NATIONAL ENERGY RETAIL LAW (SOUTH AUSTRALIA) (IMPLEMENTATION) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 27 March 2012.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (15:49): I rise on behalf of the opposition to speak to the National Energy Retail Law (South Australia) (Implementation) Amendment Bill. This is the second of two bills on our Notice Paper today. I was going to speak to the other one first, but the minister has informed me that they were done in the wrong order in the House of Assembly and that they would like to put the order right. Given that I expect both of them to pass today, I am not quite sure what the big deal is about the order. Nonetheless, I will speak to this one first.

The bill provides for the future to preserve and to continue to apply to national authorised retailers that are operating here. This bill removes any duplications or inconsistencies with the new national framework. This bill creates new parts in these acts and sets out continuing obligations to retailers operating here, and they will need to comply with certain codes and provisions, such as metering codes.

The second bill is consequential to amendments to South Australia's acts, which are of course the Electricity Act and the Gas Act. They will need to comply with certain code provisions like metering codes, technical and safety standards, the REES scheme, and the customer concessions scheme. Importantly, ESCOSA will still be responsible for South Australia's price regulation requirements, so the application of the framework in South Australia has been modified by the other bill we are yet to debate to enable ESCOSA's price regulation to continue.

Aspects of the National Energy Customer Framework will rely on state legislation for their operation, such as participation in an ombudsman scheme, and a guaranteed service level agreement. The national framework only requires retailers to be part of an ombudsman scheme in respect of small customers, whereas South Australia's existing arrangements require participation in relation to larger customers. Provisions will make sure that the NERL retailers will continue to participate as currently required in South Australia.

Although a number of ESCOSA's functions will move to the Australian Energy Regulator, ESCOSA will still need to cover costs for its remaining functions. Existing retail licence fees which currently cover the costs, such as REES, feed-in tariff costs, and membership to the ombudsman's scheme will be gone; therefore, regulations will set out an administrative fee to be charged to retailers.

I was advised in my briefing that this charge will represent a reasonable contribution towards the commission's administrative costs. I did question, in the briefing, whether the commission envisaged their costs going down given that their functions had decreased overall and, if they had less work to do, then we may see some savings which would eventually be passed back through the system to government or to consumers.

I am advised by the department that ESCOSA's estimate cost savings for the 2011-12 direct salary time of staff and indirect salary costs and overheads are approximately $560,000. I do hope that those savings are preserved, as so often in this modern world we see that we make legislative changes to make a system simpler or better and then we find that it is still more costly and often more cumbersome than the system or legislative regime we had before. The bill provides for the application of South Australia's feed-in mechanism with relation to the new National Energy Retail Law retailers.

Energy retailers currently have to comply with certain obligations in the electricity and gas acts, and associated regulations in the codes developed by ESCOSA. The requirement to comply is part of their licence obligations and relates to the technical and safety provisions, energy schemes and feed-in provisions. These will now become direct legal obligations under the national framework, and there are provisions in the bill for this, creating new parts, and each of our electricity and gas acts will provide for that. In other words, those obligations will be kept and continue to apply to the National Electricity Retail Law retailers that are operating in South Australia.

The Technical Regulator will regulate these obligations where they relate to technical and safety matters. Off-grid electricity and reticulated LPG retailers will not move to the national arrangements, so several retail licensing provisions remain in the South Australian acts; it will be business as usual for those people. I believe that Coober Pedy is supported by off-grid electricity, and reticulated LPG services exist in some areas of Mount Gambier. The Roxby Downs arrangement falls under the BHP indenture, so that will also be unaffected.

The bill also makes some consequential amendments to South Australian application acts for the national electricity and gas laws so they operate within the broader energy and national regulatory environment. Every jurisdiction will incorporate these amendments. There are also amendments which allow the Australian Energy Regulator to begin work which allows for various decisions to be implemented from 1 July 2012.

This bill and next bill that we will debate shortly are a package of bills. I will flag that we do have an amendment to this bill, and we will take advantage of the opportunity while the Electricity Act is open during the debate on these bills just to move two relatively simple amendments which correct a couple of anomalies in the feed-in scheme. I will not bring them into the debate now. I think it was put on file back on about 20 April, so members would be well aware of its content, and I will be moving that amendment when we get to the committee stage of this bill. I commend the bill to the chamber.

