NATIONAL ELECTRICITY (SOUTH AUSTRALIA) (NATIONAL ELECTRICITY LAW—MISCELLANEOUS AMENDMENTS) AMENDMENT BILL

Introduction and First Reading

Received from the House of Assembly and read a first time.

Second Reading

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (18:00): I move:

That this bill be now read a second time.

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

Leave granted.

Introduction

The Government is delivering on a key Council of Australian Government's energy commitment through legislation to improve the operation of the National Electricity Market.

The National Electricity (South Australia) (National Electricity Law—Miscellaneous Amendments) Amendment Bill 2007 will make important reforms to the National Electricity Law. This Bill will streamline the regulation of electricity distribution networks by allowing a single regulator, the Australian Energy Regulator, to regulate all distribution networks in the National Electricity Market. This together with earlier reforms to transmission network regulation will ensure that the National Electricity Market has a single national regulatory framework for electricity networks.

The regulatory framework established by this Bill provides the appropriate balance between providing certainty for network businesses while providing avenues for the protection of consumers.

The Bill introduces important changes to the Australian Energy Regulator's powers including a new set of revenue and pricing principles that will guide the regulator in making regulatory decisions, clarify its information gathering powers in order for it to effectively undertake its functions, and introduce an element of transparency through the ability for the regulator to prepare and publish reports on the performance of regulated businesses. New merits review provisions have also been introduced to allow the review of the Australian Energy Regulator's decisions by regulated businesses and users and consumers, providing the appropriate checks and balances on the decision making process.

These reforms will also streamline the National Electricity Law's rule change process by improving the Australian Energy Market Commission's ability to handle and manage rule change proposal submitted by stakeholders while ensuring that the rule change process is still accessible to all relevant stakeholders.

In short, this Bill will strengthen and improve the quality, timeliness and national character of the economic regulation of the National Electricity Market. In turn, this should lower the cost and complexity of regulation facing investors, enhance regulatory certainty and lower barriers to competition.

Background

As Honourable Members will be aware, South Australia is the lead legislator for the National Electricity Law.

The existing co operative scheme for electricity market regulation came into operation in December 1998 and was amended in July 2005 to implement important governance reforms to the National Electricity Market. The lead legislation is the National Electricity (South Australia) Act 1996. The current National Electricity Law is a schedule to this Act, and that Law, together with the Regulations and Rules made under the National Electricity (South Australia) Act are applied by the other National Electricity Market jurisdictions, that is, New South Wales, Victoria, Queensland, Tasmania and the Australian Capital Territory, by way of Application Acts in each of those jurisdictions. The Commonwealth is also a participating jurisdiction through the application of the regime to the offshore area.

As Honourable Members will be aware, South Australia is participating in the reform of the regulatory framework of Australia's energy markets in response to the Council of Australian Government's Energy Market Review of 2002.

In June 2004, the Australian Energy Market Agreement was signed by all first Ministers, committing the Commonwealth, State and Territory Governments to establish and maintain the new national energy market framework. This new framework saw the introduction of the National Electricity (South Australia) Amendment Bill 2005 into the South Australian Parliament. As you may recall the 2005 Bill introduced important governance reforms to the National Electricity Market, through separating high level policy direction, rule making and market development, and economic regulation and enforcement.

As part of those reforms, the Australian Energy Market Commission and the Australian Energy Regulator were established. The two new statutory bodies were initially given responsibility for electricity wholesale and transmission regulation in the National Electricity Market jurisdictions. The 2005 Bill also enshrined the policy making role of the Ministerial Council on Energy in the context of the National Electricity Market.

In June 2006, the Australian Energy Market Agreement was amended and signed by all first Ministers, committing the Commonwealth, State and Territory Governments to establish a consistent framework for energy access and specific reforms to the distribution and retail framework. Aspects of these reforms are the subject matter of this Bill.

As part of that commitment, an expert panel was appointed in December 2005 to provide advice on a national framework for energy access pricing. The Panel presented their report, the Expert Panel Report on Energy Access Pricing, to the Ministerial Council on Energy in April 2006. The Ministerial Council on Energy responded to the Expert Panel Report by announcing a set of policy decisions for its major energy market reform program. These policy decisions were publicly released in November 2006.

A subsequent legislative package will make further amendments to the National Electricity Law to regulate the retail electricity market, other than retail prices, and the non economic aspects of distribution.

New regulatory arrangements for distribution

This Bill reforms the regulatory framework governing the National Electricity Market by conferring the economic regulation of electricity distribution networks on the new national institutions established in July 2005—the Australian Energy Market Commission and the Australian Energy Regulator. The Bill also recognises appropriate transitioning from jurisdictional arrangements to a national framework, maintaining the South Australian tariff equalisation arrangements, and maintaining obligations relevant to the sale and lease of the electricity distribution network in South Australia. I will elaborate on these matters further below.

The Australian Energy Market Commission and the Australian Energy Regulator's role will extend to include the regulation of gas transmission pipelines and gas distribution networks for all relevant jurisdictions. The broad framework outlined in this Bill will be largely replicated in the new National Gas Law which will be Introduced to Parliament in the coming months. These pieces of legislation aim to ensure consistent national economic regulation of electricity and gas networks.

Also subject to separate legislation is the establishment of a national framework for the non price regulation of electricity and gas distribution and retail, which is expected to be implemented during 2008 subject to jurisdictional agreement on that framework.

While a number of provisions of the National Electricity Law have been retained, albeit with some amendments, the new regulatory arrangements have required the inclusion of a range of amendments and additional provisions which I will outline. In addition, the National Electricity Rules will also be amended to provide for a national framework for electricity distribution revenue and pricing regulation.

South Australian arrangements

This Bill contains provisions that preserve important elements of the current South Australian regulatory scheme.

There are a suite of pricing arrangements which together serve to preserve the scheme of state wide pricing for distribution services for all small customers. These provisions are currently located in the South Australian legislation and will be continued to ensure that this important principle continues to operate under the national framework.

The national framework also maintains existing obligations arising from the South Australian Electricity Pricing Order. These obligations formed part of the foundation for the privatisation of the electricity distribution network in South Australia. The recognition of these arrangements ensures that, in accordance with the terms of the Electricity Pricing Order, the regulatory guidance established as part of the privatisation process is continued.

The amendments to the National Electricity Rules include appropriate transitional provisions to manage the transfer from the South Australian jurisdictional arrangements to the national framework. I will outline these matters below.

Consultation

The Amendments to the National Electricity Law in this Bill have been subject to extensive consultation with industry participants and other stakeholders that began with the Expert Report in 2005. As part of the preparation of their report, the Expert Panel encouraged stakeholder participation in its review. To this end, the opportunity was provided for stakeholders to make written submissions on matters arising from the Panel's terms of reference. Stakeholders also had the opportunity to make written submissions on the Panel's Draft Report and to meet individually with the Panel after the second round of submissions had been considered.

Further consultation has been undertaken on the implementation of the recommendations contained in the Expert Panel Report. Two exposure drafts of the National Electricity Law were made available to the public in January and August of 2007 and an exposure draft of amendments to the National Electricity Rules was consulted on in April 2007.

The first exposure draft of the National Electricity Law was released for a six week stakeholder consultation period. A public forum on the exposure draft was also conducted. This forum explained the response to the Expert Panel recommendations, provided information on the content of the National Electricity Law, and provided stakeholders with an opportunity to comment and seek clarification on the key aspects of the legislation. Written stakeholder submissions were also invited on the exposure draft of the National Electricity Law. In total, 29 submissions were received in response to the exposure draft.

