Bills

Statutes Amendment (National Energy Laws) (Penalties and Enforcement) Bill

Second Reading

Adjourned debate on second reading (resumed on motion).

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (16:55): I will resume where I left off when time ran out before the lunch break. At that point in time, I was taking the opportunity to close the debate by addressing comments made during the debate. Specifically, I was dealing with comments made by the member for Kaurna. He made an incorrect assertion that the government is privatising the former government's generators.

The reality is that the former government committed over $600 million of taxpayers' money to purchase diesel generators, to set them up in two locations—at Elizabeth and Lonsdale—to run them on diesel at the same time that the former government was trying to have people believe that it was moving away from fossil fuels. They were set up so that they could only be operated at times of energy emergency and at no other time. They were not used by the previous government. They were purchased, there was a maintenance and operating contract put in place, they were installed, they were commissioned, but they were not used.

I do not say for a second that it would not be handy to have generators available for use at times of energy emergency—yes, of course it would be. However, it is completely inaccurate for the member for Kaurna to have suggested that what our government has done with them is inappropriate in any way whatsoever.

Our government has not privatised them. We have leased them to two separate companies. Part of that lease agreement is that they will be relocated and run on gas rather than on diesel—so much cleaner and a much better operation in many ways. We have entered into agreements with companies that already have renewable and grid-scale storage assets, so to complement it with new, modern fast-start gas generation is exactly the type of generation portfolio that our government believes is ideal for the South Australian market.

One company that sells on the wholesale market and sometimes perhaps to itself, if it chooses to, so that it can then on-retail, but sells essentially as a generator and has the opportunity to maximise the output from renewable energies in storage and back it up from gas-generated, fast-start quickly in two or three minutes in and out of the market using less gas when operating, is ideal. That combination allows a company like that then to go and acquire contracts to sell to customers because they are then reliant on not only the sun and/or the wind and the storage. They can then commit to deliver electricity under all circumstances. So that is absolutely a very positive development. We also managed to get back for the taxpayer a huge amount of the money that the previous government committed for generators that it was not going to use.

In addition, and very importantly—because as I have said before, I do accept that it is beneficial to have generation available at times of energy emergency—these generators, which are being leased to be used throughout the year whenever appropriate, will also still be available at times of energy emergency.

The same generators that would have been there ready to run for the previous government on diesel will now be there ready to run for South Australians, under the current government, on gas if needed under an energy emergency. So I completely refute the words of the member for Kaurna in that respect, as do all serious energy industry commentators.

The interconnector was another topic the member for Kaurna raised, a very important topic. I do not think he is right across the way in which an interconnector can be brought into the market, but that is not a criticism because it is actually pretty complicated. There is probably nobody who knows every single part of that process. ElectraNet, on behalf of ElectraNet and TransGrid, is putting forward a proposal to the Australian Energy Regulator—the federal independent body that regulates the energy industry—to have an interconnector built between South Australia and New South Wales. That would be incredibly beneficial in many ways.

The opposition has regularly and falsely characterised this as just an extension cord. There no doubt will be times when we will be very pleased to bring some electricity into South Australia through this interconnector to supplement the one that is already in place with Victoria but, far more than that, this interconnector will allow additional generation to be built in South Australia. Much of it will be exported into New South Wales. We will export far, far more renewable energy from South Australia through this interconnector into New South Wales than we will ever bring into South Australia from New South Wales.

All members here will know from comments made in question time yesterday that there are investors signed up, ready to go, just waiting for the interconnector to be committed. This will be very positive for South Australia in many ways. It will attract new investment into new generation in South Australia. It will allow us to have a greater volume and penetration of renewable energy. It will allow New South Wales to receive more renewable energy from South Australia. It will support New South Wales as it works through its retirement of fossil fuel generation, which is coming. It will help them from a security perspective, and it will help them from an emissions perspective.

This is very important for essentially the NEM. The member for Kaurna said that the interconnector would end up preventing generation in South Australia, meaning that we have less generation in South Australia. The reality is that it is actually the exact opposite, and all sensible energy industry commentators say exactly the same thing: the interconnector will attract more generation into South Australia.

The last thing that the member for Kaurna inaccurately commented on was with regard to household solar curtailment. I have not gone back over the Hansard, so I am not going to quote this, but essentially he said that the South Australian government is just going to turn off everybody's solar and make sure that everybody who has solar will be curtailed, etc. It is just base scaremongering.

