STATUTES AMENDMENT (SMART METERS) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 29 October 2013.)

The Hon. R.I. LUCAS (15:23): I rise on behalf of Liberal members to support the second reading of the Statutes Amendment (Smart Meters) Bill. South Australia, as members will be well aware, is the lead legislator for national energy retail law and national electricity law and this bill is being introduced as part of a standing council on an energy and resources market reform initiative. The bill represents the initial legislative stage for the eventual widespread introduction of smart meters and related technologies.

Currently in South Australia about 99 per cent of electricity households and businesses are fitted with the traditional accumulation meters that monitor overall usage. Retailers monitor overall usage on site at quarterly intervals. This old technology requires inspectors to visit properties to read meters and gives little visibility of usage. The old meters cannot be used to manage demand, and I am advised the cost of this old technology is about $50 per user.

The bill establishes the rule-making mechanism by which a rollout of smart meters could be established. The bill does not implement the full recommendations of the SCER (Standing Council on Energy and Resources) process and is deliberately not overly prescriptive, given that different jurisdictions will seek to incentivise or encourage the adoption of smart meters in different manners. Of course, Victoria has already implemented its own scheme which was mandated.

The bill allows the South Australian Minister for Energy to implement the initial National Electricity Rule amendments to ensure that consumer protections are in place in early 2014. After these initial rule changes, the minister will have no power to make further rules under the bill. The rules may be made only on the recommendation of SCER.

Secondly, the bill removes the power for a minister to issue a mandate for a broadscale smart meter rollout determination, as occurred in Victoria. SCER has agreed that any future rollout of smart meters should be market driven and competitive, and by removing the minister's power to mandate the rollout by South Australian Power Networks the door is open for others to enter the market without that risk in prospect. The bill retains, however, the ability of ministers to mandate limited trials or assessment, as is currently being conducted in some suburbs. The bills also goes on to provide a number of consumer protections.

In addressing some comments to this bill and the current state of the National Electricity Law and the national electricity market, I must admit that I have had to chuckle a few times as I have seen the Jay Weatherill Labor government and, in particular, minister Koutsantonis, in essence, virtually twisting himself inside out justifying positions which previously he and his government have been implacably opposed to.

I have seen in many debates, both in the house and also in the media, minister Koutsantonis, on behalf of the Jay Weatherill Labor government, lauding the virtues of the deregulation of pricing in South Australia and the introduction of competition in terms of pricing. Indeed, on a number of occasions, even during this debate, the minister was claiming that when the government deregulated electricity pricing in this state the first thing the opposition said was that we should have done it sooner. He said, 'So, I went and checked and, of course, there were no calls for us to deregulate before we did it. Now it is the same.' The minister has made these claims on many occasions during recent months on this debate; that is, the minister is the champion of deregulating electricity pricing in South Australia and the introduction of competition.

The minister is a slow learner, we know that, but when the electricity market was deregulated, when the electricity assets were privatised in South Australia, the then Liberal government, all during that particular period, mapped out a program of the introduction of competition in the marketplace over a period of time. Various tests were set in relation to the final tranche of that, which was into the retail market for the residential sector, in particular, and once sufficient competition had been introduced, there would be the deregulation of pricing.

Of course, even though there had been reports produced by national regulatory authorities saying that there was competition in the marketplace, the Jay Weatherill Labor government in South Australia, for quite some time, opposed competition and the deregulation of electricity pricing in South Australia. Now the minister is claiming to be the champion of this and that, indeed, the Liberal Party in South Australia has never supported it.

As I said, the minister is either a slow learner or he is deliberately excluding the origins of this particular debate and, indeed, his position and his party's position all during that particular period. They were the ones who opposed the introduction of the deregulation of electricity pricing. They were the ones who said it was one of the evils for the national market and privatisation. They were the ones who said they would never support it, and yet the minister just hopes that everyone will forget that was the Labor Party's position and hopes that they will forget that was his position. He now seeks to cloak himself as the champion of deregulation and competitive pricing.

