Bills

National Electricity (South Australia) (Australian Energy Regulator - Wholesale Market Monitoring) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 29 November 2016.)

The Hon. R.I. LUCAS (11:03): When I sought leave to conclude my remarks yesterday afternoon, I was referring to the views of the then independent umpire in this whole area, South Australia's own independent industry regulator, and the comments that he had made on that. That was Mr Lew Owens, who has been appointed by this government as Chair of SA Water and to various other positions over recent years. The independent industry regulator's views at that particular time were, as I said last night, that the price benefits in South Australia for customers from the Riverlink interconnector may be lower than some claims have suggested, and that in some circumstances SA customers might not benefit overall.

He went on to conclude in his report that many or most of the benefits from the proposed Riverlink interconnector might be achieved by the Snowy to Victoria interconnector, which was a 500 megawatt upgrade, together with the Murraylink underground unregulated interconnector from New South Wales to South Australia through the Riverland.

The independent industry regulator, Mr Owens, also noted that, contrary to the claims the Labor Party and other supporters had made, the Riverlink interconnector could be built and operational by the end of 1999. Mr Owens said that was not correct and stated, 'It was clear that the SNI (Riverlink) project could not be completed prior to late 2002.' That is almost three years after the Labor Party, and other proponents, had claimed that it would be completed.

As I indicated yesterday, it would certainly have meant that as we went into the 2001-02 summer period, leading into the 2002 election—when and if there had been rolling brownouts or blackouts through metropolitan Adelaide in particular—the Labor Party would have been critical of the lack of government action in providing additional electricity supply in South Australia. The only option that was available to the government at the time that was completely within the power of the government to deliver was to fast-track a very efficient gas-fired new generator at Pelican Point, which the government did and, as I said, the Labor Party strenuously opposed at that particular time.

I want to refer to some comments made in the debate at that particular time, and again the government—the Premier, the Treasurer, and other ministers—has made the claim that the former Liberal government, in the interests of ratcheting up the sales price of the assets, took deliberate policy decisions to oppose interconnection generally. I have addressed at length the issues in relation to the Riverlink interconnector but, of course, there were various other options.

I want to repeat from the record, statements made on behalf of the government back on 1 May 2001, in Hansard on page 1376, where I was being asked a series of questions about the National Electricity Market and privatisation. I said as follows:

The state government supports further interconnection—

That is, the state Liberal government. I continue:

We support Murraylink. We are prepared to provide major projects status and see Riverlink continue, if they can resolve all the issues that they have to resolve. We strongly support the Snowy to Victoria interconnector upgrade, which is 400 megawatts of power. In all those interconnection proposals we would certainly see a much stronger national electricity market if at least a good number of them anyway could be got up and going in the not too distant future.

So, the Murraylink, unregulated, underground interconnector I have spoken about before, was supported by the Liberal government and was implemented by a private sector operator. Again, they had to take the risk that if it was not used, they would not be making any money at all. That was an investment risk that they had to take in terms of competing in the National Electricity Market.

There were also discussions at that particular time about the potential upgrade, which is more than 10 years later. It has now concluded or is about to conclude the upgrade of the Heywood interconnector between Victoria and South Australia. Even in those days, there were discussions about whether or not at that stage it was viable to upgrade the Heywood interconnector. The advice at that particular time was that probably would not be supported by the national regulatory authorities at that particular stage, and that other options would be preferred.

I note and repeat that in relation to Riverlink, there are any number of statements made at the time where we indicated that if they could get the approval of the national regulatory body (at that stage, NEMMCO) then the state government was prepared to support the Riverlink proposal because, clearly, state governments need to do a lot of planning issues and a variety of other development issues to either assist or impede the development.

We had given a commitment to the proponents of Riverlink that if they could get the approval of the national regulatory authority, we would give them major project status. That was something that they sought; it was a commitment that we gave. When you are trying to build a major above-ground interconnector from Victoria to South Australia through a number of local government council areas, the advantage of getting major projects status supported by the state government was a significant support mechanism provided to the proponents, should they get to base 1, which was actually getting approval from the national regulatory authority NEMMCO.

