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

Second Reading

Adjourned debate on second reading.

(Continued from 16 October 2007. Page 903.)

The Hon. R.I. LUCAS (20:25): I am in the delightful position that, if I do not speak for some time this evening, we will not justify having dragged everyone back after dinner for the evening session. So, in the interests of justifying sitting this evening, I will make a lengthier contribution on this legislation than I might otherwise have done.

Members who have been here some time will know that, on every other occasion we have amended the national electricity law in this house and in the other place, there have been lengthy debates about the changes to the legislation: first, because we are the lead legislator—that is, with the passage of this legislation, South Australia sets the pattern for the other states as part of the national electricity market; and, secondly, because electricity, for some reason, has been a controversial issue in South Australia for almost the last 10 years or so.

In my opening remarks on this legislation, I went back not only to our last debate in 2005 (only two years ago for those who were members of this chamber) but also to some of the debate at the time of the privatisation of the electricity industry and the period leading into the 2002 election. The reason for doing so was a continuing series of extraordinary statements made by the government and its ministers, particularly minister Conlon, during debate on this legislation and also in recent times, during the estimates committees of June this year. Given that I do not have responsibility on behalf the party to respond on a daily basis to the Hon. Mr Conlon's outpourings on electricity, I take the opportunity this evening to comment on some of the claims, statements, misstatements and untruths uttered by the minister on this issue.

As we look back (on another occasion I think it would be useful for the parliament if I were to provide more detail, but I will summarise now), much was made of the entry into the national electricity market and of the privatisation. To refresh the memory of those members who were not here at the time, it was originally a decision of the former federal Labor government and a state government to put in place the original structures for the national electricity market.

It was then followed through by a federal Liberal government and a state Liberal government in South Australia and then, of course, a decision was taken in the late 1990s for the privatisation of our electricity industry. This was done for a couple of reasons and, again, I will not repeat all the arguments. Clearly, debt repayment for the State Bank was an important issue. However, another important issue at the time (and one needs to bear it in mind even more now) was the whole argument on whether it would be possible to continue to operate government controlled and owned businesses in a largely private sector driven national electricity market.

It is fair to say that the Labor Party and the Liberal Party in South Australia had different views, or at least different views publicly expressed. A number of prominent members of the Labor Party said then, and even now say privately, 'Thank goodness' that the Liberal Party took the decision they were unable to take or would have been unable to take because of their ideology.

They have had the convenience and pleasure of seeing the hard decisions taken and their endeavours to leverage political advantage out of that—and on occasions successfully—but they saw that, ultimately, there was really no other option. As I said, it is not just the issue of money and debt which has been the major focus of the debate. At the moment we are seeing in Queensland and New South Wales Labor administrations struggling with the same ideology as state Labor claimed in South Australia, that is, how to maintain government-owned and operated businesses in the competitive national electricity market.

In the past few years we have seen the first manifestations of privatisation in Queensland electricity businesses. The retail businesses are being privatised. We are also seeing the second round of attempts by the New South Wales Labor government. If you remember, Bob Carr and Michael Egan understood what had to be done a number of years ago but were defeated by the union leaders at the time. They have now commissioned a review—I will not go through the details—received the advice they knew that they had received that it just does not make any sense, and are now heading down the path of starting to privatise their electricity businesses. One of the essential pieces of advice with which they have been provided is that which many have given to anyone interested in the national electricity market for quite some time.

The New South Wales Labor government had a proper position for some time, saying, 'We'd like private businesses to come in and invest billions of dollars in a new generator to increase electricity supply in New South Wales.' The New South Wales government kept scratching its head and asking, 'Well, why aren't these businesses jumping at the opportunity to invest?' One of the simple explanations is that they were not prepared to spend billions of dollars of their shareholders' money on building a generation plant which then had to compete with government-owned and operated electricity businesses.