The reality is that AEMO has recommended to the South Australian government that there are times when it will be necessary for some of the rooftop solar generation in South Australia to be curtailed from feeding electricity back into the grid because we are at a risk of having, in the not too distant future, more electricity going into the grid from solar energy than we actually need to take out of the grid for all consumers' needs aggregated. If that is allowed to happen, the system would black out.

We are talking about a few hours at a time a few times a year for some of the rooftop solar generators in South Australia, and in fact it will affect mostly those who acquire solar rooftop generation from now on. It will affect others as they do retrofits and things like that. It is important that I put that on the record, Deputy Speaker, so thank you for the opportunity.

Coming back to a few last comments before we go into the committee stage, as the shadow minister has indicated he would like to do, this is a pretty straightforward bill in principle. This is about saying that the penalties to the industry—electricity and gas, in fact—have really not changed much, if at all, since 1996, so 25 years ago roughly, and it is about time that we updated those penalties. That is essentially what is going on.

There are some updates with regard to a system of tiering. There are some updates with regard to identifying what the penalty bans will be and, more specifically, the maximum penalties in those bans. There is some updating with regard to what types of offences of existing rules and regulations would be dealt with by different tiers. There is also the opportunity for civil penalties and other court-ordered directions to come into force if seen appropriate by the Australian Energy Regulator when identifying breaches and handing out penalties.

Finally, I would like to say that I think the Minister for Trade and Investment gave an outstanding outline of exactly what is going on. He took his full 20 minutes. He stepped through very well the research that he did very thoroughly. If the shadow minister had the opportunity to hear everything that the Minister for Trade and Investment contributed, then he would be certainly very well informed. I will certainly do everything I can to inform him, to the best of my ability and that of my adviser, when he asks questions in the committee stage.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. A. KOUTSANTONIS: I have just a general question to the minister. I note that Treasurer Frydenberg (former energy minister Frydenberg) took to the election a policy of a big stick approach to energy retailers, the wholesale market and the gas market. This has been written about on numerous occasions. I ask the minister: are any of the changes we are considering today as a consequence of that policy change and process that the commonwealth Treasurer and commonwealth energy minister and the COAG Energy Council went through, and are these not subordinate but supportive of measures made in the federal parliament?

The Hon. D.C. VAN HOLST PELLEKAAN: The short answer is no. The medium-length answer is that this is something that has been coming for 10 or so years, well before the set of rules, colloquially described as the 'big stick' legislation, were dreamt of, to the best of my knowledge. I believe it was energy minister Taylor who took it to the election, rather than the former minister, because I think former minister Frydenberg was the Treasurer going to the last election, but I may have that wrong.

This is work that has been undertaken at COAG's request under Liberal and Labor, state and federal. It really has absolutely nothing to do with that whatsoever; it is a bringing up to current day value of penalties and also an improvement and adjustment in the types of penalties that are available.

The Hon. A. KOUTSANTONIS: Thank you very much for that answer. I am just quoting a press release from minister Frydenberg, where he said that they had been reduced and returned to parliament as Treasurer. That is the only reason I mention that. Just broadly, if I can, under the title what is the ongoing future for the COAG Energy Council, given the new national cabinet role? Can the minister give the committee an overview of how it will work going forward? Will we still maintain the COAG Energy Council, or will it be a national cabinet process going forward?

The Hon. D.C. VAN HOLST PELLEKAAN: I will help. It is not really germane to the bill, but it might help you with regard to questions that you want to ask that are germane to the bill. First of all, I share my thoughts. I do not speak on behalf of the South Australian government or the COAG Energy Council or the federal government or any other state, but what is widely known is that when the premiers and the Prime Minister started meeting, initially in response to the COVID emergency, they, we understand, believed that this was working well and it might be something that then they would want to do more broadly to deal with other issues.

Then other portfolio areas started to come together in the same format, largely again under the broad umbrella of the COVID urgency that was needed at the time. Ministers, federal and state, started meeting in their portfolios through audiovisual means rather than face to face to say, 'For resources, what does COVID mean to us? For energy, what does COVID mean to us?' That was the start of it, and I believe that at what would broadly be called the COAG level, or the council level if you like, it is still being worked out whether that is the right way to continue for each portfolio.