The second round of consultation on the National Electricity Law involved round table discussion with stakeholders on matters of workability. We take this opportunity to thank all parties for their valuable contributions to these important reforms. Stakeholder comments on the exposure drafts were a valuable contribution towards ensuring the effectiveness of this Bill.

National Electricity Objective

This Bill incorporates an amended version of the National Electricity Market Objective from the existing National Electricity Law. It is now known as the National Electricity Objective and will be mirrored in the National Gas Law.

The alignment between the objectives of the gas and electricity regime is an important foundation for the regime. A single consistent objective across gas and electricity will increase the prospect that the regimes remain closely aligned over the long term, even in light of the capacity in both regimes for interested parties to make applications to changes rules through the Australian Energy Market Commission. For this reason, the objectives clause is drafted as an objective of the law, rather than an objective of the market.

The National Electricity Objective is to promote efficient investment in, and the efficient use of, electricity services for the long term interests of consumers of electricity with respect to price, quality, reliability and security of supply of electricity, and the safety, reliability and security of the national electricity system.

Just as the Australian Energy Market Commission must test changes against the objective of the law when making rules, the Australian Energy Regulator must perform its functions in a manner that will or is likely to contribute to achieving the objective of the law.

It is important to note that the National Electricity Objective does not extend to broader social and environmental objectives. The purpose of the National Electricity Law is to establish a framework to ensure the efficient operation of the National Electricity Market, efficient investment, and the effective regulation of electricity networks. As previously noted, the National Electricity Objective also guides the Australian Energy Market Commission and the Australian Energy Regulator in performing their functions. This should be guided by an objective of efficiency that is in the long term interest of consumers. Environmental and social objectives are better dealt with in other legislative instruments and policies which sit outside the National Electricity Law.

Form of Regulation Factors

Determining what services are to be regulated requires an assessment of the potential for market power to be exploited by a service provider.

In order to ensure that the appropriate regulatory framework is applied, this Bill creates new provisions for the recognition of two available forms of regulation: direct controlled network services and negotiated network services. Where electricity network services are neither classified by the Australian Energy Regulator as direct controlled network services or negotiated network services, the network service is not subject to economic regulation.

A direct controlled network service is a service for which the price is fixed by the Australian Energy Regulator in a revenue or network pricing determination. The National Electricity Law will provide the framework for either allowing the National Electricity Rules, via the Australian Energy Market Commission rule change process, to specify particular services as controlled by a price control mechanism, or allow the Australian Energy Regulator to determine the classification of services in a regulatory determination. Both decision makers are guided by the form of regulation factors.

Negotiated network services are those transmission and distribution services regulated under a negotiate/arbitrate regime. These services are not subject to upfront price control, but a binding arbitration mechanism is provided for the resolution of disputes about price and non price aspects of access between the relevant parties.

The 'form of regulation factors' guide the assessment of the form of regulation to apply to the electricity network service (that is, whether it is appropriately classified as a direct controlled network service, or a negotiated network service). This framework effectively implements the Expert Panel recommendations.

The first of these form of regulation factors assesses the presence and extent of any barriers to entry in a market for electricity network services. Many of the services provided by electricity networks can be characterised as natural monopolies and need to be regulated to ensure that consumers' interests are met.

Another factor that predisposes electricity networks towards natural monopoly status is the interdependent nature of network services. This means that it is usually more efficient to have one service provider provide an electricity network service to a given geographical area. Additionally it may be more efficient to have the same company provide other network services to the same geographical area.

The second and third form of regulation factors require that the Australian Energy Market Commission and the Australian Energy Regulator identify these interdependencies and network externalities as potential sources of market power.

The fourth form of regulation factor looks to consider the extent to which market power possessed by the owner, operator or controller of a transmission or distribution network by which services to be subject to regulation are provided is likely to be mitigated by countervailing market power possessed by the users of those services. This factor allows the Australian Energy Regulator or Australian Energy Market Commission to apply a lighter form of regulation to a network that is subject to this type of countervailing market power from a major user.

Another factor that may cause the Australian Energy Regulator or Australian Energy Market Commission to consider a lighter form of regulation, is the degree to which electricity network services and the power that they provide can be substituted for other products. For example, embedded generation installed at a customers premises may be economic for some classes of customers and therefore provide effective competition to electricity network operators. When available, natural gas may also compete with electricity for some or all of a customer's needs. The fifth and sixth form of regulation factors allow the Australian Energy Market Commission and Australian Energy Regulator to consider the presence and extent of substitutions for users to be provided with the particular service.

Finally, customers can only negotiate with service providers when they have adequate information, to determine whether or not payments required of them accurately reflect the efficient cost of providing the service. In a competitive market the efficient cost is revealed as competing providers seek to out bid each other down to the point where they are covering their costs plus a normal profit. Where a business is a natural monopoly this does not occur and it can be difficult for consumers and regulators to access information from natural monopoly service providers. The final form of regulation factor allows the Australian Energy Regulator and Australian Energy Market Commission to consider the extent to which there is adequate information available to users, to enable them to negotiate with the service provider on an informed basis.

Revenue and Pricing Principles

A key feature of the amended National Electricity Law is the inclusion of six principles that guide the development of the framework for the regulation of electricity networks. These revenue and pricing principles will guide the Australian Energy Market Commission in making the rules governing the regulation of electricity transmission and distribution networks, and the Australian Energy Regulator when making regulatory transmission or distribution determinations.

These principles are fundamental to ensuring that the Ministerial Council on Energy's intention of enhancing efficiency in the National Electricity Market is achieved. To provide certainty to the industry and consumers, this Bill will apply the principles through the National Electricity Law rather than the National Electricity Rules, where their predecessors were found. The aim of the pricing principles is to maintain a framework for efficient network investment irrespective of the evolution of the regulatory regime (via changes to the National Electricity Rules) and the industry. It is proposed that these revenue and pricing principles will be replicated in the new National Gas Law to ensure a consistent framework for energy access pricing.

The first of these principles requires that a regulated network provider should be provided with a reasonable opportunity to recover at least the efficient costs the operator incurs in providing services, complying with a regulatory obligation or requirement or making a regulatory payment. At least efficient cost recovery is vital if service providers are to maintain their electricity networks in order to meet community expectations of the service levels they receive, and to undertake further investment to serve Australia's growing population.

The Bill also defines the meaning of a regulatory obligation or instrument and the meaning of a regulatory payment.

A regulatory obligation or requirement is defined to cover obligations or a requirement imposed on network service providers through participating jurisdictional instruments and also recognises obligations and requirements imposed by the National Electricity Law and Rules. The National Electricity Law reflects the policy intent that an order of compensation under an Act or an obligation or requirement to pay a fine, penalty or compensation for breaches of service standard or reliability standards is not included as a regulatory obligation or requirement.

A regulatory payment is defined as a sum that a regulated network service provider has been required or allowed to make to a network user or end user for a breach of a reliability or service standards, such as guaranteed service level payments, to the extent they are efficient.

Equally vital to ensure that Australia's current and future electricity needs are met, is that regulators can provide service providers with incentives to maintain and improve the services.

The second principle requires that service providers should be provided with effective incentives in order to promote the economically efficient investment in and provision and use of network services.