Again, I will not go through the details, but we have seen a number of examples where the New South Wales government-owned generators have gained the market and played the market. I am not saying that they are the only ones, because those in the private sector have also been a part of this process, but the government ones have been in a dominant position in New South Wales. The private sector operators were asking, 'Hey; why would we come in here and try to compete to sell electricity into a market when the big ugly brother or sister is there dominating the electricity market with government-owned, operated and controlled electricity generators?' That is one of the reasons why the New South Wales government is now having another look at privatising the retail and generation companies in New South Wales.

We are seeing a privatised industry in Victoria and South Australia, and that will never change no matter how long the state Labor government stays in power. We are seeing the first signs of privatisation in Queensland and more significant signs of privatisation in New South Wales. In those cases, particularly Queensland, it has nothing to do with debt repayment: it is all about whether it makes any sense if you have a national electricity market to have government-owned and operated businesses taking a punt in that market. In both cases, the governments have received advice on the considerable tens of millions of dollars at risk on a daily basis as government-operated businesses, particularly retailers, compete in the national electricity market. They are gambling with taxpayers' funds and taxpayers' money in the national electricity market.

As I said, even the most senior Labor people in South Australia will concede now (and even conceded at the time) that once the decision was taken for a national electricity market essentially the die was cast. There might have been an argument about the time and the nature of the implementation of privatisation, but inevitably those who are still in the parliament in 10 or 20 years (and that will not be the Leader of the Government or a number of us, but it might be the Hon. Mr Finnigan and the Hon. Ms Lensink in the chamber at the moment) will look back and see an inexorable movement towards privatisation through the national electricity market because there really is no other option. It was really only ideology which prevented some Labor leaders and government leaders from recognising that, once they had made the decision (supported by the Liberal Party) for a national electricity market, it made no sense to have government-operated businesses within the market.

As one looks at the situation in South Australia now, one should recall the insightful report from the Independent Regulator, the Essential Services Commission. Either late last year or early this year he was quoted in the Sunday Mail indicating that, in terms of prices for households (residential mums and dads) in South Australia's electricity market in 2007, compared to the start of competition prices were essentially the same in real terms. Yes, there had been an increase in the initial 12-month period after competition was introduced but, as had been predicted all along, that settled with the market. I know the new minister seeks to claim credit for the changes, but he opposed all the initial changes, and he knows that. He did introduce policies for door snakes and a few other things like that, which he likes to claim have significantly increased competition in the South Australian marketplace. I think he knows that only he and his rusted-on supporters would believe that his actions with the door snakes were of any value at all.

However, to be fair, and as there would have been after 2002 which ever party was in power, there were refinements of the national market as it operated in South Australia which the Labor government took and of which, certainly, I was supportive and of which I am sure the Liberal Party was supportive. They were actions taken that would have been taken by a Liberal administration as well to encourage a further development of what the Liberal Party had put in place, which was a competitive electricity market. In relation to standards, I do not think that, when one looks at the reports of the Independent Regulator, anyone can make a claim that the system has been run to rack and ruin by the private operator.

In fact, the standards are the same if not better. That was written into the legislation as one of the protections. Again, the minister does not like to acknowledge that, but that was written into the legislation as one of the protections. I think the very first comprehensive performance management scheme was introduced by the Liberal administration to encourage further improvement of standards; and, as I understand it, that has now been built on at the national level. All sorts of dire claims were made about the standards of the distribution and transmission system in South Australia. Again, whilst there will always be problems, no-one is able to produce evidence from the Independent Regulator or anyone else to demonstrate that they have deteriorated under privatisation.

The third area relates to jobs. There were lots of claims that the new operators would decimate the workforce of ETSA; that they would not take on apprentices and trainees. I do not have the figures with me at the moment, but figures I recall reading sometime last year from ETSA indicated that, under private ownership, the number of apprentices taken on within ETSA had significantly increased. The total number of jobs was either around the same or marginally higher in ETSA, bearing in mind that under government ownership it had been slashed over a period under Labor and Liberal governments through the decade of the 1990s, with big cuts in job numbers in the early 1990s under Lynn Arnold and John Bannon and significant cuts under the Liberal governments of Dean Brown and John Olsen.