The other thing I chuckle about in terms of this debate, as I see the minister twisting himself inside out on this topic, is the minister's position in relation to privatisation and government ownership of assets. On many occasions, and even during this debate, the minister is very critical now of those governments that operate publicly owned power assets. He actually does two things. On the one hand he says he opposes privatisation and it is the cause of all the problems but then, on the other hand, he is talking not to the retail market through talkback radio but in the house or to the electricity fora and conferences in this debate, and let me quote him again:

Electricity is a very controversial subject and the SCER process is a very difficult one because there are entrenched biases within the SCER process. Those biases are from our eastern states colleagues, whether they be Labor or Liberal, and the government owned assets of Queensland and New South Wales. They protect their consumer advantage very well and that consumer advantage is to profit from other consumers and maintain the profitability of their own assets. They use regulations of the National Electricity Law to their advantage, to benefit their own taxpayers.

What he is pointing out there is that the government owned assets in New South Wales and Queensland use the rules and regulations and the law to reap benefits for the taxpayers of South Australia to the disadvantage of the operation of the national electricity market. The Treasury there is able to, in his contention anyway, take profitability to the disadvantage of the others within the national electricity market.

There are many other examples. I am not going to delay the process today in pointing out the inconsistency and the hypocrisy of the minister's position because I think it is self-evident to all those who follow the debate. As I said, when the minister is on talkback radio, he attacks private ownership of electricity assets but in any other forum that he attends he attacks government ownership of electricity assets and champions competitive pricing, competition and deregulation of the electricity market. Sooner or later the inconsistency and hypocrisy of that position will be self evident.

I want to take the opportunity today to put on the public record something that I have not before put on the public record and this has been prompted as a result of continuing to hear minister Koutsantonis and some other Labor members saying that they had always proposed privatisation of electricity of ETSA and they continue to oppose the privatisation of ETSA. I can indicate that former Labor legislative councillor the Hon. Trevor Crothers was one of two key votes in the Legislative Council to support the privatisation of ETSA in South Australia, a courageous decision that he and his colleague the Hon. Terry Cameron took at the time.

The Hon. Trevor Crothers told me at the time, and on a number of occasions after that debate and before he passed away, that during that particular debate he was approached by very many Labor MPs at the time who were in the parliament, including now minister Tom Koutsantonis. He told me that now minister Koutsantonis, at that particular time before the vote, urged him to cross the floor and vote with the Liberal Party, the Liberal government, for the passage of the ETSA legislation.

As the Hon. Mr Crothers put it to me, it was not because of any ideological position or merit-based judgement the Hon. Mr Koutsantonis had arrived at: it was simply a view that Mr Koutsantonis and a number of other Labor MPs had that the Labor Party would be crucified at the upcoming elections in relation to problems with the State Bank debt, or the state's debt, if the Labor Party was seen to prevent the pay-down of the state's debt through the privatisation of the ETSA assets. That particular conversation is also known to the Hon. Terry Cameron who, of course, is still alive. The Hon. Terry Cameron can attest to the accuracy of that particular statement that the Hon. Trevor Crothers made to me on a number of occasions.

I think it is important to highlight the cant and hypocrisy of certain members, in this particular case Labor minister Koutsantonis, on this issue of ETSA privatisation because, as I said, when it suits him he loves to run around saying that he is always opposed to privatisation and continues to oppose the privatisation of electricity assets, yet what is quite clear is that right from the word go he was urging Labor MLCs Trevor Crothers and Terry Cameron to cross the floor and vote with the Liberal government for the privatisation of electricity assets in South Australia. As I said, I think it is important at this stage to put that on the public record. Of course, I was not there for those discussions; I can only recount what the Hons Trevor Crothers and Terry Cameron have told me over the years in relation to those conversations.

In relation to this additional element of the potential introduction of competition into the marketplace and the implications of smart meters, there is much discussion about where smart meters might end up and what use might be made of them in South Australia. We know that way back in 2005 the company now known as SA Power Networks was commissioned by ESCOSA in South Australia to conduct a demand management, research and development program aimed at introducing demand-management strategies into the South Australian marketplace, and a budget of $20.4 million was delegated by ESCOSA to that project. I am told that through careful husbanding of that money, almost eight years later the last of that money is being spent on continuing demand management research and development, and the most recent trials and programs continue in the suburb of North Adelaide.

In previous years the suburbs of Glenelg, Mawson Lakes, Northgate and Murray Bridge were also part of a beat-the-peak research and development program, where various initiatives were trialled by SA Power Networks in relation to the use of smart meters. As I said, the trial continues in North Adelaide. It is a trial which has been very well managed by SA Power Networks, given that over a period of eight years there seems to have been very little public criticism, if any, of the work that ETSA and now SA Power Networks has conducted with the use of smart meters in those particular trials.