The third principle requires that regulators have regard to the regulatory asset base adopted in any previous determination conducted by the Australian Energy Regulator or jurisdictional regulators, or as specified in the rules. This principle is important to ensure that the regulatory framework recognises the long lived nature of electricity network assets by recognising how sunk assets have been considered previously in rules or previous regulatory determinations.

It is also important that risks are appropriately compensated for when determining efficient revenues and prices. The fourth principle ensures this by requiring that prices and charges for the provision of regulated network services, allow for a return commensurate with the regulatory and commercial risks involved in providing the service to which that price or charge relates.

The fifth principle explicitly requires the Australian Energy Regulator to have regard to the economic costs and risks of the potential for under and over investment by a regulated network service provider in its network. The cost of under investment is lower service standards for consumers and ultimately higher costs to correct these, while the cost of overinvestment is unnecessarily high prices to consumers. This principle will ensure that Australian consumers receive the level of service that they expect and at the right price.

The final principle requires that regard be had to the economic costs and risks of the potential for under and over utilisation of a service provider's network. This principle guides decision makers to consider the efficiency of the usage of existing assets and balance this against the principle of over and under investment. Utilisation is another important indicator of whether the network is operating efficiently. Underutilisation over a previous regulatory control period might indicate that prices have been set too high. It may also be an indicator of over investment, which can also result in high prices. Either way it can have adverse consequences on consumers. Conversely, over utilisation is an indicator of under investment which can result in poor service standards.

Decision making framework

A key aspect of the regulatory framework established by this Bill is the recognition of a "fit for purpose" decision making framework as recommended by the Expert Panel.

The National Electricity Law reflects the Ministerial Council on Energy policy intention to establish a "fit for purpose" decision making model by allowing the rules to set out the decision making framework and determine the level of discretion the Australian Energy Regulator has in dealing with the different aspects of a regulatory determination.

The "fit for purpose" framework acknowledges that, for the purposes of making a regulatory distribution determination, there is often such a range of revenue and price components (and inter relationships between them), that it may be appropriate in some cases for the regulator to be required to accept a reasonable proposal put forward by a service provider. In other cases, it will be appropriate to leave the regulator with the discretion to determine an outcome, or even to require the regulator apply a more specific test to different elements of the proposal. Under this model, the regulator is guided in its decision making by the express provisions in the National Electricity Rules which govern the available level of discretion, along with the National Electricity Objective and the revenue and pricing principles which apply by virtue of the National Electricity Law.

When applied as part of future changes to the National Electricity Rules, the "fit for purpose" framework will provide an appropriate degree of flexibility by allowing the regulatory framework to evolve and adapt models of regulatory decision making according to the degree of regulatory risk or certainty desired by the market.

I will shortly outline the framework established in the initial electricity distribution revenue and pricing rules.

Information Gathering Powers

This Bill introduces substantial amendments to the Australian Energy Regulator's information gathering powers under the National Electricity Law, designed to address ongoing issues of information asymmetry between regulated business and the regulator recognised by the Expert Panel.

The amendments enable the Australian Energy Regulator to obtain adequate information from industry to set efficient prices for energy services without placing an unnecessarily heavy administrative burden on industry whilst supporting competition in the energy market place and protecting commercially sensitive information.

Information on costs incurred in supplying network services is a critical input into the regulatory process and is an essential starting point for determining regulated prices for services supplied in such a market.

The Bill replaces section 28 of the National Electricity Law and introduces new Divisions 4 and 5 to Part 3 of the National Electricity Law. These powers will be replicated in the National Gas Law to provide a consistent information gathering regime across electricity and gas, fully implementing the concerns of the Expert Panel about the necessity of information provision in gas and electricity regulation.

The Bill makes the National Electricity Law search warrant provisions consistent with current criminal law policy by strengthening the suitability criteria for authorised people and introducing identity cards. The Bill revises the National Electricity Law by removing the concept of a 'possible breach' and strengthening individuals' rights in enforcement operations by the Australian Energy Regulator. Search warrants are a tool for breaches of the legislative regime rather than economic regulation.

The National Electricity Law retains the Australian Energy Regulator's ability to obtain information or documents from any person where such information or documents are required by the Australian Energy Regulator for the purpose of performing or exercising any of its functions and powers. The Australian Energy Regulator's information gathering powers under this provision extend to existing information. However, persons are not required to provide information or documents pursuant to such a notice where they have a reasonable excuse for not doing so, such as that the person is not capable of complying with the notice. Information that is the subject to legal professional privilege is also protected from disclosure under such a notice.

The National Electricity Law also extends the Australian Energy Regulator's information gathering powers. The Bill creates the concepts of a 'general regulatory information order' and a 'regulatory information notice', and outlines the processes by which these instruments may be used by the Australian Energy Regulator.

A general regulatory information order is an order made by the Australian Energy Regulator that requires each regulated network service provider of a specified class, or each related provider of a specified class, to provide the information specified in the order and to prepare, maintain or keep information described in the notice in a manner specified in the order. A regulatory information notice is a notice prepared and served by the Australian Energy Regulator that requires the regulated network service provider, or a related provider, named in the notice to provide the information specified in the notice and to prepare, maintain or keep information described in the notice in a manner and form specified in the notice.

The Australian Energy Regulator can only serve a regulatory information notice or make a general regulatory information order if it considers it reasonably necessary for the performance or exercise of its functions. In considering whether it is reasonably necessary, the Australian Energy Regulator must have regard to the matters to be addressed in the service of the regulatory information notice or the making of the general regulatory information order, and the likely costs that may be incurred by an efficient network service provider or efficient related provider in complying with the notice or order. The Australian Energy Regulator must also exercise its powers under this section in a manner that will or is likely to contribute to the achievement of the national electricity objective.

A key component of these reforms is to extend the Australian Energy Regulator's information gathering powers to parties related to the service provider. This mechanism is designed to ensure that the Australian Energy Regulator has sufficient information to perform its functions and to discourage service providers from using corporate structures to avoid disclosure of information to the regulator, without allowing the Australian Energy Regulator to unduly interfere in competitive commercial arrangements.

The National Electricity Law requires the Australian Energy Regulator to consider additional matters in considering whether it is reasonably necessary to serve a regulatory information notice or make a general regulatory information order for related providers. One of the matters the Australian Energy Regulator is required to consider is whether the service provider is able to provide the required information rather than imposing an obligation on a related provider. The Australian Energy Regulator is also required to consider the extent to which the services provided by the related provider to the service provider are provided on a genuinely competitive basis.

The National Electricity Law clarifies the functions upon which the general regulatory information order and regulatory information notice powers extend. A regulatory information instrument must not be served solely for the Australian Energy Regulator's enforcement functions, appeals or collecting information for the preparation of a service provider performance report. Outside of these areas, the tests for issuing a regulatory information instrument are sufficient to ensure these powers do not create an unnecessary regulatory burden.

The National Electricity Law also recognises that there are certain circumstances where the Australian Energy Regulator needs to issue an urgent regulatory information notice. In such circumstances, the Australian Energy Regulator is required to identify that the notice is an urgent regulatory information notice and given reasons as to why the regulatory information notice is an urgent notice.

In instances where there is non compliance with a regulatory information instrument, either a general regulatory information order or a regulatory information notice, the National Electricity Law gives the Australian Energy Regulator the ability to make certain assumptions in instances where the regulated network service provider or related provider does not provide the information to the Australian Energy Regulator in accordance with the applicable regulatory information instrument or provides information that is insufficient.

