, so it might require less notice. Again, we want broad discretion here because things move very quickly. That is the answer I can give you.

Mr VAN HOLST PELLEKAAN: Would it be your intention wherever possible to advise the public that those powers have been assumed?

The Hon. A. KOUTSANTONIS: We could make a gazettal, which is informing the public. We could publish it on a website, which is informing the public. I can put out a press release, which is informing the public. I could call some journalists or I could tweet it. I think getting the information out so that the public are aware is very important, but what is also important is speed, and speed in these situations can be quite urgent. There will be no secret directions that people will not be aware of, and the actual declaration will be in writing.

Mr VAN HOLST PELLEKAAN: This clause talks about the potential for the powers to be assumed for up to 14 days, or less if that seems appropriate. Would that just be for one incident or expected incident? Let's just say hypothetically that there is a reason why these powers would be assumed that satisfies everything in the bill, and you set a period of time. If within that period of time a different supply shortage or a different expectation of a supply shortage came up, would it require a different declaration or would it be covered in the same time period?

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: Which?

The Hon. A. KOUTSANTONIS: It would require a new declaration. I am not sure if it would be required, but we would make a new declaration because we would be assessing the new situation.

Mr VAN HOLST PELLEKAAN: These powers are quite broad-ranging and influence a whole range of people and organisations. I am thinking particularly about generators. Is there a third-party influencing power within this? In a situation where you would like to direct a generator to undertake activity—presumably generate—but that generator, to do that, requires participation and quite likely gas, do you have the power then to force that generator to purchase fuel, essentially, to fulfil your direction?

The Hon. A. KOUTSANTONIS: Again, it depends on who I am directing. If I am directing diesel generators—and there are diesel generators operating in the NEM—you would have to check to see the availability of fuel. There are no powers under this for me to get them that fuel. I could use other powers under other acts to get them that fuel. I could use direct procurement through the government to get them that fuel as Treasurer. The government can go out and procure fuel sources.

The key for us here is the ability for them to transfer that fuel source into energy, and that is the part I am interested in directing. The rest really is ancillary. I can use the Gas Act to maintain pressure, I assume. We will check that, but I assume I have powers under the Gas Act to direct gas. The Prime Minister has already talked about giving AEMO those powers through a national body, which we are considering, to make sure there is sufficient pressure in pipes to restart generators. Generators often fail to start. One of the reasons they fail is that there is insufficient pressure in the pipes leading into the generators. On average, gas-fired generators fail on one out of every four times they attempt to start.

Mr VAN HOLST PELLEKAAN: Say that again, please.

The Hon. A. KOUTSANTONIS: Gas-fired generators, on average, sometimes fail to start. I think the industry average—I could be wrong here—is one in four attempts to start fail. So, 25 per cent of the time they fail to start, and they try again and again until they start. These things are not as efficient as our brand-new aeroderivative generator, which is like a jet engine, which I am looking forward to getting my hands on. I think it is an important power to have. I am interested more in the ability to turn that fuel source into generation but, if the fuel source is scarce, you may choose not to direct that generator. You might go somewhere else and find someone else who has a source. There are a number of options available to us.

Mr VAN HOLST PELLEKAAN: If the fuel were available, would this bill give the minister the power to direct the generator to purchase the fuel in what would normally be considered very unattractive commercial conditions, or would the government acquire the fuel and essentially give it to the generator to use?

The Hon. A. KOUTSANTONIS: I would just give them a direction to generate.

Mr VAN HOLST PELLEKAAN: Regardless of the cost?

The Hon. A. KOUTSANTONIS: Yes, electricity is an essential service.

Mr VAN HOLST PELLEKAAN: Minister, new section 27C(5), which you referred to a little while ago, talks about 'avoid unduly interfering with the operation of the National Electricity Market'. You have said in your other comments that, with a focus on what is best for South Australia, if you need to interfere with the market you will interfere with the market, that you will do whatever is necessary. How does that sit with this requirement to avoid unduly interfering with the market? What does it really mean by 'unduly'? If you or I potentially just wanted whatever is best for South Australia, we might say that that's not undue at all. Somebody else might say that you are interfering with the market unduly. How would you go about trying to do what is the very best for South Australia in the way you have described you would before, and simultaneously comply with this requirement?