There are a number of other areas where one can judge the health or otherwise of the electricity market: prices, standards and jobs are probably the three big categories, and in all those areas I challenge the government or anyone to argue, as we now with the benefit of hindsight look back on the first five years of a privatised market in South Australia, that a lot of claims made by ministers Conlon and Foley and Mr Rann have not come to fruition.

It is also a joy to go back and look at some of the wonderfully naive views Messrs Foley and Conlon put to the South Australian electorate in 2002 under the heading of `Labor's nine point power plan' and `Labor's plan to protect electricity consumers'. We pointed out at the time the many flaws within some of the policies announced by the Labor Party at the time. Labor made a number of claims in relation to what it would do about South Australia being able to sell power back to Victoria or the eastern states at times when the South Australian Labor Party believed it should not be and would take action in some way to prevent or modify that. It was a cute line for talk-back radio and the media, but anyone with an understanding of the market knew that Messrs Foley and Conlon had no idea what they were talking about in relation to saying they would take action to fix that issue.

They made many claims in relation to rebidding but, whilst there has been some action in relation to rebidding (I will not bore the council with details of all the many claims they made in the media and claims about rebidding, as many did not come true), they also promised to build Riverlink or SNI, but everyone knew, other than the Labor Party and those they could delude, that that would not be possible, given the nature of the market.

The Hon. J.S.L. Dawkins interjecting:

The Hon. R.I. LUCAS: Yes, and the route. They wanted to take it through the Riverland. Sadly, it was not just the Labor Party as we had Dick Blandy, Mr Booth and others who were fellow travellers with the Labor Party, at least on that aspect.

The government was to give the Essential Services Commission emergency reserve powers to cap retail prices if it found that tariffs were unjustifiable and excessive. I would like the minister's response on what the government has done to implement that promise. It said that it would give the commission power to investigate and, if necessary, prosecute electricity companies if they failed to meet reliability and maintenance standards, with tough new penalties up to $1 million. I refer to maintenance standards and ask the government what action it took to give the Essential Services Commission the power to impose penalties of up to $1 million on ETSA Utilities if it was not able to keep up maintenance standards to whatever standard the government had indicated it wanted.

There are many other promises, but in particular I ask the minister, when he responds, to address the fact that the Labor Party had a wonderful idea to introduce a prices justification system for all parts of the electricity industry, particularly the generators and retailers. This would be done by amending the Independent Industry Regulator Act. I ask the minister to indicate what the government did to introduce a prices justification system for all parts of the electricity industry, particularly the generators and retailers.

So, I particularly want to know where the prices justification system was for the generators. They were going to amend the legislation to achieve that, and I question whether or not hidden away in the legislation we have before us the government is arguing that it seeks to implement that policy. There are many other aspects of those policy documents and I do not intend to go through all of the documents this evening but, as I said, some of them are deliciously naive. We knew at the time that in many cases they were impossible to implement, but they sounded good and Messrs Conlon, Foley and Rann at the time were able to generate media publicity for those supposed policy options.

The other claims that I want to refer to tonight were some made by minister Conlon during the debate and also during the estimates committees in the House of Assembly. The minister indicated one of the reasons that private sector operators were not putting money into generation was the absence of a greenhouse policy. He then went on to argue, `What they do not know is what that cost will be and when it will be incurred; you would have to build $2 billion worth of plant not knowing over the lifetime of the plant what the significant increased cost would be and when you would incur it. That means that no-one is building new coal-burning plants, except possibly the Queensland government, which has the benefit of owning its assets and can take the risk that a business would not.'