These instruments are intended to clearly set out the information requirements on service providers to report annually and at a revenue reset. By creating clear obligations, regulators, users, related parties and network service providers will be able to more clearly ascertain compliance with the law and the efficiency of prices for services. As well, the framework set out in the National Electricity Law should help to avoid information being collected in several different ways under different parts of the National Electricity Rules.

These amendments will require the Australian Energy Regulator to take into account the comments received, including the likely costs of compliance, before issuing a regulatory information notice. Consultation is intended to ensure the Australian Energy Regulator does not exercise its powers without regard to why it requires the information and taking into account the regulatory burden that may be imposed by the request for information.

Disclosure of confidential information

This Bill also establishes a comprehensive framework covering the circumstances were the Australian Energy Regulator is authorised to disclose confidential information. The Trade Practices Act generally requires the Australian Energy Regulator keep information confidential but allows the National Electricity Law and National Gas Law to specify how and when the Australian Energy Regulator may disclose confidential information. In the regulatory framework for energy, while there is a legitimate need to protect confidential information particularly that relating to businesses in competitive parts of the market, there is also a need to disclose much of a network service provider's information to the public to allow adequate scrutiny of its costs.

Accordingly, the Australian Energy Regulator is able to disclose confidential information with consent, where aggregated, for court proceedings or to accord natural justice. Additionally, where none of the previous options apply or are appropriate, the Australian Energy Regulator is able to disclose information where it would not cause detriment or if the public benefit of disclosing outweighs the detriment. The Australian Energy Regulator must give affected parties 5 business days to comment on such a disclosure and if submissions are received, must issue a further disclosure notice and wait a further 5 business days before disclosure. These decisions are also subject to merits review in the Australian Competition Tribunal.

Performance Reporting

This Bill allows the Australian Energy Regulator to publish performance reports on the financial and operational performance of network service providers. This is a key aspect of transparency for both distribution and transmission network service providers and will be of great benefit to users and consumers. Performance reporting on regulated services is an important element of the regulatory framework as it allows the Australian Energy Regulator to consider whether the network service providers are complying with the regulatory determinations, and to promote competition by comparison for monopoly service providers.

In preparing a report on the financial and operational performance of a network service provider, the National Electricity Law provides that the Australian Energy Regulator can only prepare a report in a manner that will, or is likely to, contribute to the achievement of the National Electricity Objective. The National Electricity Law also provides that the report prepared by the Australian Energy Regulator can include performance against network service standards, customer service standards, and profitability of the regulated services. The report may also cover other performance of network service providers directly related to the economic regulatory functions of the Australian Energy Regulator. The purpose of these requirements is to provide the regulator and users and consumers with information about how the regulated network service provider is performing more broadly to ensure it can deliver reliable and efficient network services.

The National Electricity Law also requires the Australian Energy Regulator, before preparing a performance report under the law to consult with persons specified in the Rules and in accordance with the consultation process outlined in the Rules. The initial rules require the Australian Energy Regulator to consult with service providers, associations representing network service providers, and the public generally in order to determine the appropriate priorities and objectives to be addressed in the preparation of a performance report. In preparing the performance report, the Australian Energy Regulator is also required to consult with jurisdictional safety and technical regulators to avoid unnecessary duplication.

The Rules also provide the service provider with an opportunity, at least 30 business days before the publication of the report to, submit information and make submissions relevant to the subject matter of the report, and the service provider must be given an opportunity to comment on material of a factual nature to be included in the report. This provides an opportunity for affected stakeholders to be consulted while at the same time encouraging transparency and insight into a network service provider's performance.

Performance reporting is already a major part of the distribution regulatory regime in South Australia and it will be an important addition to the national framework. This provision will be repeated for gas in the National Gas Law.

The Rule Change Process

The Australian Energy Market Commission has been responsible for developing the National Electricity Rules since July 2005. This process has been successful and has resulted in important developments such as the transmission pricing rule and reform of regional boundaries. As with any new process, over the last two years some concerns have been raised about the workability of the current rule change process.

This Bill will address these workability concerns and assist the efficient operation of the rule change process. It was always intended that the Australian Energy Market Commission, although not being able to initiate rule changes itself, would be able to solve the issues or problems raised by a rule change proposal by implementing a solution which it considers best contributes to the achievement of the national electricity objective. Amendments in this Bill make that power clear.

The Australian Energy Market Commission will be given a greater ability to manage its workload including the power to consolidate multiple rule change proposals and deal with them as one proposal where it considers this to be efficient. The Australian Energy Market Commission will also be given longer to prepare its draft and final rule determinations and will be able to prospectively extend timelines for complex matters. The Australian Energy Market Commission will also be able to stop the clock on a rule change proposal while it is requesting additional information from a proponent.

This Bill will introduce a new fast track procedure that will allow the Australian Energy Market Commission to shorten the time required to make a rule, from 26 weeks to 17 weeks, when the rule change proposal has been effectively consulted on by National Electricity Market Management Company, the Australian Energy Regulator or the Reliability Panel. Fast tracking is designed to prevent duplication of consultation processes and to ensure that rule changes are processed efficiently.

While the Bill introduces the power to levy fees for rule change applications, it has been decided not to levy any such fees in the initial Regulations. This recognises the public interest in an open and accessible rule change process but allows further action should the revised process lead to a large number of vexatious applications.

These changes will also be implemented in the National Gas Law.

Merits Review

This package will introduce a mechanism for limited merits review by the Australian Competition Tribunal of specified regulatory decisions under the National Electricity Law. This merits review model will be mirrored in the National Gas Law to ensure consistent regulation of electricity and gas.

These amendments will allow a range of affected parties, including; network service providers, users and consumer associations, to seek review of the primary transmission and distribution determinations made by the Australian Energy Regulator (which apply for particular regulatory periods, usually 5 years). Regulations under this Act may prescribe other decisions of the Australian Energy Regulator under the Rules to be decisions subject to merits review, and it is intended that pass through applications during a regulatory period under the Rules will be so prescribed. No others decisions are currently intended to be included in the initial Regulations.

Merits review will only be available if the original decision contained errors of fact, if the original decision maker's discretion was incorrectly exercised, or if their decision was unreasonable, having regard to all the circumstances.

An applicant for merits review will need to seek leave from the Tribunal to bring an action for review and, amongst other things, will need to meet a materiality threshold. The Tribunal must be satisfied that there is a serious issue to be heard. In addition, for revenue related errors, the amount at issue as a result of all of the alleged grounds of review must exceed the lesser of $5 million or 2 percent of average annual regulated revenue. An application for leave setting out the grounds of review must be made within 15 business days of a reviewable decision being published.

There will be a relatively wide scope for persons and groups to intervene in merits review proceedings, once commenced. Persons with a sufficient interest in the original decision are able to intervene, as well as jurisdictions, and user and consumer associations and interest groups with the leave of the Tribunal. Specific provision is made for the intervention of user and consumer associations and interest groups to overcome legal arguments that regulatory decisions are not sufficiently connected to their concerns or members.

The Tribunal will be able to affirm or vary the original decision, or set the decision aside and either substitute a new decision or remit the matter to the Australian Energy Regulator for reconsideration.

Consistent with the current gas regime and the desire to make the original decision making process meaningful, arguments to make out a ground of review must be based upon submissions made previously to the Australian Energy Regulator. The Australian Energy Regulator is also able to raise related and consequential matters in a review to ensure that the Tribunal takes account of broader issues affecting the decision.