I think the issue in relation to the use of smart meters deserves some commentary and some debate, and there is obviously continuing debate about what smart meters might be used for. Certainly, in some areas people are arguing that they can be used remotely by the distribution companies during peak periods to reduce power usage, in particular in relation to turning off condensers in air conditioners with minimal impact on the actual temperature in the home by switching off in an hour for just a few minutes, allowing the fan to continue to operate. That is one of the particular trials that has been looked at.

I think the key issue being explored in smart meters has been the issue of encouraging consumers to modify their patterns of usage. There are many who are attracted to the notion of the use of smart meters to introduce time-of-use pricing, but I would like to, I guess, issue a touch of a cautionary note in relation to the wholesale acceptance of the logic of smart meters and time-of-use pricing. Certainly, there is increasing debate at the national level in terms of the arguments for and against the introduction of time-of-use pricing and the impacts if time-of-use pricing were to be introduced.

One of the arguments put to me has been that if time-of-use pricing is introduced, and that is on the basis that in the peak period, say between 3 o'clock and 6 o'clock of an evening, that if people are charged extraordinarily high amounts for the use of their air conditioners and power during that particular period they will turn them off and not use them during that particular period. In that way, because we do have the peakiest electricity load in the nation, the difference between the peak capacity the system requires and the average capacity that is required can be minimised thereby reducing costs within the system, and also reducing the prospects of blackouts and brownouts.

It has been put to me that the logic of that is at least plausible, but some have put to me the argument that the experience in South Australia, and in some other jurisdictions, is that that might work for the first one or two nights; that is, households are prepared to adjust their consumption during the peak periods, but when you get to the third night of 10 days of 40º-plus peak periods consumers get to the stage of saying, 'It's all too hot, hang the expense, we're going to crank the air conditioners up to the level that we're going to anyway.'

If that happens, even with the use of time-of-use pricing, then the claimed benefit of reducing the peak no longer exists. Unless you accept that there will be blackouts at that particular time because you cannot produce the peak electricity load in that particular period, it does not matter whether you are using your peak for 10 days in a row or whether you do not use the peak for two or three days of 40 degree temperature but on the third, fourth or fifth day you do reach the peak, ultimately the system has to be constructed to meet the peak otherwise you have a situation of blackouts eventuating.

So, that is an issue that will need to be debated by policy makers and the market in terms of how both policy makers and the market responds. Certainly there is a lot of research going on at the national level from some people arguing against time-of-use pricing, not just for that particular reason. A recent AEMC draft report, Power of Choice, stated:

While over the short term, exposure to time varying pricing will impact consumers in different ways, over the longer term more cost reflective pricing should lower energy bills for all consumers due to lower system costs.

In some of the discussion going on at the national level, arguments against time-of-use pricing raise a number of issues. It impacts most on those who can least afford to pay high electricity prices at peak times: the poor, the unemployed, the elderly and young families; all those who do not have the comfort of an air-conditioned office or the luxury of eating their evening meal in an air-conditioned cafe or restaurant to save on peak demand at their home.

It can impact differently on different households depending upon their fuel mix. For example, those households that have invested in gas appliances, such as hot water and heating, have less electricity consumption to shift around to avoid peak pricing impacts or to seek benefits from peak pricing. It only in part addresses issues that are beginning to occur in some areas and some networks with significant residential PV installations.

Such installations mean there is little energy consumption by those households from the network during the mid-afternoon. However, as the evening peak arrives and the sun is lower in the sky, their consumption increases significantly, creating difficult load factor issues for networks. Those consumers are exposed to only a proportion of peak rate charges, and if they have been producing extra kilowatt per hour via their solar earlier in the day this can be used as an offset to future charges, thus reducing the impact of the time-of-use price signal.

In addition to time-of-use pricing, prices of consumption are at particular rates regardless of the type of household appliances being used at the time. This is of particular concern as much of the debate blames air conditioner uptake for escalating energy prices. Time-of-use pricing does not discriminate between households that do not have air conditioners or lower consumption or flat consumption. As such, it can be argued that time-of-use pricing sends a blunt pricing signal rather than one tailored to the cause.