I also noted in that response at the time, in May 2001, that the other area where the government had already provided assistance is that we had given special approval to the proponents of Riverlink to enter land through the Riverland, if need be against the landowner's consent, to assist it in terms of its root preparation work should it ever get the approval. In May 2001, I noted that the proponents had had that approval for 12 months and at that time we asked the independent regulator on how many occasions had that approval been used by the proponents and, as of May 2001, the proponents had not used that special approval on a single occasion.

The government again indicated its willingness to support the proponents if they were able to get the national regulator's approval. We provided them with special approval, as I said, to enter land, even against the landowner's consent, to assist it in terms of root preparation work should it ever get the approval and, again, that was not utilised at all. What members now will not realise but at the time there was very strong opposition from the Riverland community to the Riverlink interconnector because they did not want to see big transmission tower lines going through their orchards and properties through the Riverland.

There was a local campaign against that occurring, and they certainly were much more supportive of the underground, unregulated Murraylink interconnector because, clearly, it did not have the same intrusive impacts on their business operations, as they saw it. The local member at the time, Karlene Maywald, subsequently a member of a Labor cabinet, was also supporting her constituents in opposing or expressing concern at the very least about the Riverlink interconnector, and made her views known in the parliament at that particular time on any number of occasions.

Clearly, from the community viewpoint but also from the government viewpoint, when one was looking at interconnection from New South Wales to South Australia, when given the choice of an underground, unregulated interconnector such as Murraylink, which was about 220 megawatts, or an above-ground trying to be regulated interconnector such as Riverlink, there was support at the local level but it was also an attractive option in terms of the cost to South Australian electricity consumers as well because, again I repeat, if Murraylink did not transmit any power then it did not earn any money and electricity consumers did not have to pay for the availability of it.

With Riverlink, if no power was used at all, South Australian and New South Wales electricity consumers would have to pay, in essence, what would in the end be the equivalent of an availability payment for the interconnector that was being built. So, there were negatives to the Murraylink interconnector, but there certainly were attractive elements to that particular proposal.

Also noting the Independent Industry Regulator report, and backing that particular Independent Industry Regulator report, I want to refer to a NEMMCO draft ruling in September 2001, again all occurring in and about the same time. This was the draft ruling in September from NEMMCO in relation to Riverlink, and a summary of that produced in one of the energy journals or reports at the time summarised the NEMMCO draft report of September 2001 as follows:

'The Riverlink interconnector, which promised multimillion-dollar power savings for South Australia, has been rejected in a draft report by the operators of the National Electricity Market,' reported The Advertiser, 20 September 2001.

Snowy upgrade regarded as more viable option: A National Electricity Market Management Company committee has favoured a 400MW upgrade of the Snowy Mountains-Victoria interconnector as the more economically viable project for providing electricity to the South Australia and Victoria region. NEMMCO spokesman, Charlie MacCauley, said the $44 million Snowy upgrade was 'far superior' to the 250MW SNI Riverlink, costing $110 million.

In a press release issued on 19 September by myself about the NEMMCO draft committee report, I said as follows:

A draft report from the National Electricity Market Management Company's expert advisory group (Inter Regional Planning Committee) has found that the benefits to the National Electricity Market of increasing the capacity of the existing Snowy Mountains to Victoria interconnector (SNOWVIC) are up to $100 million higher than building the proposed second Riverland interconnector (SNI)—

which is also known as Riverlink—

NEMMCO has recommended that the New South Wales Labor government project, SNI, not be given regulated asset status because it has failed to pass the independent market benefit regulatory test.

Further on in that press statement:

NEMMCO's analysis is impacted significantly by the fact that an interconnector through the Riverland (Murraylink) is already being built and is expected to be operating by early next year.

At that particular time, what the government had available to them was an Independent Industry Regulator report advising against, and raising concerns, I should say, about Riverlink, and a September 2001 report from the NEMMCO committee. In the months leading up to that, our advisory team that was working for the government had obviously been working with the NEMMCO advisory committee and the NEMMCO people and was aware of the direction that their analysis was heading.

They were certainly aware of the direction in which the Independent Industry Regulator was heading, and the independent work that the advisers that the South Australian government during that period had employed was not only noting the work that was being done by NEMMCO and the Independent Industry Regulator, the two independent umpires in this issue, but their own work mirrored, by and large, the views that were being expressed, or about to be expressed, by the Independent Industry Regulator in South Australia and the National Electricity Market Management Company on behalf of the National Electricity Market.