Access Disputes

This legislation introduces a new procedure for disputes relating to access, and these provisions will be common with the National Gas Law. Under the new Part 10, a dispute occurs when a user or prospective user is unable to agree with an electricity network service provider about one or more aspects of access to an electricity network service that are specified by the Rules to be an aspect about which there can be an access dispute. The initial distribution rules will specify price and non price aspects of access to a distribution network as aspects about which there can be an access dispute.

It is not proposed, however, to so specify aspects of access to transmission networks. Transmission access disputes will therefore continue to be subject to the dispute resolution framework in Chapter 6A of the National Electricity Rules.

These amendments will allow the Australian Energy Regulator to act as arbitrator between parties to an access dispute. They will establish the Australian Energy Regulator's powers and make their access determinations binding on the parties to an access dispute. This access dispute framework is consistent with the Competition Principles Agreement and Parts IIIA and XIC of the Commonwealth Trade Practices Act.

Under the new process the Australian Energy Regulator will be required to terminate access disputes where it is clear that the service sought in the dispute is capable of being provided on a genuinely competitive basis. The Bill also ensures that existing contractual rights are protected in access disputes and that, by obliging the Australian Energy Regulator to take into account the revenue and pricing principles, network service providers are appropriately compensated for providing access.

Other elements of access

The Bill also establishes in the National Electricity Law the fundamental obligation on network service providers to comply with the distribution and transmission determinations made by the Australian Energy Regulator. This recognises the fundamental importance of the determinations in the regime. Additionally, networks and other users will be prohibited from engaging in conduct for the purpose of preventing and hindering access to a network in a similar way to section 44ZZ of the Trade Practices Act and section 13 of the Gas Pipelines Access Law. The changes will assist the National Electricity Law and Rules to be an effective access regime under the Trade Practices Act and accordingly provide immunity from inconsistent regulation under Part IIIA of the Trade Practices Act.

Enforcement guidelines

In response to several significant power system incidents, in October 2005 the Ministerial Council on Energy directed the Australian Energy Market Commission to undertake a review into the enforcement of and compliance with technical standards under the National Electricity Rules.

Following an extensive consultation process, in September 2006 the Australian Energy Market Commission released its Final Report making a number of recommendations about compliance with, and enforcement of, technical standards relating to electricity generators. Its recommendations focused on improvements to the processes and procedures for compliance monitoring, notification and rectification of technical standards. It also recommended that the Ministerial Council on Energy should propose a rule change to give effect to those recommendations.

The National Generators Forum in consultation with the Australian Energy Regulator and National Electricity Market Management Company is developing rule changes relating to generator technical standards which resulted from the Australian Energy Market Commission review.

The Ministerial Council on Energy, in its communiqué of May 2007 noted this work and commented that it was appropriate and consistent with the overall market governance model for the National Generator's Forum, in consultation with National Electricity Market Management Company and the Australian Energy Regulator, to initiate a rule change proposal based on the Australian Energy Market Commission recommendations through the rule change process.

To ensure that the proposed rule changes work consistently with the governance principles under the National Electricity Law, this Bill introduces some important amendments which will give effect to the compliance and enforcement regime of the Australian Energy Regulator. The National Electricity Law will include compliance programs as a factor for a Court to consider when determining a penalty level. In addition, a provision will be inserted into the National Electricity Law providing that the Australian Energy Regulator, with respect to its enforcement functions, may publish guidelines specifying matters to which it will have regard in deciding whether to issue an infringement notice or institute proceedings with respect to a breach of the National Electricity Law or Rules. These amendments to the National Electricity Law are an essential addition to ensure that the legislative framework appropriately provides the framework for compliance with the Law and Rules, an effective enforcement and monitoring regime, and provides the appropriate certainty for market participants on how the Australian Energy Regulator will perform its enforcement functions and powers.

National Electricity Rules

The amendment to the National Electricity Law is accompanied by amendments to Chapter 6 of the National Electricity Rules, which guide the Australian Energy Regulator in making revenue and pricing determinations for distribution services. This legislation allows initial amendments to the rules to be made by ministerial instrument to achieve a national framework for the economic regulation of distribution. After the enactment of the initial rules, the Australian Energy Market Commission will be able to amend the distribution rules through the rule change process. The Australian Energy Regulator will also become the regulator for the purposes of regulating electricity distribution networks and will be guided by the National Electricity Law and Chapter 6 in performing this function. It is noted that the new Chapter 6 distribution revenue and pricing rules will be applied by the Australian Energy Regulator and come into operation at the next regulatory resets for electricity distribution networks. The intent is not for that framework to apply to existing distribution regulatory determinations.

The principle change will be the replacement of the distribution pricing rules in Part D and E of Chapter 6 of the National Electricity Rules and the derogated jurisdictional arrangements, with nationally consistent distribution revenue and pricing rules. The new rules look to implement the following.

First, the amended rules implement the advice of the Expert Panel and in particular the revised pricing principles and framework for decisions on the form of regulation. In developing the rules, the Ministerial Council on Energy has been guided by the National Electricity Objective. Consistent with the objective, the distribution rules are designed to accommodate the "fit for purpose" decision making model.

Second, the amended rules take into account the work and drafting style of the Australian Energy Market Commission in its revised transmission revenue and pricing rules. This is to ensure that the Ministerial Council on Energy's objective of creating a consistent regulatory framework, to the extent appropriate, is established for transmission and distribution regulation, while at the same time recognising fundamental differences between distribution and transmission networks.

Third, the amended rules build upon the existing distribution arrangements in each State and Territory to ensure unnecessary disruption and uncertainty is not created by the changes to the national framework required by the amended Australian Energy Market Agreement. To manage this, savings and transitional provisions are included to ensure appropriate transitioning from the existing regulatory framework to the new national framework.

The amendments to Chapter 6 of the rules have created a framework that balances the need to provide certainty to business and consumers with the challenges of bringing six varying regulatory regimes into one.

I will now outline some of the key elements of the new national electricity distribution revenue and pricing rules.

Classification of distribution services and the regulatory process

The rules set out a principles based approach to determine the form of regulation and the control mechanisms used to determine revenues and prices, on a determination by determination basis. This will allow the Australian Energy Regulator to accommodate the wide range of jurisdictional arrangements across the National Electricity Market.

The rules provide for distribution services to be classified between standard control services – in which the Australian Energy Regulator will apply a building block approach to setting the revenue requirements, alternative control services—in which the Australian Energy Regulator can apply a "light handed" form of price or revenue control, or the negotiate/arbitrate framework. In classifying these services, the Australian Energy Regulator is to have regard to how the distribution services were previously classified and whether there has been a change in circumstances, guided by the form of regulation factors, which would warrant a change in the classification of a distribution services. The regulatory framework for the treatment of negotiable distributions services, standard control services and alternative control services is provided for in the rules.

A two stage determination process that balances certainty and flexibility has been included in the rules. This commences with the ability for the Australian Energy Regulator to prepare and publish a Framework and Approach document in anticipation of every distribution determination. The aim of this document is to set out the form of price control to apply in a distribution determination, set out the classification of distribution services, tailor the application of incentive schemes to individual distribution business, and cover other appropriate regulatory matters. This element of the process will aid the network business to prepare the revenue application it is required to submit 13 months prior to the expiry of a distribution determination, and encourage stakeholder participation in the regulatory process.

