STATUTES AMENDMENT (NATIONAL ENERGY RETAIL LAW IMPLEMENTATION) BILL

Introduction and First Reading

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

Second Reading

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for Tourism, Minister for the Status of Women) (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.

This Bill forms part of the Government's package of legislation to implement a national framework for regulating retailers and distributors who sell and supply electricity and gas to customers. The National Energy Customer Framework is an important component of the national energy reforms to which this Government is committed.

The purpose of this Bill is to amend the Electricity Act 1996, the Gas Act 1997 and other Acts as a consequence of the implementation of the National Energy Customer Framework in South Australia. It has been agreed that jurisdictions will aim for a start date of 1 July 2012 for the new Customer Framework.

Honourable Members will be aware that the National Energy Retail Law (South Australia) (Implementation) Amendment Bill 2012 will replace significant parts of existing jurisdictional energy legislation as South Australia transitions to the Customer Framework. This Bill therefore seeks to remove from South Australian energy legislation areas of duplication or inconsistency with the new national Framework.

Further, certain provisions of the National Energy Customer Framework rely upon jurisdictional energy legislation for their full effect. For example, the operation of energy ombudsman schemes, guaranteed service level schemes, and social policy initiatives such as community service obligations. Therefore, the Customer Framework is intended to operate in parallel with jurisdictional energy legislation, and this Bill provides for those jurisdictional arrangements to work with South Australia's application of the Framework.

The Customer Framework will also work alongside existing national electricity and gas regulatory frameworks covering wholesale markets and network access regulation. This Bill will make limited consequential amendments to South Australia's application Acts for the National Electricity and Gas Laws to ensure the National Energy Retail Law operates effectively within the broader energy regulatory environment. These amendments are necessary to ensure the important preparatory work being undertaken by the Australian Energy Regulator ahead of the commencement of the Customer Framework is valid. These are uniform provisions that each participating jurisdiction will include as part of its legislative reforms to implement the Customer Framework. The Commonwealth passed the Australian Energy Market Amendment (National Energy Retail Law) Bill 2011, which contained the same validation provisions, in September last year.

Honourable Members will be aware that energy retailers operating in South Australia are currently subject to a range of obligations contained in the Electricity Act 1996 and the Gas Act 1997, their Regulations, and in Codes made by the Essential Services Commission of South Australia. The requirement to comply with these obligations is established by conditions attached to the retail licence.

At the commencement of Customer Framework, South Australian licensing of on-grid electricity and natural gas retailers will cease and will be replaced by a national regime of retailer authorisation under the Framework. For the avoidance of doubt, licensing arrangements for the retail of off-grid electricity, the retail of reticulated liquefied petroleum gas, and for electricity distribution remain unchanged.

While most of South Australia's retail obligations will be replaced by similar obligations under the Customer Framework, some existing obligations are not covered and yet remain important features of the retail environment in South Australia. Existing retailer obligations which are not covered by the Customer Framework include South Australia's Residential Energy Efficiency Scheme, the customer concessions scheme, gas safety awareness plans, and the electricity feed-in mechanism.

Accordingly, these features will be preserved and continue to apply to retailers operating under the national retailer authorisation. For this purpose, the Bill provides for these retail obligations to continue as direct statutory obligations under the Electricity Act 1996 or the Gas Act 1997. The Bill creates new Parts in each of these Acts that will set out the continuing obligations that are to apply to a NERL retailer when operating in South Australia. The new Parts will enable certain existing retail obligations to be prescribed in regulations, such as specific Codes or Code provisions made by the Essential Services Commission.

These new Parts will apply to NERL retailers despite the fact that those retailers are not required to hold a licence in South Australia. Just as exemptions may be granted from South Australia's existing retail licensing regime, this Bill also provides that, with the approval of the Minister, the Essential Services Commission of South Australia may provide exemptions from the requirements set out in these new Parts.

The new Parts contain appropriate compliance and enforcement provisions, which are based on the existing provisions that apply with respect to a breach of a licence condition. For the majority of these direct obligations, the relevant regulator will continue to be the Essential Services Commission. Where a direct obligation relates to a technical or safety matter, the Technical Regulator will be the relevant regulatory body. Consequential amendments will be made to the existing provisions of each Act that govern the issuing of warning notices and assurances to enable these to work in relation to the obligations contained in the new Parts.

The Essential Services Commission also retains responsibility for South Australia's retail price regulation arrangements. The application of the Framework in South Australia will be modified by the National Energy Retail Law (South Australia) (Implementation) Amendment Bill 2012 to enable price regulation by the Commission to continue. This Bill makes minor amendments to the price fixing provisions of the Electricity Act 1996 and the Gas Act 1997 to ensure the Commission is able to continue to regulate the retail prices of a NERL retailer that is prescribed under the National Energy Retail Law (South Australia) Act 2011 as having the obligation to offer to sell energy.