That was, essentially, that you could meet and have a greater benefit to the South Australian market through a combination of other interconnection options and together meet the security issues that we needed for the following summer through a fast tracking of the Pelican Point power station, which was, of course, as I indicated yesterday, the government's position. The government's position through much of that period—and I guess we are talking through this period of 1998-99 through to 2000-01 whilst this whole debate was raging, but in particular it was coming to fruition in the early stages and then again peaked at the later stages of that particular period.

Certainly, through that period of two or three years, the government's preferred position in terms of meeting security and supply was the in-state generation at Pelican Point of 500 megawatts, with the potential for an expansion to 800 megawatts; an unregulated, underground interconnector from New South Wales to South Australia, such as Murraylink, with 220 megawatts; a SNOWVIC interconnector of 400 megawatts, which, as I indicated earlier, the independent industry regulator, NEMMCO, subsequently found as being of greater advantage to South Australia and Victoria than alternative options; and then also leaving open the option at some later stage, if they could get regulatory approval from NEMMCO, for the Riverlink interconnector, which was 250 megawatts.

That led to the letter to NEMMCO, that was written by the Liberal government and myself as the operational minister, asking, on the basis that questions were being raised, about what the best options were for NEMMCO to delay its decision in relation to whether or not the Riverlink interconnector should receive regulated asset status or not.

The letter simply said, 'There are increasing questions being raised about whether or not Riverlink would have all the benefits that were being claimed by the New South Wales Labor government and the Labor Party in South Australia and its supporters', and that there were significant questions and doubts being raised as to whether it was, indeed, the best option for South Australia. The South Australian Liberal government reversed its position and said, 'We believe, in light of this, that we would like you to defer your decision in relation to whether or not the Riverlink interconnector should get regulated asset status.'

Within days, as it was entitled to do because it was independent to the South Australian government and we had no control over it, NEMMCO ignored the letter from the South Australian Liberal government and brought down its finding. I do not know whether I have the exact date. Around June 14^th or June 17^th, it brought down its ultimate finding. On 17 June 1998, I put the position of the South Australian government on the record in Hansard when I said, amongst other things:

In relation to the Riverlink decision, clearly NEMMCO's role was pivotal. It had to take a decision as to whether or not Riverlink was a regulated asset [or not]…

And then further on:

More importantly, the other issue is what the attitude of the South Australian Government will be and—as the honourable member might have gleaned from my press release—given the recent advice that we have taken, the State Government has been reviewing its decision which it made late last year of an in principle support for Riverlink. Indeed, we had put a point of view that, because of the recent changes and because of the advice that we were receiving, if NEMMCO was to make a decision that it would be a regulated asset, we would prefer it to put on hold its decision whilst we as a State Government finally went through our process of deciding whether or not we still supported Riverlink. As it turned out, clearly NEMMCO had already made up its mind, because it issued its decision pretty quickly. It had given us some forewarning that it was on the way and it had taken a decision that it would not be a regulated asset.

As I said, whilst the South Australian government did send the letter saying we were rethinking our position and would they defer their decision, they ignored that particular position, as they are entitled to do, and said, 'No, it did not meet the test,' and that they, as the independent body, would not support it being built as a regulated asset at that particular time.

I can only repeat again, on the basis of that particular decision, that the South Australian Liberal government—contrary to the claims being made by Premier Weatherill, Treasurer Koutsantonis and ministers in this chamber and elsewhere—never had the power to stop Riverlink. Even after the 2002 election, when the Labor government had promised that it would build Riverlink, it came to the same brick wall, and that is that eventually the national electricity market regulatory bodies and appeal mechanisms said no, it would not be built as a regulated asset and the consumers of South Australia and New South Wales would not be required to fund the availability of the Riverlink interconnector.

I conclude my comments by saying that the problems that we and the state confront with the national electricity market is that, quite frankly, after 15 years of a state Labor government they must start accepting some responsibility for the dilemmas and problems that now confront South Australia. They were the ones who promised in 2002 to build an interconnector to New South Wales as the simple solution, knowing that they could not do it, and they have not delivered. It has only been in the last few months, since the most recent price spike problems, that the South Australian government has now found $500,000 towards a business case for an investigation into, in essence, a Riverlink interconnector between New South Wales and South Australia.