I think there is a strong desire from federal government and states, Liberal and Labor, to see whether or not this is a better way of working than the more traditional COAG style, but I do not believe that any final decisions have been made about that. Certainly from an energy perspective, I can share that ministers have all been keen to make sure that we have face-to-face meetings in person as well as face to face through digital means that we have been having at the moment.

They are working very well, and they are able to come together with far less fuss and fewer resources and more speed. But ministers have certainly said, 'We think it's important we do get together face to face in person as well,' and how that transforms from here is yet to be seen.

The Hon. A. KOUTSANTONIS: Does the COAG Energy Council still exist, or has it been terminated?

The Hon. D.C. VAN HOLST PELLEKAAN: To the best of my knowledge, it still exists, and the way that we have been meeting more recently is in addition to that.

Clause passed.

Clause 2.

The Hon. A. KOUTSANTONIS: Regarding commencement, when does the minister anticipate this act coming into effect?

The Hon. D.C. VAN HOLST PELLEKAAN: Member for West Torrens, I have been advised that it will go through the normal process of proclamation and assent. Some of the regulations have been finalised, so some of them could be brought into effect quite quickly. Some of them are still being consulted on and still being developed. I apologise that I do not have a date or a firm answer for you, but I guess the short version is: the normal way. It is not urgently pressing that it happens at a particular point in time, but we do not want to drag our feet either, so the sooner the better.

The Hon. A. KOUTSANTONIS: I think that is a perfectly reasonable response to the question that I asked. The reason I ask about timing is about consultation. I do not want to jump around and do the committee a disservice, but it seems to me that, given that consultation is still underway, the legislation passing and having a date set forward for assent assists people in preparing for the introduction of change.

As you said in your remarks, it has been quite a while since there has been a refreshment of this act in terms of penalties. There are large definitional changes for who it applies to, so I would imagine you could give the industry some certainty to know whether we are talking about the next six months, the next 12 months or the next 24 months. I am not trying to be difficult; I am just trying to ask for a range, if you could give it to me.

The Hon. D.C. VAN HOLST PELLEKAAN: Yes, I certainly understand it would be nice to know if it was six months, 12 months or 24 months. The AER is understandably keen to get it started as quickly as possibly. Certainly, from a South Australian government perspective and also with responsibilities as lead legislator, we are keen to get it happening as soon as possible.

Parts of it could come into effect at different times from others and connect what I have just said to—part of the statement in your question, member for West Torrens, was it would help people to prepare, to get ready and to know when it was happening with regard to their behaviour. The reality is that none of the things that could be considered breaches are changing through this act, so what is right to do and what is wrong to do under all the rules is not changing. The penalties are changing.

If, hypothetically, a company is doing everything to the best of its ability, regardless of the penalties, the time that it comes in should not change much in terms of their actions and the way it goes about things. If, hypothetically, a company is perhaps not doing everything it could possibly do to make sure that it makes no breaches and it is waiting to see, 'Well, maybe we'll tighten up our operation a bit when the penalties get stiffer,' that would be a shame if, hypothetically, there were companies operating in that way but, nonetheless, they should not be breaching, regardless of the penalties.

We will bring the changes in as quickly as possible. I am not avoiding your question; there is no answer. Some of it could come in very quickly, so the act can come into effect, the regulations can follow, all the penalties that currently exist will still exist and they could methodically be changed as the bits of consultation are completed and the regulations are completed across the whole batch.

The Hon. A. KOUTSANTONIS: Again, that is a perfectly reasonable answer. I am a little bit confused, though, about your answer. My understanding is that you cannot enact parts of the act. I completely accept that you will do the regulations as you go along, and that is a perfectly reasonable and sensible thing to do, but the question I have asked is not when the regulations will come into effect but when will the act be enacted. Without again pre-empting any debate on any clauses, there are clauses here that define annual turnover, that define what a listed corporation is and that change those definitions.

While I accept what the minister is saying is perfectly sensible, if you are in the system now you should be behaving and be captured by these penalties, but there are definitional changes in here, including turnover, which changes the penalty threshold, I imagine, which is what the act is attempting to do.

The reason I ask this is not so much about the regulations that are out to consultation. I imagine the regulations would be about the way in which the penalties are implemented and the thresholds to meet them, but the core body of the act would be: when is it in place? My final question here is: do you expect the act to be assented and the regulations decided later, or will you finish consulting on the regulations before you assent to the act, because I think that is a fundamental difference?