Determining the revenue requirements

The rules provide for a framework upon which the Australian Energy Regulator is to determine the revenue requirements using a building block approach for standard control services.

The Australian Energy Regulator is appropriately guided by a "fit for purpose" framework in assessing the element of a service provider's regulatory proposal. For example, the rules set out the basis upon which an initial asset base is established for a regulated network service provider. Existing regulatory asset values for each distribution business are set out in the rules, and the rules also allow for a roll forward approach. The rules also set out a framework to consider capital and operating expenditure requirements, which are key elements of a service provider's costs. The Australian Energy Regulator is guided by principles that enable it to determine whether to accept the forecasts proposed by a service provider.

The rules also provide a process upon which the Australian Energy Regulator determines the cost of capital. The final decision on the cost of capital for a distribution network provider is part of the final regulatory determination. However, the rules allow the Australian Energy Regulator to publish its views on industry wide cost of capital values and methodology in a regulatory intent document. This framework creates a balance between creating uniformity in the investment incentives of network service providers across the National Electricity Market while also recognising that these methodologies and values change as the market conditions change.

The rules also provide a mechanism for adjusting the regulatory determination through the recognition of pass through events. The intent of the pass through provisions is to recognise costs, whether positive or negative, that are outside of the service provider's control while protecting the incentive properties of the regulatory framework. The rules define certain pass through events but provide the regulator with the flexibility to specify additional events in its determination.

A key feature of the rules is the ability for the Australian Energy Regulator to develop incentive schemes around capital and operating expenditure efficiency, service standard efficiency and demand management. These schemes can be tailored to consider the unique circumstances of the network service provider during the Framework and Approach phase of the regulatory process. In developing the schemes, the Australian Energy Regulator is guided by principles including that it must be satisfied that the application of a scheme is likely to result in future benefits to customers sufficient to warrant the payment of any rewards to the service provider. The schemes are in addition to the minimum service standards and other guaranteed service level arrangements in place through other jurisdictional instruments.

Distribution pricing rules

The new rules also set out a distribution pricing framework which was developed having regard to the approach applied across jurisdictions.

While the pricing arrangements promote the setting of efficient prices, the rules will also contain a side constraint which limits the increase in distribution tariffs to the greater of CPI minus X plus two percent or two percent per annum for a class of customers. The X factor and side constraints together ensure appropriate smoothing of price or revenue increases or decreases.

The rules also set out process for the Australian Energy Regulator to annually approval a service provider's pricing proposal and ensure compliance with the distribution determination and other requirements of the rules.

Removing barriers to demand side response and distributed generation options

The new rules help deliver on the Council of Australian Governments' commitment to remove barriers to the efficient uptake of renewable and distributed generation.

Consistent with this commitment, the Ministerial Council on Energy, in developing the new rules actively sought independent expert opinion on potential barriers to distributed generation and demand side response. A consultation paper addressing these barriers was released in parallel with a draft of the new rules and public submissions on the report were considered as part of the new rules. The purpose of these changes is to ensure that the rules do not inadvertently discourage demand management and embedded generation options that benefit the market and consumers.

The new rules provide the appropriate balance in considering network and non network options in meeting investment drivers as well as ensuring there are appropriate incentives for network businesses, to the extent it can, manage demand. Included in the new rules are provisions to ensure that home owners with solar PV units capture the benefits of their energy savings in reduced network charges and large customers who manage their demand to make lasting reductions will also be able to have their tariff allocation reassessed. Treatment of embedded generators is equalised with large generators by ensuring they are not charged to export electricity to the grid. The new rules include a Demand Management incentive mechanism to help address network operator incentives for adopting efficient non network options. Efficiency incentives also now consider arrangements that reduce electricity lost in distribution networks.

The Ministerial Council on Energy is continuing to address barriers to the efficient uptake of renewable and distributed generation in its current work programs, including as part of the Ministerial Council on Energy's work stream that looks to create a national framework for electricity distribution network planning and connection arrangements and as part of the non price distribution and retail legislative package. Addressing these issues will help to reduce greenhouse emissions in an economically efficient manner.

Reliability Panel

The Bill covers off the immunity of members of the Reliability Panel to ensure that it can continue to function effectively and fulfil its crucial role in the National Electricity Market. Any liability claim will instead lie with the Australian Energy Market Commission.

Australian Energy Market Commission officials assisting the Reliability Panel are already covered through the existing immunity provision in the National Electricity Law.

Savings and transitional provisions

To ensure a smooth transition to the new National Electricity Law and Rules, savings and transitional provisions are included in both. Additional savings and transitional provisions will also be included in the Regulations.

These provisions will enable existing distribution determinations to continue operating under the current rules until they expire. The existing jurisdictional ring fencing guidelines will be retained and will be transferred to the national framework under the non price distribution and retail legislative package. The capital contributions framework will also be retained and dealt with through a separate work stream creating a national framework for electricity network planning, connection and connection charges.

The transitional provisions will also allow jurisdictional regulators to share information with the Australian Energy Regulator to enable them to administer existing determinations and facilitate them making future revenue determinations.

South Australian savings and transitional provisions

As I previously noted, the South Australian transitional provisions contained in the National Electricity Rules appropriately provide for the transition from the current regime to the national framework.

The first of the transitional arrangements will ensure that some aspects of the Essential Services Commission of South Australia's determination for the regulatory period 1 July 2005 to 30 June 2010 are reflected in the Australian Energy Regulator's first regulatory determination for the South Australian electricity distribution network. This will ensure that the South Australian distribution network is protected from being disadvantaged by the transition to the new regime.

Protection of South Australian consumers from sudden price rises is also important. As I noted previously, the distribution rules allows for the application of a 'side constraint' on tariffs in relation to the provision of standard control services. Transitional arrangements in South Australia will impose an additional $10 per annum limit on increases to the fixed supply charge component for small customer's electricity bills. This arrangement will remain in force for the entire 2010 2015 South Australian distribution determination. The transitional provision will also allow the Australian Energy Regulator to review the application of this additional side constraint prior to issuing its framework and approach paper for the 2015 regulatory reset.

Interpretation provisions

The Bill includes minor amendments to the schedule of interpretative provisions. This Schedule 2 to the new Law means the Law is subject to uniform interpretation in all participating jurisdictions and will be consistent with the National Gas Law.

Conclusion

As I noted at the beginning of this speech, this Bill will strengthen and improve the quality, timeliness and national character of the governance and economic regulation of the national electricity market, for the benefit of South Australians and all Australians.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause is formal.

2—Commencement

The measure will be brought into operation by proclamation.

3—Definition

The "NEL" means the National Electricity Law (set out in the Schedule to the Act).

4—Amendment provisions

This clause is formal.

Part 2—Amendment of National Electricity (South Australia) Act 1996 as part of the national scheme

5—Amendment of section 2 of the NEL—Definitions

This clause provides the definitions connected with the amendments to be made to the NEL, makes consequential amendments, and deletes the definitions that are no longer required.

6—Amendment of the NEL—New sections 2A to 2F inserted

A number of additional provisions will explain key concepts under the NEL.

For example, an access dispute will be a dispute between a network service user or prospective network service user and a network service provider about an aspect of access to an electricity network service specified by the Rules to be an aspect to which Part 10 applies.