The Hon. A. KOUTSANTONIS: We are not bloody-minded; we are not attempting to destroy the national market. There is always more than one path to victory, always more than one path to get to where we want to go. If there are two or three paths available to us, and two of the three broadly will cut large gouges through the operation of the national market and one that is broadly consistent with the national market, which is the more conservative option and more in keeping with the national market? Why? I want investment in the National Electricity Market in South Australia.

Again, my powers are powers of last resort. This is not the idea that I would somehow start using this to say that, regardless of cost, regardless of market conditions, regardless of your market position, regardless of everything else, operate now in perpetuity forever at this rate. I am not saying you are. This is always about a last resort. The entire plan, from this legislation through to the temporary generation, through to the backup generation, through to our contracts for the battery, through to our renewable technology fund, are all about making sure that we are building a safety net for South Australia.

The contract with the battery is about us calling on it when we think there will be a time of peak demand without sufficient ability to meet that demand through the market. So we will put them out of the market using a contract that will be transparent to the market, they will pull out, they will start charging and they will dispatch what we tell them to dispatch.

The backup generator, the 250 megawatts that we are putting in, will be offering constant inertia to the system, working in that ancillary market, being able to have a fast start capability to turn on, like a jet engine, and provide services when load shedding is about to occur, and in substitute of load shedding our generation comes in place.

We are not interested in market participation. The market is here now: I voted against the creation of a private market. I am interested now in minimising our impact, but if we do intervene it will be decisive, and in times when there needs to be intervention we will choose the path that gives us the best outcome with the least inference in the market, because we want people to invest in South Australia.

Mr VAN HOLST PELLEKAAN: Part of this act makes it very clear that there will be no compensation or no right to claim against the government for any directions that are given. What advice have you had about potential sovereign risk implications to exist in current market operators, organisations that are in the market already who are now exposed to the potential that they might receive directions from which there is no compensation—having never been exposed to that risk before?

The Hon. A. KOUTSANTONIS: Then they should not manipulate the market. It is very simple. We are not talking about people selling cars. I am not trying to be disparaging of the shadow minister; I am saying that we are not talking about commodities like Coke or Pepsi or milk or bread or clothes. We are talking about essential utilities: water and electricity. Because we do not control electricity anymore, I think sovereign risk can be imposed on us by other people who operate these assets, like with the debate about Alinta.

I understand the local member of parliament's frustration at the closure of Alinta, but I was not going to have a company imposing on us their terms and conditions, no more than I would let AGL or Origin or anyone else do that—we are a sovereign state—because they are involved in the marketplace of an essential service: power. The public demand and expect the government have control of this market in emergencies and that is what we are giving them. So, I do not think it causes any sovereign risk.

This is a political question and the political response is this: the public of South Australia were outraged when the market gave us the outcome of a second unit at Pelican Point sitting idle when South Australians were load shed. It did not need to happen. The direct consequence of that is being debated today.

Mr VAN HOLST PELLEKAAN: Linking those comments back to something that you said quite a while ago, is it a fair characterisation to say that this bill is as much about having the power so that the market will operate the way that all those who have South Australian's best interests at heart would want the market to operate as it is actually about getting your hands on the levers yourself?

The Hon. A. KOUTSANTONIS: That is a very good point the shadow minister makes. These rules give us the levers. How we touch them is often in its absence. So, it is better sometimes not to touch the levers but to know that they are there. When the levers are not there, and you cannot pull them or push them, the market does its own thing. They will now know that we have these powers. Whether it is Mr Dan van Holst Pellekaan or minister Koutsantonis, they know that the parliament and its ministers will act in the sovereign interests of South Australia for our security.

I do not begrudge the market acting in their own interests because they are good little capitalists. They have a set of rules that the market gives them and they operate within those rules. If they can do things within the rules that returns a better return for their shareholders, good luck to them. Shame on us for letting it happen. Our job is to make sure that our constituents, our shareholders are looked after, and they are our constituents. So, we have these rules. I do not want to use these rules but I will have no hesitation in using them if South Australians are put at risk.

Mr VAN HOLST PELLEKAAN: Another slightly philosophical question, but directly relevant: is it a bit of a double-edged sword to have these powers? Does it expose the minister and/or the government of the day to criticism or potentially some other form of liability if the powers are not used under certain circumstances? This is all about trying to predict when there is going to be a problem, and, if the market and the participants do not respond to that prediction the way you would like them to, you do grab the levers with your own hands. Given that people are involved in this all the way through, and people are fallible, is there an exposure to the government if, in hindsight, it could be said that the powers should have been used but they were not?