There, in one sentence, is exactly the reason you would never leave someone such as minister Conlon, or any Labor minister, in charge of electricity businesses, because what minister Conlon was arguing in his wonderfully naive, or stupid (take your choice), way is that it makes no sense for anyone to invest $1 billion or $2 billion in a generating plant over the past few years if you do not know what the national greenhouse policy will be. He is saying: why would you spend $2 billion if you do not know what your returns are going to be? And that is a very sensible point of view. But he then argues, and this is where the left ideology of the Labor Party comes in, of which Mr Conlon is captive, that really the only one who can is the Queensland government, which has the benefit of owning its assets and can take a risk that a business would not.

So, there it is. What minister Conlon is saying is that government-run businesses in Queensland, if he had his way in South Australia, would be taking the risk with taxpayers' money, because it is not your own, to build plants when, he says, it makes no sense to do it because you do not know what your returns are going to be. There, in one sentence, is summarised the foolishness of the Labor position and the foolishness of minister Conlon's position. I invite a reply from the minister. I am sure I will not get it, because there really is no response to that sort of foolishness from minister Conlon.

Minister Conlon was then tackled about the higher electricity price level in South Australia. He then makes a couple of points with which I would have to agree. He says the regulator sets the prices—that is right—and they are higher here for a number of reasons. One is that 60 per cent of our in-store capacity is natural gas, which is obviously very environmentally friendly compared to coal, but it is much more expensive. Then he says we also have a very peaky demand—which, again, is true—and we have to over-build transmission distribution systems so we have higher network costs than most other states.

Those particular statements are, indeed, correct, and of course that is what the Liberal Party was saying prior to 2002. But minister Conlon has been saying during estimates committees and everywhere else that the Liberal Party in some way set higher transmission and distribution pricing systems because it was just trying to ratchet up the sales price of the assets.

When it suits him, he immediately uses the logic and rational response that South Australia's system is different. One might be able to argue the margin and that maybe we should not be so much higher than the other states. He acknowledges the essential truth of the argument that we are a peaky system and that we are spread very thinly over a big state. Our distribution and transmission network has few people and is spread over the whole of South Australia. These are not the words of the Liberal Party. These are the words of minister Conlon who says that the reason we have higher prices is that the independent regulator sets it and 60 per cent of our capacity is natural gas (which has always been the case). It has always been high. It is good in one way but it also expensive. Secondly, we have to overbuild our transmission distribution systems so we have higher network costs than most other states.

The minister loses track of his arguments in relation to this matter. In that argument, and also that which I highlighted earlier, we have exactly the points the Liberal Party has been making. Minister Conlon by accident or by default has agreed, in essence, with points the Liberal Party was making in 2002—and has made ever since then. One of the minister's favourite points—he always uses it on radio (and it is wrong) and he uses it in the parliament (and it is wrong)—is that the Liberal Party sold a monopoly government-owned retailer to a monopoly private sector-owned retailer. Minister Conlon knows that is untrue; and it has been pointed out to him on a number of occasions. What occurred was that the market was progressively opened up to private sector retailers.

From the first opening of the market—and I do not have the exact dates with me this evening—the very big business customers were opened up to any retailer. I think six or 10 retailers opened up in South Australia from the first day of the market. Then we had the next size of businesses—and at that stage we had at least 10 retailers—and eventually the home owners market was opened up—and certainly we had more than 10 retailers. I think at one stage up to 15 or 20 potential retailers were in the marketplace. It is untrue (as the minister has claimed) to say that we went from one monopoly government-owned retailer to one monopoly private sector-owned retailer. He knows that that is untrue.

We opened up the market from day one. This occurred nationally, not just in South Australia, and it occurred at different times. It was opened up on a gradual basis so that any retailer could come in and compete. If the minister was to change his language and say, 'Obviously, there would be a dominant retailer,' that is, the person who bought the retail business, then one can argue that was the case initially. It was always going to be a number of years, as competition was introduced into the marketplace, before we would see a more competitive marketplace in South Australia.

