Legislative Council Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia Legislative Council published Bills Statutes Amendment (Energy Efficiency Shortfalls) Bill STATUTES AMENDMENT (ENERGY EFFICIENCY SHORTFALLS) BILL Introduction and First Reading Introduction and First Reading Received from the House of Assembly and read a first time. Second Reading Second Reading The Hon. G.E. GAGO Legislative Council Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy The Hon. G.E. GAGO (Minister for State/Local Government Relations, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister Assisting the Minister for Transport, Infrastructure and Energy) (22:39): 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. The Statutes Amendment (Energy Efficiency Shortfalls) Bill 2009 represents a key step in implementing the Government's Residential Energy Efficiency Scheme (REES), which commenced on 1 January 2009. The REES delivers on the Government's commitment to assisting South Australian families, particularly low income families, reduce their energy bills, cut their greenhouse emissions, and help them prepare for price increases arising from emissions trading in 2010. The Honourable Mike Rann announced the REES at the Solar Cities Congress in Adelaide in February 2009. The REES takes effect as a licence condition for all retailers of electricity and gas in South Australia who supply more than a threshold number of residential customers. The framework for the scheme has been established by regulations under the Electricity Act 1996 and Gas Act 1997. The REES requires obliged retailers to meet three targets in respect of each of their licences. Firstly, they must achieve a set amount of greenhouse gas savings, measured in tonnes of carbon dioxide equivalent, by implementing energy efficiency activities such as ceiling insulation in households. Secondly, they must ensure a set proportion of these savings are achieved in a Priority Group comprising low income households and those in hardship. Thirdly, they must deliver a set number of energy audits to Priority Group households. Scheme targets are set by the Minister for Energy, and are apportioned to obliged retailers by the Essential Services Commission of South Australia (ESCOSA). The Minister also sets the minimum requirements for an energy audit; and the initial list of eligible energy efficiency activities retailers can implement, their deemed value in tonnes of greenhouse savings, and their minimum specification. ESCOSA has the role of maintaining the list of energy efficiency activities going forward. The REES is similar to schemes being established in other jurisdictions, including the Victorian Energy Efficiency Target and New South Wales Energy Efficiency Target. These schemes also commence in 2009. This Bill amends the Electricity Act 1996 and Gas Act 1997 to provide for a new and flexible penalty regime specifically for the REES and which is designed to motivate retailers to comply with their obligations. In essence, the penalty regime applies where ESCOSA finds that a retailer has not met more than 90 per cent of one or more of its targets for the year. If this occurs, ESCOSA may issue a notice giving the retailer a choice to either pay a monetary penalty, which varies depending on the size of the shortfall; or be prosecuted for breach of licence which carries a criminal conviction and a fine of up to one million dollars. If the retailer has met more than 90 per cent of its target, any shortfall is simply carried over to the next year without penalty. The monetary penalty has two components: a flat rate of up to $100,000 which is payable regardless of the size of the shortfall; and a dollar value for each tonne of carbon dioxide equivalent not saved, and for each energy audit not undertaken. Dollar values are to be set above what it would cost retailers to comply, and at a level sufficient to deter non-compliance. The actual dollar values will be considered by the Government and set by Regulation once this Bill has been passed. Any penalties are paid to the Consolidated Account. If the retailer ignores the notice or refuses to make a choice, ESCOSA has discretion to either enforce the monetary penalty as a debt, or prosecute for breach of licence. Nothing stops ESCOSA from commencing proceedings for breach of licence at any time, but if it does so, then it cannot also recover the monetary penalty. A 'make good' provision has been included for a shortfall relating to a retailer's energy audit target. This means that even though a retailer pays a penalty or is successfully prosecuted, the entire audit shortfall is added to the retailer's target for the next year. Without this provision, there is a material risk that retailers may pay the penalty rather than comply. The energy audit is an important component of assisting low income families, and the Government has sought to ensure the primacy of this measure. The amendments provided for in this Bill and the anticipated amendments to the regulations will come into force after the commencement of the REES (1 January 2009). Accordingly, the Bill specifically provides that the penalty regime applies to any relevant shortfall arising in its first year of the operation. In addition to the penalty regime, retailers face significant commercial, prudential and reputational risk in not complying with their obligations under their licence. All of these things in combination will assist in ensuring South Australian families, including low income families, benefit from reduced energy costs, as well as delivering environmental benefits from reduced greenhouse gas emissions. The Department for Transport, Energy and Infrastructure consulted extensively with retailers, their potential contractors, ESCOSA, welfare groups and other stakeholders during 2008. This included specific consultation on the penalty regime established by this Bill. I commend the Bill to Members. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title 2—Commencement 3—Amendment provisions These clauses are formal. Part 2—Amendment of Electricity Act 1996 4—Insertion of section 94B This clause inserts new section 94B. 94B—Energy efficiency shortfalls Proposed section 94B provides that an electricity retailer is liable to a penalty imposed by the Essential Services Commission of South Australia if the retailer has failed to engage, in accordance with and to the extent required by the regulations, in activities relating to energy efficiency identified by the regulations (an 'energy efficiency shortfall'). The penalty is comprised of a prescribed base penalty and an additional amount to reflect the extent of the energy efficiency shortfall. Procedures for recovering a penalty are set out in the measure. A retailer may elect to be prosecuted in respect of a shortfall instead of paying the shortfall penalty. Part 3—Amendment of Gas Act 1997 5—Insertion of section 91A This clause inserts new section 91A. 91A—Energy efficiency shortfalls Proposed section 91A is to the same effect as proposed section 94B of the Electricity Act 1996. Retailers required to engage in energy efficiency activities hold licences under both the Gas Act 1997 and the Electricity Act 1996. Hence, it is necessary to insert the penalty provision into both Acts. Debate adjourned on motion of Hon. D.W. Ridgway.