The Hon. A. KOUTSANTONIS: Yes, if I do not exercise the powers in a scenario, I think the opposition will criticise me. If I exercise the powers under the same scenario, I think you will criticise me. There is massive political risk, but with political risk, elections have consequences. With those consequences we govern. I want the tools to govern, and those tools are, I am not going to let a marketplace send South Australians without power because it suits them.

So, yes, using it will give me more political risk because I will not have the refrain that you privatised our assets and it is run by a private market. I am giving myself powers to intervene. It will not work every single time, but these powers will give us a fighting chance to make sure that South Australians have a system that is on their side, not on the side of the successful purchasers of our generators.

Mr VAN HOLST PELLEKAAN: You have just highlighted a key difference between us. I did not say anything about political risk, and I did not think of political risk, but it was the first and only thing that you mentioned with regard to risk. I was thinking more about a community, or an industry, or a company—think of any large company that requires electricity to do what it does. If the powers are not used and an event occurs so that company does not have electricity, could that company or that community have any claim over the government for not having used those powers?

The Hon. A. KOUTSANTONIS: Not under the clauses of this act.

Mr VAN HOLST PELLEKAAN: I refer to clause 8, new section 27G, which is about delegation. Like many other things, that is very wide open. The minister could delegate these powers to anyone—absolutely anyone. Could you give some examples of the types of people who you would contemplate delegating those powers to if you were using them?

The Hon. A. KOUTSANTONIS: It is likely to be to another minister, or it could be to a senior departmental official.

Mr VAN HOLST PELLEKAAN: Would it be anybody outside of government?

The Hon. A. KOUTSANTONIS: No.

Mr VAN HOLST PELLEKAAN: Section 27E(3) states, 'Information classified by the Minister as confidential under this section is not liable to disclosure'. What type of information would you predict that you would classify as confidential if you were using these powers?

The Hon. A. KOUTSANTONIS: Commercial information.

Mr VAN HOLST PELLEKAAN: So, purely commercial information. That might potentially be some operational information if there was a commercially sensitive element to it, but purely commercial information?

The Hon. A. KOUTSANTONIS: Generators have costs. They do not want their competitors to know what their costs of generation are. I would keep that confidential.

Clause passed.

Clause 9.

Mr VAN HOLST PELLEKAAN: My question is in relation to the dollar rates for the penalties. I understand that is always a difficult issue. How do you set those? I did a really quick calculation, and I am looking at section 28A(1), which contains a $250,000 maximum penalty for a person who fails to comply with the direction of the minister. If the market price was $14,000 then $250,000 equates to 18 megawatts, if I have done my sums correctly. That is not a lot in terms of potentially trying to direct a generator to do something. I understand this is largely about trying to get generators into the market, it is not about trying to stop them from doing it. How are these figures determined?

The Hon. A. KOUTSANTONIS: Most of these companies are listed on the ASX, and they will obey Australian laws. There are not many companies in Australia, or any companies that I know, that would deliberately break the law or a lawful instruction. So, the fine really is irrelevant, it is just there because we have the ability to charge them.

More importantly, some of these offences are summary or indictable. So, if the system in this country gets to the point where Australian companies can wilfully break the law and pay the fine, that is not how this country operates and it is not how our corporate sector operates. The Australian corporate culture is not like that. The ASX and the corporations laws make sure that Australian companies operating here operate within the laws of this land, and they will take lawful instructions.

Clause passed.

Remaining clauses (10 and 11) and title passed.

Bill reported without amendment.

Third Reading

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (18:29): I move:

That this bill be now read a third time.

Mr VAN HOLST PELLEKAAN (Stuart) (18:30): As everybody in this house would know, it is extraordinarily frustrating for the opposition to have a bill come with such speed and lack of warning. I know that the government would have known about this before 11 o'clock. The minister has explained how urgent it is to get this through, and I accept that explanation. I said right at the beginning of this debate, shortly after 11 on Tuesday morning, that we would not oppose the passing of this bill in this place but that we would take the opportunity to do as much homework as possible between the houses and return with an opposition position in the other chamber.

I have absolutely no desire to thwart the passage of any legislation that will make things better for South Australia and South Australians. I am learning as much as I possibly can about everything to do with energy and electricity, and I take these matters very seriously. The opposition will not make this difficult for any reason whatsoever. If the opposition decides that there are flaws in it and that there are reasons why it needs to be changed or objected to, then that will be the case, but there will be no other reason to prevent or thwart the passage of this bill.

Bill read a third time and passed.