The other untruth that the minister continues to perpetuate has its genesis on a little bit of fact, and then he perpetuates an untruth based on that. When the government was looking originally at the privatisation of its businesses, a paper was circulated at the time that talked about how the government was going to sell the retail businesses. The option that was being actively canvassed at the time was to split up the South Australian marketplace into a number of different distribution and retail companies. One of the options that was considered was, in essence, to put a spoke in a wheel from Adelaide through to the borders, where, for example, ETSA—the distribution company and the retail company—was divided up into three, with bits of the metropolitan area and bits of the country. Other options included two in the city and perhaps one or two in the country. Various models were canvassed but, in essence, the distribution and retail company was to be divided up into a number of participants.

Mr Conlon's claim is that, to maximise the price of the sale of the retail business, the government changed that policy to sell it as a whole for the whole of the South Australian marketplace. That is just untrue and, as the minister who was there at the time, I can for the first time put on the record some of the detail of the reasons why one approach was changed to the other.

The principal reason was that I visited Victoria and spoke with Victorian ministers and senior bureaucrats and advisers in relation to what they had done with respect to their privatisation. Victoria had divided its state market up into four or five distribution retail companies (and I am going on memory now); that is, the state was divided into four or five, and there was a distribution and a retail company in each. What I found in Victoria was that, because of the way in which it had done that, there were differing prices in country regions as compared to the metropolitan area, and there were differing prices in some country regions compared to other country regions. The reason for this was that there were four or five separate companies, all with the capacity to manage their business within their particular part of Victoria.

One of the essential elements of the privatisation debate in South Australia had been, first, to try to get the legislation through both houses of parliament, obviously, and, secondly, we were strongly committed to being able to do what we currently do with water pricing; to postage stamp electricity—that is, to be able to say to the regional communities, 'We have potentially taken a hit in terms of what our sale price might have been, but we are postage stamping the electricity price for country customers.'

There are many things which we could have done to maximise our sale prices (and I will not go through all of them tonight) in relation to generation and which we did not do, because we took decisions in the public interest, in our view, that there was a balance between what we would get—and, clearly, we wanted to get as much money as we could from the sale to repay the Labor Party's State Bank debt, but we also knew that there was a balancing of the public interest.

This was a perfect example, where we said, 'Okay; we probably would get more money if we were to have a situation where we allowed electricity companies to charge country consumers higher prices for electricity, much more on a user pays basis', that is, 'It costs more to send the electricity to the South-East, the West Coast or to the Mallee; therefore, we will charge them more.' That is a whole debate that I am sure we will see in coming years with respect to the water industry. Having gone to Victoria and seen and spoken to members of parliament from country areas who were furious that their constituents' prices there were higher than in some other areas, we took the view (certainly, I took the view) that we did not want to go down that particular path.

So, it is untrue, as the minister has claimed, that this decision to change the nature of how we would break up retail and distribution was done on the grounds of maximising the sale price and to sell to a monopoly retailer. Both of those claims were wrong, and I am pleased to be able to put that on the public record this evening. As I said, I have not provided some of that detail before.

The minister, in his claims in the estimates committee, went on to say that we set different time lines for gas competition and electricity and that it was almost unspeakably stupid. A number of those decisions were taken as a result of national discussions that had gone on. In terms of the claims that the current minister has made about the time lines for introducing changes, competition or legislation, in many cases they have been wildly inaccurate when one compares the actual performance with the promise made by minister Conlon. Many other claims were made during the estimates committee and during the minister's debate which lacked substance. I cannot respond to all those this evening, but they were some of the more important ones that I wanted to at least rebut on the public record.

In concluding this section of my contribution, I ask the minister to provide to the council the additional increments to the generation capacity in the South Australian market since the Labor government took power in March 2002. I do so because, in the four or five years prior to 2002, under the former Liberal administration, there was a very significant increase in electricity generating capacity in South Australia of almost 40 per cent. I will not bore the council with the details of each of those additional increments, but certainly there was the building of Pelican Point, a number of the peaking power stations around the state and also the new interconnector coming into South Australia.