The Hon. M. PARNELL (15:55): In supporting the National Energy Retail Law (South Australia) (Implementation) Amendment Bill 2012, I want to put two issues before the council that go to the effectiveness of this legislation in providing for genuine consumer protection. These two issues are late payment fees and, secondly, reviewing the implementation of these laws to make sure that the promises of consumer protection that we have received do in fact eventuate.

I will start with the question of late payment fees. What we are referring to is the ability of retailers to charge a fee to a customer for the late payment of an account. The Greens believe that, given the nature of energy as an essential service to households and given the increasing proportion of household budgets going to energy bills, this is not an appropriate measure to further penalise those who are struggling to pay their electricity bills.

Members would have received from the South Australian Council of Social Service a briefing note that actually sets out some of the problems with late payment fees. I refer to the SACOSS briefing note of 26 March 2012 which, under the heading 'Late payment fees', states:

Late payment fees disproportionately penalise households experiencing payment difficulties. This is not an appropriate measure when dealing with an essential service, where the penalty for nonpayment is disconnection. We believe that late payment fees only exacerbate hardship. SACOSS is of the view that late payment fees should be banned.

In summary, the NERL provides that late payment fees can not be charged to 'hardship customers' and in jurisdictions where late payment fees for small customers under a standard retail contract are not permitted by State or Territory law. SACOSS understands that about 0.3 to 0.4 per cent of residential customers are on retailer 'hardship' programs, yet about 25 per cent of households currently struggle to pay their energy bills on time, despite giving very high priority to utility bill payment. SACOSS considers late payment fees to be inappropriate.

So, when we get to the committee stage, I will have an amendment which seeks to prevent late payment fees for small customers, and I think that is an appropriate thing for us to do.

I do understand that one of the arguments that will be mounted in favour of late payment fees is that there is a proportion of the public out there who will take advantage of that scheme and who will deliberately pay their bills late, leave it until the last possible moment before disconnection and then pay up. Whether those people exist in reality or simply in the imagination of electricity companies is a reasonable question for us to ask. I am indebted to UnitingCare Australia and, in particular, Mark Henley, for having provided me with some analysis on low income people and their attitude towards power bills.

I should also take the opportunity now to congratulate the former UnitingCare Wesley organisation for their rebranding recently to the name of Uniting Communities. I was very pleased to attend their launch at the Adelaide Oval. The only disappointment for the day was that the media was paying more attention to the demolition of the grandstand and the waste of usable furniture, when in fact what was happening inside the meeting hall was, I think, of more importance.

The information that has been provided by UnitingCare Australia is in relation to surveys they had undertaken of low income people showing how seriously they take payment of their bills. What we find from that survey is that lower income people—that is, household annual income of less than $40,000 per year—place higher priority on paying electricity bills on time or early.

In fact, the proportion of low income people who prioritise their electricity bill was 41 per cent, compared with high income earners, which was 28 per cent. So, in fact, the people who are more able to pay their bills are the ones who are more likely to hold out and pay their bills late. This has a disproportionate effect on low income people, so the Greens want to see those fees banned for small residential customers.

Another thing we believe is important—and we will be moving an amendment in committee—is to make sure that we keep a track of the promises that have been made and assess on a regular basis whether, in fact, they are being achieved. I will be moving an amendment for a review that the Essential Services Commissioner must undertake at the expiry of two years from the commencement of the legislation, which will give us some sort of a measure as to whether the impact of these new laws on consumers has delivered the promises, including efficiencies and customer protection promises, that have been made.

I would make the point that we are not seeking to impose any additional burden on industry or on business. We simply want a customer impact review to be undertaken so that we can see whether the promises made are coming to fruition. With those brief comments, the Greens will be supporting the second reading of this bill.

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) (16:02): I would like to thank honourable members for their second reading contributions and their support for this bill. I look forward to dealing with the committee stage expeditiously.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. D.W. RIDGWAY: As I indicated earlier, I thought maybe Mitch Williams or the government got it back to front in the House of Assembly; I apologise, as evidently I have it back to front, too, in the Legislative Council. What I would like to do is put some comments in relation to this bill on the record while the staff are coming around.

As I said, these two bills were final instalments in a package designed to implement COAG's 2007 agreement to establish a single, industry-funded Australian energy market operator (AEMO) for both electricity and gas. The first of these bills implements the national legislation here in South Australia. It includes a number of provisions to amend national law, as we are the lead legislator. It creates transitional provisions so there is minimum disruption to the market and existing contracts, with retailers taken, hopefully relatively seamlessly, into the new system.