The Hon. D.C. VAN HOLST PELLEKAAN: My apologies if I was not clear. The act will be proclaimed as quickly as possible, and then the regulations that follow it and the act will be all at once. The effect of the on-the-ground, if you like, changes will be rolled out as quickly as possible, but they will quite likely come in parts. However, the act itself will all come into effect at one point in time.

Clause passed.

Clause 3.

The Hon. A. KOUTSANTONIS: I am a bit confused with paragraph (c), which provides:

(c) a provision in Part 4 amends the National Gas Law set out in the Schedule to the National Gas (South Australia) Act...

Could you please explain to the committee what that change does? Is it just a definitional change?

The Hon. D.C. VAN HOLST PELLEKAAN: Clause 3(c), I am advised, says that everything in part 4 of the bill we are discussing at the moment is what amends the National Gas Law, keeping in mind this bill amends three sets.

The Hon. A. KOUTSANTONIS: That is the part that I am concerned about. Is there any change within the body of this amendment bill that changes any of the vesting powers or the conferral of the function of powers on a state minister?

The Hon. D.C. VAN HOLST PELLEKAAN: I am advised that there is no relinquishment or gain of powers for the state minister. This is essentially powers for the Australian Energy Regulator.

The Hon. A. Koutsantonis: I will take it on notice between the houses. If you find something, I assume you will tell me.

Clause passed.

Clause 4.

The Hon. A. KOUTSANTONIS: This clause changes some definitions. It provides:

annual turnover has the same meaning as in section 2(1) of Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth;

If your opening statement to me was that these changes have no impact on the 'big stick' commonwealth changes that amended the Competition and Consumer Act to give the ACCC power to intervene and fine within the electricity market, why are we adopting their definitions for annual turnover? Is it just a harmonisation measure, or does this confer any powers on the ACCC to act using this act?

The Hon. D.C. VAN HOLST PELLEKAAN: No, shadow minister, I do not think you have anything to fear in this regard. There is no connection. It is just like some things refer to the ABS figures. This is just identifying a measure of turnover because, as you would have seen, tier 1 penalties at a maximum could be $10 million or 10 per cent of turnover or three times the financial gain that an organisation might have received by the breach. So it is just a definition of 'turnover'. It has no other connection to any other use of national consumer law that I am aware of.

The Hon. A. KOUTSANTONIS: Clause 4(3), amending section 2(1), inserts the meaning of 'listed corporation'. It provides:

listed corporation has the meaning given by section 9 of the Corporations Act 2001 of the Commonwealth;

I assume there is already a provision within the act, which I tried to find earlier, talking about listed corporations being liable to penalties. Is there now a difference that you are trying to fix? Could you explain the reasoning why you want to insert this definition rather than leave the definition as it was?

The Hon. D.C. VAN HOLST PELLEKAAN: To the best of my knowledge, it is really just another way of having a definition and perhaps broadening out the definition of what types of organisations might be liable to these penalties if they do a breach. My adviser has said that there is some research to do to give you a very specific answer to your question, and I will get that for you between the houses.

The Hon. A. KOUTSANTONIS: This is not a conspiracy theory. I just assumed listed corporations were already subject to the National Electricity Law, so I am surprised that we have to change a definition of 'listed corporation'. I am sure there is a perfectly good reason for it. I could have the answer between the houses. I do want to pose a question to you in this section. There are a number of players in the market, I imagine, especially the wholesale market and the retail market, that are not listed. Do penalties still apply for them if they are licensed, in another provision? Or is this simply for only listed corporations?

The Hon. D.C. VAN HOLST PELLEKAAN: I will give you the same style answer as I did before. No, it is not so much a list of individual organisations. It applies to body corporates, it applies to individuals, it applies to listed corporations, liable entities. Again, just like the last time, I am advised that some detailed research will be done so that I can get a more specific answer to you between the houses.

Let me finish by saying that the intent is to capture any type of organisation or person who might need to be captured in this. It is actually about trying to make sure that the range of definitions captures everybody so that we do not accidentally exclude anybody, which was the risk you raised in your question.

Clause passed.

Clause 5 passed.

Clause 6.

The Hon. A. KOUTSANTONIS: I note that in this section, all the penalties are prescribed including dollar amounts. I was just wondering why they are not subject to regulatory change to be increased, rather than to come back to the parliament every time we want to increase these fines of penalties.