Whilst there has been significant activity since 2002 in relation to wind energy and wind turbines, what I am seeking from the minister—and I guess this information will be provided by the Electricity Industry Supply Planning Council—concerns the additional increments to capacity which NEMMCO is able to take into its calculations in terms of available supply. The minister may well indicate that so many megawatts of capacity in terms of wind energy have been built in South Australia, but only a relatively small percentage of that can be assumed for dispatch by NEMMCO in terms of the operation of the national electricity market. I seek that information because I think members ought to know. We know what occurred in the four years prior to 2002. We need to know what has occurred in the five years since 2002 in terms of additional capacity.

A statement made by the minister in the house in which I think he indicated that peak capacity in South Australia was a bit over 3,000 megawatts certainly did not fill me with too much joy, because the peak capacity on the change of government in about 2002 was not too far away from 3,000 megawatts. Of course, with the growth of the national economy and the growth in demand that we have seen, there is significant growth in potential peak capacity demand which will need to be met by peak supply over this summer and coming summers as well.

The last debate we had on the national electricity law was in 2005. A number of issues were raised then and I seek some responses from the minister as to what has occurred since then. That particular change in the law gave the Ministerial Council on Energy the power to direct the Australian Energy Market Commission to carry out a review and report to the Ministerial Council on Energy. I am wondering whether the minister, first, can provide information on the number of occasions when the ministerial council has directed the Australian Energy Market Commission to carry out reviews and to provide reports to the Ministerial Council on Energy and on what particular issues were those reviews to be conducted.

Secondly, the minister indicated during that last debate that, under that legislation, the ministerial council would be able to initiate rule change proposals. On how many occasions—and the details of those—has the Ministerial Council on Energy initiated rule change proposals under the current rules that have prevailed for the past two years? This is an issue I want to raise later on, but the minister said last time:

Placing these principles in the law rather than in the rules ensures that they cannot be changed by the normal rule change process and instead must be changed by legislation, thereby providing greater certainty for the industry and consumers on the regulatory practice of the Australian Energy Regulator.

That was the claim made in the debate in 2005. Will the minister clarify whether, in this piece of legislation we have before us in 2007, there are any changes to that thinking, or are the changes we are looking at in 2007 consistent with that statement made by the minister in 2005? In particular, I am wondering whether there are changes, which we are being asked to look at on this occasion which have been taken out of the law and been placed in the rules.

I am not sure how complicated a process this would be, but I assume the minister is in a position to be able to provide us with a copy, draft copy or otherwise, of the proposed rules once this legislation is passed. As I have said, I seek a copy or draft copy of those proposed rules but, in particular, I would like the committee's attention to be drawn to whether or not there are examples of issues that are currently being canvassed or covered in the national electricity law but are being taken out of the law and are being placed in the rules.

There may well be examples vice versa, where things have been taken out of the rules and placed in the national electricity law and, if that is the case, I would be similarly interested in that as well. I repeat again that the minister said last time that it was important to put these things in the law because it provided 'greater certainty to the industry and consumers on the regulatory practice of the Australian Energy Regulator'. So, if something is being taken out of the law and put in the rules, clearly, that would provide less certainty, using the minister's own words, for participants in the industry.

On the last occasion, the minister indicated that the law allowed ministers of participating jurisdictions to initiate a jurisdictional derogation as a rule change proposal. On that occasion, the minister indicated the derogations South Australia either had sought or was seeking. What I am seeking is advice from the minister as to whether, since 2005, there have been any further derogations sought by the South Australian minister or, in this particular legislative change, are we seeing or about to see further derogations in relation to South Australia's position? I have also asked the minister for a copy of the new rules.

I note in the 2005 debate that the minister said, 'It is important to note that this initial rule-making power can only be exercised once.' What the minister was saying there is that we were being asked to pass the law in 2005 and that we were giving the power to the ministers on a once-only basis to establish the national electricity rules and that after that they would not have that power and they would have to go through the rule change process. We were told that that would be on a once-only basis and that every other rule change would have to go through this transparent process.