A number of those arguments are drawn from work being done by people such as Mr Gavin Dufty on behalf of, I think, St Vincent de Paul nationally and a number of other people who have been looking at the whole argument of time-of-use pricing. Some of these people are arguing that, rather than just accepting the argument that time-of-use pricing is the solution with smart meters, an alternative such as amount-of-use pricing should be considered by retailers as an option, and ultimately they have argued for hybrid or blended proposals, that is blended time-of-use and amount-of-use tariffs. The blended model that Mr Dufty has flagged in one particular paper is a blended time of use where time-of-use charging would be used only in the off-peak period and amount of use would be used during the shoulder and peak periods.

The argument that people like Mr Dufty and others are using to consider options other than time-of-use pricing is in part, of course, that it will be fairer for many consumers who they believe will be disadvantaged by time-of-use pricing. For example, they argue that those households with low consumption regardless of the time of day would have low energy charges and those with peaky or high consumption patterns would pay an appropriate rate regardless of the time of day.

They argue that such a tariff design has an additional advantage because as household behaviour changes the tariff rate adjusts to reward or penalise the behaviour of the household. They argue that the tariff effectively rewards lower energy demand with a cheaper energy rate and a reward is achieved through a reduction in consumption, or shift in consumption, from peakier times to other times of the day or night.

They argue that the tariff design would also give a household the ability to manage their appliance use to suit their unique needs and still be rewarded with a lower rate, if their consumption is in the lower price band. They argue that this is a distinct advantage over time-of-use pricing that penalises all consumption at the peak pricing time.

For example, if households were home on a 40º-plus degree day, under time-of-use pricing, all consumption in the peak period will be charged at the higher peak rate. They argue that this sends a perverse message that all consumption is bad during this time, or air conditioner consumption is bad at this time. In both cases, this is not technically true, they argue. In fact, it is cumulative consumption that creates excessive peak demand that is the real issue.

There is much more detail in the work of Mr Dufty and many other writers at the national level who are much more skilled in these areas than am I, in terms of the potential uses of smart meters but, inevitably, ministers and policymakers are introducing smart meters for a reason. So far, the debate has been limited to a narrow scope of options such as time-of-use pricing and cranking up the charges in peak periods with the inevitable, as I said, disadvantage for the poor, the unemployed, large families and those who cannot reorganise their electricity consumption at those particular times.

The alternatives that Mr Dufty and others are raising in relation to amount-of-use charging and blends of both, I am sure, based on my experience in the past in this area, will also have their problems. Policymakers, I am sure, will be able to raise concerns and issues about the introduction of tariff structures based on those particular models. The reason for my raising them today is, hopefully, to at least broaden the debate in South Australia amongst policymakers and others to look beyond just the use of smart meters for either remote demand management, which is part of the trials that are being and have been conducted in South Australia, or the simple time-of-use use of smart meters, and have a look at other alternative uses of smart meters in terms of where we might head in the future.

Given the speed with which minister Koutsantonis moves, it is unlikely anything will happen between now and March next year, so it will be a decision for either a re-elected Labor government or a newly elected Liberal government. I would hope that, whichever of those options occurs, the debate in relation to smart meters will extend beyond, as I said, the narrow scope of the debate thus far into some of these other areas that I have canvassed this afternoon. With that, I indicate the Liberal Party's support for the second reading of the bill.

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for the Status of Women, Minister for State/Local Government Relations) (15:53): I understand that there are no further second reading contributions to this bill. In terms of concluding remarks, I would just like to summarise by saying that this bill seeks to ensure that the government amends the national energy legislation to provide for the implementation of smart meter consumer protections and to remove the power for a minister to issue a ministerial smart meter rollout determination.

The bill empowers jurisdictions to stipulate retail tariff structures that must be included in a retailer's standing offer for small customers and have an interval meter or smart meter. The bill will provide that, once initial rules have been made by the South Australian minister on the subjects provided for in the bill, the minister will have no power to make further rules under this power. I thank the opposition for their indication of support for this important bill and look forward to the committee stage.

Bill read a second time.

Committee Stage

Bill taken through committee without amendment.

Third Reading

The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for the Status of Women, Minister for State/Local Government Relations) (15:56): I move:

That this bill be now read a third time.

Bill read a third time and passed.