Customers who are on default contracts will move to the national framework's deemed customer retail arrangement. That will be a temporary contract until retailers contact customers and assist them in moving to a permanent standing or market contract.

We will be retaining certain elements of the current state system, the ones which are perhaps preferential to aspects of interstate systems. Each jurisdictional implementation bill will most probably have specific provisions for its own state. I understand that the state-specific provisions will apply to operators under national authorisation, which are doing business here in South Australia. Some of the notable state-specific provisions are that South Australia will retain some of its own consumer protections, and they will be regulated at the national level. This is mainly of interest to those deemed small customers who are entitled to a suite of protections under a normal retail contract.

The threshold defining a small customer will be higher than under the national framework, so this bill will retain the threshold of 160 megawatt hours per annum. That is a greater threshold than some of the other states, so effectively customers here in South Australia will have greater protections, relative to the same consumptions in other states.

Our application of the national electricity retail law ensures the continued operation of the existing price regulation framework. AGL would do this for electricity and Origin would do it for gas. So these companies will have to offer regulator price (that is, the standing offer price dictated under the national energy law) and, on top of that, can make unregulated market offers as can other retailers.

The price comparator offered by ESCOSA will be maintained. This is an incredibly important tool for customers, especially as the cost of living soars and people need an opportunity to save money wherever possible. It will be a while until the Australian Energy Regulator's price comparator is up and running, so we will maintain our current one until the national one has the same functionality. I understand that provision is made to move to a national tool once it becomes available.

South Australian customers will have access to a dispute resolution process, including of course the Energy Industry Ombudsman. Provisions are being put in place to make sure that any disputes arising before the framework comes into operation (including any to the Ombudsman) can go ahead under the new framework. Quite sensibly, there are provisions on late payment fees whereby they cannot be charged while a customer and retailer are involved in a formal complaint process. As is currently the case, they cannot be charged to hardship customers either.

South Australia will also retain its small claims regime and will suspend the national framework regime. Our distributor, ETSA, operates this so that its liability obligations are met for failure of supply of electricity in bad faith or in negligence.

The national energy retail law establishes a regime to enable small customers to make claims for compensation from distributors who provide connection services to the customer's premises. In order for the national regime to operate, national regulations or local instruments are required to define certain aspects of the small claims service, such as a claimable incident. As ETSA Utilities already has a small claims service successfully operating in South Australia, the new regime under the national energy retail law is not being established.

South Australian small customers will continue to have access to the small claims service operated by ETSA Utilities in accordance with ETSA Utilities' liability obligations currently contained in the distribution code. As a consequence of South Australia's implementation of the national electricity law, the liability obligations currently contained in the distribution code are intended to be prescribed in regulation.

South Australia currently requires retailers to comply with certain standards relating to a retailer's responsiveness to telephone calls and written inquiries. The National Energy Customer Framework does not provide for similar standards. Accordingly, South Australia proposes that these service standards be retailed through the National Energy Retail Law (South Australia) (Implementation) Amendment Bill. We are glad to hear that customers will still be entitled to minimum service standards under these new arrangements.

I also note that this bill also deals with some issues arising from how the national law was drafted. For example, it gives the technical regulator more discretion in working with a retailer before a retailer of last resort event takes place. Obviously, there will sometimes be issues whereby a retailer's access to the wholesale market is threatened, perhaps due to a simple administrative oversight. It does not make sense to initiate the raft of arrangements needed for a retailer of last resort to be appointed when the technical regulator is able to resolve a matter efficiently. Therefore we see this as a sensible approach. The energy retailer will be responsible for appointing the retailer of last resort, and I understand that application process is currently at the expression of interest stage.

With regard to retailer authorisations, the bill clarifies how partnerships can apply for national authorisation so that an application can be made jointly. With those few comments, I indicate that the opposition will be happy to support the National Energy Retail Law (South Australia)(Implementation) Amendment Bill 2012.

Clause passed.

Clauses 2 and 3 passed.

Clause 4.

The Hon. M. PARNELL: I move:

Page 9, lines 13 to 23—Delete subsections (1) and (2) and substitute:

A retailer must not impose a fee for late payment of a bill for customer retail services provided to a small customer.