As I read the 2007 legislation, it appears that the commitment given by minister Holloway on behalf of minister Conlon in 2005 is not being adhered to. If I am wrong I will be pleased to have that corrected but, on my reading of it, it appears that ministers Holloway and Conlon are saying, 'Okay, we said in 2005 that it would be a once-only use of this power, but we are now going to have another lick of the lollipop and are going to give the ministers the power to make another set of rules without parliament having any say in them.' After that they will then go through this transparent process again.

That is why I come back to the question I asked a few moments ago, because it is important for us in this parliament to know what the rules will be and, in particular, what the changes to the rules will be, as well as what issues have been taken out of the national electricity law and are now being incorporated into the rules. With the national electricity law, at least members of parliament and parliaments themselves have some say; with the national electricity rules we have no say—essentially, it is just an executive decision of ministers in the national electricity market meeting deciding what they believe best suits them and the market.

In 2005 the government said that the ministerial council was to reconsider the issue of merits review for electricity, and I note that in the second reading explanation there is an explanation of a limited form of merits review. I flag to the minister that I will need to take advice from him, and perhaps also from my colleague the Hon. Mr Lawson, regarding exactly what this particular form of merits review will mean in practice. I would also appreciate it if the minister could provide any greater detail or explanation to a non-lawyer in relation to that.

My colleague the member for MacKillop indicated to me that there was a June 2006 amendment to the Australian Energy Market Agreement. If that is in fact the case (I think we had a stoush about the version of the Australian Energy Market Agreement during the last debate in 2005, or it may have been the previous change to the law in 2004), and if there is a more recent form of the Australian Energy Market Agreement than the one I have, which is 2004, would the minister or his officers provide a copy to me and to those members of the committee who may be interested in having a look at it?

This has the potential to be a complicated committee stage debate and I do not intend to go through all the individual sections of the clauses tonight in the second reading; I will leave that to the committee stage. However, I will to flag three areas about which I want to ask questions. One is the issue of the timing of legislation. Those who have been in this chamber for a while know that at various times we have had a gun held to our head in terms of having to pass legislation for the national market. I recall that in June 2004 (I think) the state minister (and, to be fair, the federal minister) jumped up and down on their hind legs insisting that the legislation had to go through to help the establishment of the Australian Energy Market Commission and the Australian Energy Market Regulator. As we know, that was just a façade; all that was established at that time was a shell so that the ministers, both state and federal, could claim that they had met the time-line involved. Those bodies existed in name only for a number of months; they did nothing, and the existing regulators in the states and the other national bodies continued to operate.

Then, of course, we had the legislation in 2005 to which I have been referring and, again, there was pressure on us to get that legislation through, although it was not as bad as 2004. I will remind the Hon. Mr Holloway of his answers during the committee stage of that debate in 2005. He outlined that there would be a time-line, and this particular legislation was, I think, originally meant to be have been seen back in 2005-06. We are now seeing it in 2007. So, we are about 12 to 18 months, I suspect, behind time in terms of getting this legislation through, and this only relates to the distribution sector of the electricity industry.

My understanding is that there is another tranche of legislation which relates to the retail sector, which we will see, I assume, in 2008. Originally, we were meant to see that some time in about 2006-07. Then, as I understand it, if the government adopts the position that it is not going to hand over the power of retail pricing then there might be a third tranche of legislation when, and if, the government eventually decides to do what minister Conlon told the Sunday Mail in an exclusive interview a number of years ago, that he had agreed to hand over retail pricing powers to the commonwealth regulator. I want to confirm whether that is correct, that we potentially see another three tranches of legislation in implementing further stages of the national electricity market and, in particular, whether the minister can indicate when he and the ministerial council expect the parliament to see those pieces of legislation.