Another provision will set out the form of regulation factors under the NEL, being—

(a) the presence and extent of any barriers to entry in a market for electricity network services;

(b) the presence and extent of any network externalities (that is, interdependencies) between an electricity network service provided by a network service provider and any other electricity network service provided by the network service provider;

(c) the presence and extent of any network externalities (that is, interdependencies) between an electricity network service provided by a network service provider and any other service provided by the network service provider in any other market;

(d) the extent to which any market power possessed by a network service provider is, or is likely to be, mitigated by any countervailing market power possessed by a network service user or prospective network service user;

(e) the presence and extent of any substitute, and the elasticity of demand, in a market for an electricity network service in which a network service provider provides that service;

(f) the presence and extent of any substitute for, and the elasticity of demand in a market for, electricity or gas (as the case may be);

(g) the extent to which there is information available to a prospective network service user or network service user, and whether that information is adequate, to enable the prospective network service user or network service user to negotiate on an informed basis with a network service provider for the provision of an electricity network service to them by the network service provider.

7—Amendment of section 6 of the NEL—Ministers of participating jurisdictions

This amendment deletes redundant provisions.

8—Amendment of the NEL—Section 7 substituted and new section 7A inserted

The NEL is to have a revised objective, being to promote efficient investment in, and efficient operation and use of, electricity for the long term interests of consumers of electricity with respect to—

(a) price, quality, safety, reliability and security of supply of electricity; and

(b) the reliability, safety and security of the national electricity system.

New section 7A will set out a set of revenue and pricing principles for the purposes of the NEL.

9—Amendment of section 8 of the NEL—MCE statements of policy principles

MCE policy principles will expressly apply in relation to making a Rule or conducting a review under section 45.

10—Amendment of the NEL—New Division heading inserted into Part 2

Part 2 of the NEL is to be divided into Divisions.

11—Amendment of section 11 of the NEL—Electricity market activities in this jurisdiction

Section 11 of the NEL is to be amended so that its application is expressed to be to a generating system connected to the interconnected national electricity system, as it exists in the particular jurisdiction.

12—Amendment of the NEL—New Division 2 inserted into Part 2

Specific compliance obligations are to be placed on operators, with civil penalty provisions.

13—Amendment of section 15 of the NEL—Functions and powers of AER

The AER is to be vested with a number of additional functions under the NEL. Express provision with respect to the AER having the power to do all things necessary or convenient to be done in connection with the performance of its functions is to be included in the NEL.

14—Amendment of the NEL—New section 16 substituted

Section 16 of the NEL must be revised to take into account the national electricity objective and the revenue and pricing principles.

15—Amendment of the NEL—New section 18 substituted

Section 44AAF of the Trade Practices Act 1974 will have effect as if it formed part of the NEL.

16—Amendment of the NEL—New heading to Division 2 of Part 3

Division 2 of Part 3 is now to be specifically relevant to search warrants.

17—Amendment of section 19 of the NEL—Definitions

The term relevant provision is to apply to any provision of the NEL, the Regulations or the Rules.

18—Amendment of the NEL—New section 20 substituted and new sections 20A and 20B inserted

An authorised person will be required to comply with any direction of the AER in exercising powers or functions as an authorised person. An authorised person will have an identity card issued by the AER.

19—Amendment of section 21 of the NEL—Search warrant

An application for a search warrant may be made if an authorised person reasonably suspects that there may have been a breach of a relevant provision and there is or may be a thing or things of a particular kind connected with the breach on or in the relevant place.

20—Amendment of the NEL—deletion and substitution of sections 22 and 23

The provisions relating to access to premises under the terms of a warrant are to be clarified and revised.

21—Amendment of section 24 of the NEL—Copies of seized documents

These are clarifying amendments.

22—Amendment of NEL—New section 25 substituted

A document or other thing seized by an authorised person under a warrant must always be given to the AER.

23—Amendment of section 26 of the NEL—Extension of period of retention of documents or things seized

24—Amendment of section 26 of the NEL—Obstruction of person authorised to enter

These are consequential amendments.

25—Amendment of the NEL—New Divisions 3 to 7 of Part 3 inserted

The information gathering powers of the AER are to be revised for the purposes of the NEL.

26—Amendment of the NEL—New section 31 substituted

Section 24 of the Australian Energy Market Commission Establishment Act 2004 is to apply as if it formed part of the NEL.

27—Amendment of section 32 of the NEL—AEMC must have regard to national electricity objective

This is a consequential amendment.

28—Amendment of section 34 of the NEL—Rule making powers

This amendment will make it clear that the AEMC may make Rules for or with respect to any matter or thing contemplated by the NEL, or necessary or expedient for the purposes of the NEL. It is also to be made clear that certain matters in guidelines or other documents adopted under the Rules may be left to be determined by the AER, the AEMC, NEMMCO or a jurisdictional regulator.

29—Amendment of the NEL—New sections 35 and 36 substituted

Sections 35 and 36 are to be revised. Certain Rules will not be able to be made without the consent of the MCE. A Rule may not provide for a criminal penalty or civil penalty for a breach of a provision of a Rule.

30—Amendment of section 37 of the NEL—Documents etc applied, adopted and incorporated by Rules to be publicly available

Section 37(2) of the NEL is to be revised so that it sets out 2 methods of making a Rule publicly available.

31—Amendment of the NEL—deletion of section 40

The definition in section 40 of the NEL is now to be found in section 2 of the NEL.

32—Amendment of section 41 of the NEL—MCE directions

A direction from the MCE to the AEMC for the conduct of a review may extend to—

(a) any matter relating to any other market for electricity; or

(b) the effectiveness of competition in a market for electricity for the purpose of giving advice about whether to retain, remove or reintroduce price controls on prices for retail electricity services.

33—Amendment of section 42 of the NEL—Terms of reference

The MCE will now be able to—

(a) require the AEMC to have specified objectives in the conduct of a MCE directed review which need not be limited by the national electricity objective;

(b) require the AEMC to assess a particular matter in relation to services provided in a market for electricity against specified criteria or a specified methodology;

(c) require the AEMC—

(i) to assess a particular matter in relation to services provided in a market for electricity; and

(ii) to develop appropriate and relevant criteria, or an appropriate and relevant methodology, for the purpose of the required assessment.

34—Amendment of section 45 of the NEL—Reviews by AEMC

This amendment makes it clear that publication of a report must take into account the operation of section 48 of the NEL.

35—Amendment of section 46 of the NEL—AEMC must publish and make available up to date versions of Rules

This amendment makes it clear that the Rules must be maintained on the AEMC website.

36—Amendment of section 47 of the NEL—Fees

This amendment makes it clear that a fee may be calculated in accordance with a specified formula or methodology. A fee may extend to a service under the Regulations.

37—Amendment of section 48 of the NEL—Confidentiality of information

This is a consequential amendment.

38—Amendment of section 49 of the NEL—Functions of NEMMCO in respect of national electricity market

This amendment inserts a note to refer to the fact that NEMMCO will also have responsibilities with respect to the new Consumer Advocacy Panel.

39—Amendment of the NEL—New Parts 5A and 5B inserted

These new provisions provide for the vesting of functions and necessary or convenient powers.

40—Amendment of section 58 of the NEL—Definitions

The list of civil penalty provisions needs to be revised.

41—Amendment of section 61 of the NEL—Proceedings for breaches of a provision of this Law, the Regulations or the Rules that are not offences

This is a drafting matter to provide consistency with section 61(1) of the NEL.

42—Amendment of section 62 of the NEL—Additional Court orders

The note is no longer appropriate.