To ensure consumers retain the ability to advise the Commission in relation to their remaining retail functions, the Bill provides for the role of the consumer advisory committee to continue to encompass the Commission's retail functions under the Electricity Act 1996 and the Gas Act 1997.

To ensure the Essential Services Commission and the Technical Regulator have the appropriate functions and powers in relation to retained obligations, amendments are proposed to the corresponding provisions in each of the Electricity Act 1996 or the Gas Act 1997. Furthermore, it is also necessary to amend the Essential Services Commission Act 2002 to ensure that the Commission is able to regulate NERL retailers, including by requiring a retailer to conduct an audit and report the audit results to the Commission.

Honourable Members will be aware that South Australia currently provides for an industry-funded model for the regulation of the energy retail sector in South Australia. South Australian retailers currently pay a licence fee that represents a contribution to the costs incurred to administer the regulatory framework for energy retailing.

The Bill provides for retailers operating under the Customer Framework to continue to be obliged to pay a fee that represents a reasonable contribution towards the administration costs that relate to those retailers. Administrative costs which can be recovered have been defined and will be further prescribed by Regulation.

The new administration fee is modelled on the existing retail licence fee arrangements, with an important difference. The amount of the new annual administration fee will be calculated in accordance with requirements to be prescribed in the regulations. This will improve transparency about the licence fee and enable businesses to better plan their business costs.

South Australia's arrangements for contestable network services will continue via a new provision to be inserted in the Electricity Act. The current arrangements are achieved via a transitional derogation under the National Electricity Rules, which will fall away with the commencement of the Customer Framework. Continuing to provide consumers with the ability to choose their service provider for certain types of network services such as network extensions will ensure competition and more efficient costs over the longer term.

Honourable Members will also note that the Bill removes the current Retailer of Last Resort (or 'RoLR') arrangements that apply to ETSA Utilities, as the Customer Framework establishes a comprehensive RoLR regime that will apply to both the electricity and gas sectors. Accordingly, the provisions contained in the Electricity Act 1996 are no longer required.

Minor amendments will also ensure the Electricity Act 1996 and the Gas Act 1997 make appropriate reference to the national energy laws, including the National Energy Retail Law, Regulations and Rules.

Subject to the passage of this Bill, supporting regulations will be required to specify the detail of the continuing obligations.

I commend the Statutes Amendment (National Energy Retail Law Implementation) Amendment Bill 2012 to Members.

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—Amendment of section 4—Interpretation

5—Amendment of section 6A—Functions and powers of Commission

6—Amendment of section 14A—Consumer advisory committee

These amendments are consequential.

7—Insertion of Part 3 Division A2

This clause inserts proposed new Division A2 in Part 3.

Division A2—Application of provisions

14E—Application of provisions

Proposed section 14E relates to the application of provisions in Part 3 to NERL retailers.

8—Amendment of section 23—Licences authorising operation of transmission or distribution network

These amendments repeal the provisions relating to the retailer of last resort requirements and remove the requirement that the Commission make a licence authorising the operation of a distribution network subject to a condition for the purposes of those requirements.

9—Amendment of section 24—Licences authorising retailing

This amendment relates to the repeal of retailer of last resort requirements.

10—Amendment of section 24B—Licence conditions and national energy laws

11—Amendment of section 35A—Price regulation by Commission

12—Amendment of section 35B—Initial electricity pricing order

These amendments are consequential.

13—Amendment of section 36AA—Provision for standing contract with small customers

These amendments relate to the implementation of the National Energy Retail Law.

14—Insertion of Part 3 Division 3AC

This clause inserts proposed new Division 3AC in Part 3.

Division 3AC—Contestable services

36AF—Contestable services

Proposed section 36AF relates to the provision of services on a contestable or competitive basis.

15—Amendment of section 54—Emergency legislation not affected

This amendment is consequential.

16—Insertion of Part 6A

This clause inserts proposed new Part 6A.

Part 6A—Regulation of NERL retailers

63AA—Application of Part

The Part applies to NERL retailers.

63AB—Compliance with certain code provisions under Essential Services Commission Act 2002 and requirements of regulations

Proposed section 63AB requires a NERL retailer to comply with certain requirements under codes published by the Commission and the regulations.

63AC—Participation in ombudsman scheme

Proposed section 63AC requires a NERL retailer to participate in an ombudsman scheme.