I seek advice from the minister also on the operation of the Australian Energy Regulator. Minister Conlon found himself in some hot water a couple of years ago when this was being debated, when a number of people made the suggestion, including myself, that the Australian Energy Regulator would be making critical decisions on the South Australian market from somewhere in Melbourne and would be out of touch with the South Australian electricity market. The minister's response to that was to say: 'Well, we need a branch office of the Australian Energy Regulator in South Australia.' I asked the minister—and the Hon. Mr Xenophon interjected at the time—exactly what is the shape, structure and substance of the Adelaide office of the Australian Energy Regulator as we debate this legislation?

Earlier in the year I met with the Australian Energy Regulator representatives in Melbourne and they indicated to me, at that stage, that they were having discussions about potential staff from ESCOSA coming across to the Australian Energy Regulator. I asked the minister to indicate: what is the staffing complement? What is the status of the most senior position with the Australian Energy Regulator in Adelaide? How many staff came across from ESCOSA to the Australian Energy Regulator in South Australia?

I flag the issue of retail pricing. As I said, minister Conlon let the cat out of the bag a couple of years ago in an interview with the Sunday Mail, where he gave an exclusive that he was going to transfer the power over retail pricing to Canberra. Since then he has come back to the position where he has not made that decision yet, and neither has the South Australian government, and he has various versions of the policy. I would like the minister to put on the record what the latest version is. One version was that he would not transfer the powers to the Australian Energy Regulator until we had a local office of the Australian Energy Regulator in South Australia.

I am asking for the minister to indicate exactly what he has agreed to in relation to a transfer of retail pricing powers to the Australian Energy Regulator, because certainly people at the national level believe that all of the states, and in particular, I think, the premiers at COAG have agreed that there will be a review of competition in the marketplace. I think that will be done by the AEMC, although I stand to be corrected on that. That has just been completed in Victoria and, surprise, surprise, that review says: 'Yes, there is competition'. There is to be a review, I think, next year in South Australia about our marketplace and, surprise, surprise, it will say: yes, there is competition.

My understanding from people at the national level is that the Premier supposedly agreed that, if this independent review shows that there is a competitive market, then the jurisdictions will hand over power to the Australian Energy Regulator. That is why I want to have a look at a copy of the national agreement, because that is the claim that is being made about South Australia's and Victoria's position, so I would like to see a copy of the agreement. If the South Australian government, through its Premier or minister, argues differently, then it ought to be put on the record what its position is, particularly if that independent review next year concludes that there is a competitive market in electricity pricing here in South Australia.

I flag that that is a critical issue in terms of this parliament's understanding of the legislation; that is, what deals, if any, has the South Australian government done to hand over the critical power of retail pricing of electricity to an Australian energy regulator? Mr Acting President—

The Hon. B.V. Finnigan: Mr President.

The Hon. R.I. LUCAS: Mr President; well they change so quickly here. I flag that, during the committee stage of the debate, that will be a critical issue, and it would certainly expedite the discussions if the minister could (a) provide the information that is sought before we commence the committee stage and (b) have a clear, concise and understandable explanation of what the government's position currently is and what the parameters of its decision-making process will be in the future.

I said earlier that I would flag two other issues which I did not, so I will quickly flag them now. In this legislation, in 2002, the Labor Party and others talked a lot about tougher penalties and major changes in relation to rebidding. I want the minister to summarise exactly what the government has achieved in relation to tougher penalties. I highlighted earlier the issues in relation to maintenance standards, and I do not think there have been any changes there, although there may have been tougher penalties in relation to generators' bidding practices, but that was not the issue that I raised. As to the issue of rebidding, what (if any) changes have been achieved in the past few years on that or are being incorporated in the changes to the National Electricity Law that we see before us this evening?

As I indicated, potentially, it could be a complicated committee stage. I do not intend to raise all of the minor issues during the second reading; I will raise those issues when we get to the committee stage.

Debate adjourned on motion of the Hon. B.V. Finnigan.

At 21:23 the council adjourned until Wednesday 24 October 2007 at 14:15.