This is the amendment I referred to earlier. It is a ban on the imposition of late payment fees. Under the bill, clause 24 states that a retailer may impose a fee for the late payment of a bill and then proceeds to set out some very minor restrictions, such as the fee must not exceed the reasonable costs of the retailer in recovering an overdue amount, and also bills that are in dispute should not be subject to a late payment fee. I think we can do better than that, I think we can ban them altogether. That is what the South Australian Council of Social Services has asked for.

I remind members that the ultimate sanction of not paying your bill is that you get cut off. That is a pretty serious sanction. As I pointed out, we know that lower income people are more assiduous at paying their bills than higher income people, which means that the late payment fees will fall disproportionately hard on those who are struggling. In terms of the figures I gave before, only 0.3 per cent to 0.4 per cent of residential customers are on formal hardship programs, but about 25 per cent of customers struggle to pay their bills.

We know that, ultimately, the bills do get paid (in the vast majority of cases) and that people will go without in order to keep the lights burning and the power going. We know that we have the capacity as a state to put in place our own rules relating to this matter. It is appropriate for us to say that these late payment fees will not be part of the energy landscape in South Australia. I would urge all honourable members to support this amendment, which comes, as I say, at the request of the South Australian Council of Social Services.

The Hon. G.E. GAGO: The government rises to oppose this amendment. This amendment seeks to prohibit the charging of late payment fees on small customers. The government does not support this amendment as the National Energy Customer Framework achieves an appropriate balance in relation to late payment fees by ensuring that those customers who cannot afford to pay their energy bills on time are not penalised, while allowing retailers to recover their costs from those customers who choose not to pay their bills on time. The government recognises that customers experiencing hardship should not be subject to late payment fees, and I can advise that the national energy retail law introduces a prohibition on retailers charging hardship customers late payment fees.

In addition, the government is amending the national framework's application in South Australia to provide greater protections with respect to late payment fees. Firstly, South Australia's proposed amendments retain the existing requirement which limits late payment fees to the reasonable costs of the retailer recovering the amount owed. Secondly, the proposed amendments introduce a new prohibition on late payment fees where a customer has lodged a complaint under the national framework with their retailer or with the Energy Industry Ombudsman and the complaint is being dealt with. The government believes that this provides appropriate protection for vulnerable customers, while allowing retailers to recover their costs, where appropriate.

Late payment of bills results in higher operational costs for energy retailers, and there is a risk that, in the absence of late payment fees, the cost to retailers of late payment of bills and the risk of resulting bad debts will be reflected in higher energy prices that may be passed through to all customers. Further, a ban on late payment fees, as proposed, may act as a disincentive to customers who otherwise have the financial capacity to pay their bills on time.

The Hon. D.W. RIDGWAY: The opposition will not support this amendment. In relation to late payment fees, the bill provides:

(1) A retailer may impose a fee for late payment of a bill for a customer retail service.

(2) However, if the service is provided under a customer retail contract with a small customer—

(a) the fee must not exceed the reasonable costs of the retailer in recovering an overdue amount;

The opposition's view is that that actually covers the reasonable costs, whether a bit of postage or a little bit of administrative work, and if it gets to the point where they perhaps have to get a debt collector or take some legal action to recover it, at the end of the day probably, as the Hon. Mark Parnell says, the vast majority gets paid and in most cases it is just a simple arrangement, I suspect, where there will be some late payment of fees and often arrangements are made.

But, where there is a problem, we think the bill currently covers it adequately in that the fee must not exceed the reasonable costs of the retailer recovering the overdue amount. So, we will not support the Hon. Mark Parnell's amendment.

Amendment negatived.

The Hon. M. PARNELL: I move:

Page 11, after line 26—Insert:

29A—Review

(1) The Commission must conduct a review of the operation of the National Energy Retail Law in South Australia after the expiry of 2 years from the date fixed under section 4.

(2) The review must focus on the impact of the National Energy Retail Law on consumers of energy and whether the implementation of the Law has—

(a) resulted in increased efficiencies; or

(b) adversely affected customer protection in pursuit of national consistency,

and may address such other matters as the Commission thinks fit.

(3) The Commission must prepare a report on the outcome of the review and provide a copy of the report to the Minister.

(4) The Minister must, within 6 sitting days after receiving a report under subsection (3), have copies of the report laid before both Houses of Parliament.