Even if that proceeds, it is three to five years before such an interconnector—if it gets approval and it has to go through the same independent assessment that Riverlink has been through on so many previous occasions—even if it gets approved it is going to take a three to five-year period to actually be delivering or be available to deliver extra power into South Australia. The upgrade of the Heyward interconnector from the first business case to actually being completed has taken four to five years. That is a relatively simple task because there is already land acquired, poles and wires constructed and you just have to increase the capacity; a much simpler engineering task but it has still taken four to five years to do that.

The task of actually acquiring property and land, building an interconnector over a completely new route, getting planning approval, if you have to from either councils or the state regulatory bodies—all of those issues—after you get the approval from the independent regulator, demonstrates that if the government was such a believer in interconnection it would have taken action much sooner than this year, after they had been in power for 14 or 15 years, in terms of delivering.

It is déjà vu all over again, if I can use a colloquial expression. They went into the 2002 election promising an interconnector to New South Wales to solve all the problems and they are hoping to go into the 2018 election, 16 years later, with virtually the same promise, only this time they promise $500,000. Back in 2002 they promised $20 million to the New South Wales Labor government to help build the interconnector—again, a public relations stunt because they knew they had to be seen to be looking like they were doing something even though they knew that it was an independent national body that had to take the final decision, and it was highly likely to say no to that particular interconnector.

After 15 years, this Labor government can no longer validly blame privatisation which occurred almost 20 years ago, when, as I put on the record yesterday, Treasurer Koutsantonis was urging a Labor member Trevor Crothers to cross the floor and support the privatisation when it occurred in the late 1990s.

As I said yesterday, if privatisation is posing the problem, according to the Labor Party analysis, then how come Victoria, which privatised earlier and much more significantly than we did in South Australia, have the lowest electricity prices and in South Australia we have the highest electricity prices?

In summary, I repeat that the Liberal government did not stop Riverlink because it never had the power to, and therefore it did not stop Riverlink to drive up the sale price of the assets because at that particular time the Liberal government fast-tracked a 500-megawatt gas-fired generator at Pelican Point to be a significant new competitor. Contrary to the Labor Party claims, the Liberal Party did not sell the generators to a monopoly, as the Labor government is still claiming.

It was in fact the Liberal government that smashed the monopoly of the old Optima, or the old ETSA, ignoring the advice of the board of Optima at the time, which said, 'You will maximise the sale price of your assets if you sell the generation assets as a monopoly.' The former Liberal government smashed the monopoly generation capacity into three generators and Terra Gas Trader. Not only did it do that, but it then introduced the significant new competitor at Pelican Point, the 500-megawatt gas-fired generator.

I conclude again, as I noted yesterday, how ironic it is. Clearly, Treasurer Koutsantonis and Premier Weatherill work on the basis that South Australians have very short memories, because in the last few months their policy has been directed towards Pelican Point being part of the solution to the problem; that is, Pelican Point were the ones who were encouraged and implored to open up their capacity, with the problems of recent months, and to start operating to help South Australia continue to operate. Treasurer Koutsantonis went cap in hand to the operators of Pelican Point to ask them to assist South Australia in its current crisis.

More recently, Treasurer Koutsantonis has been saying that with the closure of Hazelwood in Victoria he hopes to see that Pelican Point will now be able to become an operator in South Australia. This is the same Pelican Point power station that the Labor Party, with Treasurer Koutsantonis and Premier Weatherill, fought trenchantly to have established here as an in-state viable generation option for electricity supply in the state of South Australia.

With that, I indicate the Liberal Party support for, as I said at the outset, what is a modest measure in terms of tackling the problems of the National Electricity Market, and for those reasons, because it is modest, we have no problems with supporting the second reading.

The Hon. K.J. MAHER (Minister for Employment, Minister for Aboriginal Affairs and Reconciliation, Minister for Manufacturing and Innovation, Minister for Automotive Transformation, Minister for Science and Information Economy) (11:32): I thank honourable members for their contributions on this bill and, as indicated, look forward to the speedy committee stages in a moment.

Bill read a second time.

Committee Stage

Bill taken through committee without amendment.

Third Reading

The Hon. K.J. MAHER (Minister for Employment, Minister for Aboriginal Affairs and Reconciliation, Minister for Manufacturing and Innovation, Minister for Automotive Transformation, Minister for Science and Information Economy) (11:34): I move:

That this bill be now read a third time.

Bill read a third time and passed.