The Hon. D.C. VAN HOLST PELLEKAAN: Member for West Torrens, if you think about where we were in 1996—flat fees left. We are trying to bring them up to a current-day standard for a range of reasons, contemplating inflation, but also a more modern understanding of the energy system. Another one of the things we are doing is the specific dollar amounts are indexed through this amendment bill. The new act will have indexes.

If my memory serves me correctly, the next time they are indexed will be 1 July 2023, and then every three years after that. Those fixed dollar amounts, which are not automatic penalties in their own right—some of them might be maximum, some of them might be ranges, etc.—will be indexed with inflation from these new base rates every three years.

The Hon. A. KOUTSANTONIS: Again, without wanting to disrupt the committee or enter into a debate with the minister on this, obviously when penalties are introduced into a bill they are indexed; there is a definition for indexing. I thought the purpose of the COAG change was to allow a freshening up and to allow, by regulation, fees and penalties to be increased annually. If there is an indexing process, that is fine; that is the decision of the COAG and the opposition supports it.

The part that I am interested in is the breach by a natural person. There are different civil penalties for the breach by a natural person depending on the circumstances of the corporation or entity that they are in. Could the minister explain why, under new section 2AB(1)(a) the fine for a natural person is $33,900 but in the cause of new section 2AB(1)(b) it says:

(b) in the case of a breach of a civil penalty provision prescribed by the Regulations for the purposes of this paragraph—

(i) if the breach is by a natural person—

(A) an amount not exceeding $287 000…

I am assuming the regulations will specify a different type of entity that person is employed with, or there is a turnover difference. Could you explain that to the committee?

The Hon. D.C. VAN HOLST PELLEKAAN: I have not mentioned it, but one of the key foundations of the set of changes we are trying to make is that not only are we updating the penalties to a current-day value but there is also a range of penalties, and I did mention that before. We are getting tier 1, tier 2 and tier 3 penalties.

For example, for the highest tier breach, the maximum penalty is whichever is the greater: $10 million, 10 per cent of the organisation's turnover or three times the gain the company made via the breach. For tier 2 the maximum penalty is $1.435 million and for tier 3 the maximum penalty is $170,000. Having said that, there is also a tier structure for natural persons. That is why those rates are different. It is not that the natural person is necessarily different, but because that person would be getting fined for a tier 1 or a tier 2 or a tier 3 offence.

Clause passed.

Clauses 7 and 8 passed.

Clause 9.

The Hon. A. KOUTSANTONIS: Clause 9 amends 'Obstruction of person authorised to enter'. The act provides:

A person must not, without reasonable excuse, obstruct or hinder an authorised person in the exercise of power under a search warrant under this division.

It just deletes the penalty and provisions and substitutes it with the penalties.

Was consideration given to giving greater powers to officers to enter remote sites? There was a case that came to my attention where people needed to enter a site to execute a search. It was unstaffed and they could not enter. The act was silent on it. I am just wondering if it is a problem or whether the department and council see no issue with that. If they see no issue with that, I will happily support it and move on.

The Hon. D.C. VAN HOLST PELLEKAAN: For clarification, a remote or unmanned site?

The Hon. A. KOUTSANTONIS: Unstaffed.

The Hon. D.C. VAN HOLST PELLEKAAN: I am advised that is not something that came up in the consultation at any stage. If anything emerges that I am not aware of or that my adviser is not aware of right now, we will let you know between the houses.

Clause passed.

Clause 10.

The Hon. A. KOUTSANTONIS: I have always had a problem with this power that the AER has. The AER is not an independent statutory office. The AER commission are public servants employed by the commonwealth Treasury. They are not necessarily like ESCOSA or any other body that are independent and self-regulate. They charge a fee and are regulated by the government but, by and large, they are independent and can act on instruction.

We are giving public servants extraordinary powers of compulsion, maintaining serious powers of compulsion, under this clause. I have always been a believer that the AER should be separated from the Department of Treasury and Finance and should be a standalone body, much like ESCOSA. It is not.

Does the minister have any concerns about the increasing powers given to this body—which go through nearly four pages of amendments—a body that is basically appointed by the Treasurer? Would you like to add anything on that?

The Hon. D.C. VAN HOLST PELLEKAAN: Just give me a moment, please. Apparently some messages have to be dealt with as soon as possible. My apologies, the answer was going to take a little while.

Progress reported; committee to sit again.