(5) The Commission must, between the date fixed under section 4 and the completion of the review under this section, publish, on a quarterly basis, statistics about the de-energisation of premises due to inability to pay energy bills during each quarter.

This is the review clause, which is very simple in its operation and imposes no additional obligations on electricity companies. All it seeks to do is ensure that the promises that have been made in the introduction of these new national energy retail laws in fact flow through to those they are designed to benefit, namely, customers.

In a nutshell, the review is a two-year review and is conducted by the Essential Services Commission, and the objectives of the review are to determine whether the implementation of these national energy retail laws has resulted in increased efficiencies or whether or not they have adversely affected customer protection in the pursuit of national consistency.

It will be a fairly straightforward report, a statistical analysis of the outcomes of these changes, with the report to be tabled before both houses of parliament. Whilst the commission is fairly open as to how it reports and what it reports on, one specific obligation I have included in this amendment is to continue the status quo, the current practice, of publishing quarterly statistics about people being disconnected (or 'de-energisation' is the word used in the legislation) due to the inability to pay energy bills.

It will be important for us to keep our finger on the pulse of electricity consumers, in particular low income consumers, and for us to know how many of these are being disconnected through an inability to pay bills. That information will become more important as energy prices rise. Whilst I do not need now to go into all the reasons why energy prices will rise, what is absolutely clear is that the overwhelming reason is the increased investment now required in infrastructure, in distribution infrastructure in particular.

We know that electricity prices over about a three-year period are going to go up by about 31 per cent due to those infrastructure costs. When you add the carbon price it adds a small amount—it will go up to 36 per cent. I just make the observation that whilst people are out there saying that the reason electricity prices are going up is because of environmental initiatives, it is rubbish. Electricity prices are going up for a range of reasons, some of which flow back to the privatisation of ETSA and the valuation of assets, including easements, but much of which relates to a need to improve infrastructure which results, in an urban environment, from massive air conditioners as much as anything else.

So we know that electricity prices are going to go up. We know that people will be disconnected for nonpayment of their bills, and we need to keep a tab on how often that is happening. My understanding is that the current practice is quarterly reporting and we want to ensure that that quarterly reporting of disconnections continues.

The Hon. G.E. GAGO: The government opposes this amendment. We do not consider it necessary to impose a new legislative requirement for the Essential Services Commission to undertake a review. If, after a period for implementation of the new national framework, a review is deemed to be necessary, both the Treasurer (as the responsible minister) and the Minister for Resources and Energy (as the industry minister) have power under the Essential Services Commission Act 2002 to direct the commission to undertake a review.

The government considers that the reporting requirements imposed on the Australian Energy Regulator under the National Energy Consumer Framework provide sufficient information to stakeholders and governments about the framework's operation to inform on the necessity to direct a review to be undertaken. The Australian Energy Regulator is required by the law to prepare and publish an annual retail market performance report comprising market overview and market activities reports. This will include information such as a report on energy affordability for small customers, customer service and customer complaints, and the handling of customers experiencing payment difficulties.

The market activities report must also include information and statistics on the number of premises disconnected for nonpayment. In addition, the Australian Energy Regulator is intending to publish quarterly information on the performance of the energy retail market, including the number of disconnections for nonpayment and reconnections, as is the current practice by the commission. On this basis the government does not support the requirement to publish this information by the commission as it would be inefficient for two separate regulators to collect and publish the same information.

The Hon. D.W. RIDGWAY: This amendment, which was, I think, put on file at 12.17 yesterday, just dropped outside the opposition's time frame to evaluate things before our party room. However, we do not necessarily see that a review is the wrong thing to do, so I indicate that we will be happy to support it. However, when we have had a chance to consider it over the next 24 to 36 hours, if a message comes back that it is a bad decision, then we probably would not insist on it. We think it is worth progressing. We think a review is not necessarily a bad thing as it gives an opportunity to make sure that things are operating in the way that we are led to believe they should be. I indicate that the opposition is prepared to support it.

The Hon. J.A. DARLEY: I will be supporting the Hon. Mark Parnell's amendment.

The committee divided on the amendment:

Majority of 8 for the ayes.

Amendment thus carried; clause as amended passed.

Remaining clauses (5 to 16) and title passed.

Bill reported with amendment.

Third 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) (16:30): I move:

That this bill be now read a third time.

Bill read a third time and passed.