43—Amendment of section 64 of the NEL—Matters for which there must be regard in determining amount of civil penalty

In determining a civil penalty amount, it will now also be expressly relevant to have regard to whether the service provider had in place a compliance program approved by the AER or required under the Rules, and the extent of compliance with such a program.

44—Amendment of the NEL—New Division 2A of Part 6 inserted

The Commercial Arbitration Acts of each jurisdiction are to apply to proceedings involving a Rule dispute and decision or determination of a Dispute resolution panel in accordance with new section 69A.

45—Amendment of the NEL—New section 71 substituted

These amendments make clearer provision with respect to appeals from decisions or determinations of a Dispute resolution panel, being appeals on questions of law.

46—Amendment of the NEL—New Divisions 3A and 3B of Part 6 inserted

These amendments introduce a scheme for merits review and other non judicial review.

47—Amendment of section 74 of the NEL—Power to serve a notice

The AER will be required to serve an infringement notice within 12 months after the date on which the AER forms a belief that there has been a breach of a civil penalty provision.

48—Amendment of section 81 of the NEL—Payment expiates breach of civil penalty provision

The acceptance of the infringement penalty by the AER should determine the matter.

49—Amendment of the NEL—Deletion of section 84

50—Amendment of section 85 of the NEL—Offences and breaches by corporations

51—Amendment of section 86 of the NEL—Proceedings for breaches of certain provisions in relation to actions of officers and employees of relevant participants

52—Amendment of the NEL—New Subdivision heading inserted into Division 1 of Part 7

These are consequential amendments.

53—Amendment of section 87 of the NEL—Definitions

Various definitions must be revised or deleted for the purposes of Part 7.

54—Amendment of the NEL—New Subdivision 2 of Division 1 of Part 7 inserted

The form of regulation factors and the revenue and pricing principles will be relevant to certain rule making functions of the AEMC.

55—Amendment of the NEL—New heading to Division 2 of Part 7

56—Amendment of the NEL—New section 90A inserted

It is necessary for the Minister to assume additional rule making functions.

57—Amendment of section 91 of the NEL—Initiation of making of a Rule

This amendment clarifies the operation of section 91(2) of the NEL.

58—Amendment of the NEL—New sections 91A and 91B inserted

The AEMC will be able to make a rule that is different from a market initiated Rule if the AEMC is satisfied that its proposed rule will or is more likely to better contribute to the achievement of the national electricity objective.

59—Amendment of section 92 of the NEL—Contents of requests for Rules

A request for the making of a Rule may give rise to the requirement to pay an application fee prescribed by the Regulations.

60—Amendment of the NEL—New section 92A inserted

The AEMC will be able to waive an application fee under section 92.

61—Amendment of the NEL—New sections 93 and 94 substituted and new section 94A inserted

The powers of the AEMC to consolidate requests for rules are to be clarified. The processes surrounding the consideration of a request for a rule are to be revised to some extent. The AEMC will be given express power to request additional information from a person who requests the making of a rule.

62—Amendment of section 95 of the NEL—Notice of proposed Rule

If the AEMC decides to act on a request for a rule to be made, or forms an intention to make an AEMC initiated rule, the AEMC will publish notice of the request or intention and a draft of the proposed rule.

63—Amendment of section 96 of the NEL—Publication of non controversial or urgent final Rule determination

The period for acting under section 96(1) is to be extended from 4 weeks to 6 weeks.

64—Amendment of the NEL—New section 96A inserted

Certain requests for rules will be able to be dealt with expeditiously.

65—Amendment of section 99 of the NEL—Draft Rule determinations

A draft rule determination will be made within 10 weeks after the date of the notice under section 95, or 5 weeks in the case of a rule under section 96A.

66—Amendment of section 101 of the NEL—Pre final Rule determination hearings

It will be made clear that the AEMC may decide to hold a hearing in relation to a draft rule determination on its own initiative.

67—Amendment of section 102 of the NEL—Final Rule determinations

The AEMC will make a final rule determination and publish it within 6 weeks after the period for submissions or comments comes to an end.

68—Amendment of the NEL—New section 102A inserted

Provision must be made for cases where the AEMC decides to make a more preferred rule.

69—Amendment of section 107 of the NEL—Extensions of periods of time in Rule making procedure

The AEMC will be able to extend a period of time in necessary cases (rather than relying on a "public interest" test).

70—Amendment of the NEL—New section 107A inserted

Further consultation may occur in relation to a proposed rule change and accordingly specified time periods may be extended.

71—Amendment of section 108 of the NEL—AEMC may publish written submissions and comments unless confidential

This is a consequential amendment.

72—Amendment of the NEL—New section 108A inserted

The AEMC will be required to prepare a report if it does not make a final rule determination within 12 months after publication of the relevant notice under section 95.

73—Amendment of section 119 of the NEL—Immunity of NEMMCO and network service providers

74—Amendment of section 120 of the NEL—Immunity in relation to failure to supply electricity

These are consequential amendments.

75—Amendment of section of the NEL—New section 122 and new parts 10 and 11 inserted

It is necessary to include an immunity provision with respect to members of the Reliability Panel. A new Part relating to access disputes is also to be enacted. Other miscellaneous provisions are also to be inserted into the NEL.

76—Amendment of Schedule 1 to the NEL

The matters that may be the subject of the Rules are to be revised and expanded.

77—Amendment of Schedule 2 to the NEL—Clause 1

78—Amendment of Schedule 2 to the NEL—Clause 2

79—Amendment of Schedule 2 to the NEL—Clause 4

80—Amendment of Schedule 2 to the NEL—Clause 8

81—Amendment of Schedule 2 to the NEL—Clause 10

82—Amendment of Schedule 2 to the NEL—New Parts 6A and 6B of Schedule 2 inserted

83—Amendment of Schedule 2 to the NEL—Clause 39

84—Amendment of Schedule 2 to the NEL—Clause 41

85—Amendment of Schedule 2 to the NEL—Clause 42

These clauses enact additional provisions with respect to the interpretation and operation of the NEL.

86—Amendment of Schedule 3 to the NEL—Clause 1

87—Amendment of Schedule 3 to the NEL—New clause 4A inserted

88—Amendment of Schedule 3 to the NEL—New clauses 10A and 10B inserted

89—Amendment of Schedule 3 to the NEL—New clause 18 inserted

These are transitional provisions to be inserted into the NEL.

Part 3—Amendment of National Electricity (South Australia) Act 1996 to make consequential amendments

90—Amendment of section 12—Specific regulation making power

These amendments will allow the regulations to deal with matters of a transitional nature on account of amendments made from time to time to the new National Electricity Law.

91—Insertion of section 15

The provisions of clause 2 of Schedule 2 of the National Electricity Law relating to the conferral of functions and powers on Commonwealth bodies will extend to any such conferral effected by a provision of the Act or a regulation under the Act.

Part 4—Amendment of National Electricity (South Australia) Act 1996 to address local issues

92—Insertion of Part 6

New Part 6 will facilitate the transfer of the economic regulation of electricity distribution to the Australian Energy Regulator under South Australian law. Under these provisions, ESCoSA will continue to administer the 2005 2010 Electricity Distribution Price Determination made in April 2005 and the AER will undertake responsibility to make future price determinations, subject to certain requirements set out in new section 18(5) and to the provisions of the relevant South Australian Pricing Order.

Debate adjourned on motion of the Hon. D.W. Ridgway.