63AD—Compliance with customer concessions scheme and performance of community service obligations

Proposed section 63AD requires a NERL retailer to comply with any scheme for customer concessions or the performance of community service obligations.

63AE—NERL retailers annual administration fee

Proposed section 63AE provides for the imposition of an annual administrative fee on NERL retailers.

17—Amendment of section 63A—Warning notices and assurances

18—Amendment of section 80—Power of exemption

19—Amendment of section 94B—Energy efficiency shortfalls

These amendments are consequential.

20—Amendment of section 98—Regulations

This amendment relates to the implementation of the National Energy Retail Law.

Part 3—Amendment of Essential Services Commission Act 2002

21—Amendment of section 29—Commission's power to require information

This amendment provides that the Commission may require a NERL retailer required to comply with Part 6A of the Electricity Act 1996 or Part 5A of the Gas Act 1997 to conduct an audit of its compliance with the relevant Part and report the results of the audit to the Commission.

Part 4—Amendment of Gas Act 1997

22—Amendment of section 4—Interpretation

23—Amendment of section 6A—Functions and powers of Commission

24—Amendment of section 15—Consumer advisory committee

These amendments are consequential.

25—Insertion of Part 3 Division A2

This clause inserts proposed new Division A2 in Part 3.

Division A2—Application of provisions

18C—Application of provisions

Proposed section 18C relates to the application of provisions in Part 3 to NERL retailers.

26—Amendment of section 26A—Licences authorising retailing

This amendment relates to the implementation of the National Energy Retail Law.

27—Insertion of section 26B

This clause inserts proposed new section 26B.

26B—Licence conditions and national energy laws

This amendment relates to the implementation of the National Energy Retail Law and achieving consistency with the Electricity Act 1996.

28—Amendment of section 34A—Standing contracts

These amendments relate to the implementation of the National Energy Retail Law.

29—Repeal of Part 3 Division 3B

This amendment repeals the retailer of last resort scheme.

30—Amendment of section 54—Emergency legislation not affected

This amendment is consequential.

31—Insertion of Part 5A

This clause inserts proposed new Part 5A.

Part 5A—Regulation of NERL retailers

61AC—Application of Part

The Part applies to NERL retailers.

61AD—Compliance with certain code provisions under Essential Services Commission Act 2002 and requirements of regulations

Proposed section 61AD requires a NERL retailer to comply with certain requirements under codes published by the Commission and the regulations.

61AE—Participation in ombudsman scheme

Proposed section 61AE requires a NERL retailer to participate in an ombudsman scheme.

61AF—Compliance with customer concessions scheme and performance of community service obligations

Proposed section 61AF requires a NERL retailer to comply with any scheme for customer concessions or the performance of community service obligations.

61AG—NERL retailers to match available gas to customers' estimated aggregate demand

Proposed section 61AG provides that a NERL retailer must ensure that at all times the quantity of gas available to it for delivery to its customers from a distribution system is sufficient to meet reasonable forecasts of its customers' aggregate demand for gas from the distribution system.

61AH—NERL retailers annual administration fee

Proposed section 61AH provides for the imposition of an annual administrative fee on NERL retailers.

32—Amendment of section 61A—Warning notices and assurances

33—Amendment of section 77—Power of exemption

34—Amendment of section 91A—Energy efficiency shortfalls

These amendments are consequential.

Part 5—Amendment of National Electricity (South Australia) Act 1996

35—Insertion of section 15A

This clause inserts proposed section 15A.

15A—Regulation-making power for the purposes of the National Electricity (South Australia) Law

Proposed section 15A inserts a regulation making power for the purposes of the National Electricity (South Australia) Law.

36—Insertion of Part 8

This clause inserts proposed new Part 8.

Part 8—Validation of instruments and decisions of AER

20—Validation of instruments and decisions made by AER

Proposed section 20 relates to the validation of instruments and decisions made by the AER.

21—AER—authorisation of preparatory steps

Proposed section 21 relates to the authorisation of certain steps required of the AER before making a decision or an instrument.

Part 6—Amendment of National Gas (South Australia) Act 2008

37—Insertion of section 24

This clause inserts proposed section 24.

24—Regulation-making power for the purposes of the National Gas (South Australia) Law

Proposed section 24 inserts a regulation making power for the purposes of the National Gas (South Australia) Law.

38—Insertion of Part 6

This clause inserts proposed new Part 6.

Part 6—Validation of instruments and decisions of AER

25—Validation of instruments and decisions made by AER

Proposed section 25 relates to the validation of instruments and decisions made by the AER.

26—AER—authorisation of preparatory steps

Proposed section 26 relates to the authorisation of certain steps required of the AER before making a decision or an instrument.

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