Bills

Australian Energy Market Commission Establishment (Governance) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 31 October 2017.)

The Hon. K.J. MAHER: Mr President, I draw your attention to the state of the council.

A quorum having been formed:

The Hon. R.I. LUCAS (12:27): I rise on behalf of Liberal members to support the second reading of the Australian Energy Market Commission Establishment (Governance) Amendment Bill. The government introduced this bill, which provides the AEMC with the ability to increase the number of commissioners in the Australian Energy Market Commission from three to five and some other related consequential amendments.

The member for Stuart, Mr Dan van Holst Pellekaan, has had carriage of this particular measure for the Liberal Party and he has advised that the AEMC makes the rules that govern the electricity and natural gas markets. The governance arrangements of the AEMC are determined by the Australian Energy Market Commission Establishment Act 2004 and, as members will know, for many, many years South Australia was the lead legislator for national energy legislation.

The current act requires the AEMC to consist of three commissioners, inclusive of the chairperson. Following a review by the COAG Energy Council, it was recommended that the number of possible commissioners be increased to five, with the minimum remaining at three. The reasons given for increasing the number of commissioners is to manage the increasing workload of the AEMC. It was argued that by increasing the number of commissioners it would seek to increase the diversity of skills and experience that has been built into the appointment protocol and matrix used by the COAG Energy Council.

Whilst I will not have a significant number of questions, I know the government has a very senior energy adviser available to the council. We will be seeking some further information in relation to what is the skill set base which is missing from the current group of commissioners and what particular areas of expertise did the COAG Energy Council envisage should be represented on the AEMC through the appointment, potentially, of additional commissioners?

The consequential amendments relate to the appointment process and quorum requirements relating to the appointment of additional commissioners. It obviously makes sense if you are going to increase the number of commissioners potentially that the quorum would change.

We have been advised by the member for Stuart that the COAG Energy Council had undertaken consultation on the amendments. The member for Stuart received submissions on this bill from a range of stakeholders. His assessment was that they were generally supportive of the changes in the legislation. With that brief contribution, I indicate the Liberal Party supports the second reading of the bill.

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) (12:30): I thank the honourable member for his contribution on what is a very simple and straightforward bill. I look forward to the speedy progression through the committee stage. I might just ask for an indication if there are any questions in committee stage, because I will get the officer around for that. With that, I look forward to the committee stage.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. R.I. LUCAS: Could I ask the minister whether he has advice and can indicate who the current commissioners are and what their areas of expertise or speciality are? Can the minister indicate what the COAG Energy Council envisaged should also be represented in terms of the skill set base by increasing the number of commissioners?

The Hon. K.J. MAHER: I thank the honourable member for his question. I can indicate my advice that the three current people are Mr John Pierce, who is a policy expert, an economist and a former under treasurer for New South Wales; Mr Neville Henderson is an energy expert, in particular with previous experience in the Victorian Power Exchange; and Dr Brian Spalding, who has had experience with AEMO and NEMMCO and specifically the New South Wales market operations. I am advised that there is the desire for greater diversity of experience. One such area that has been discussed is from the consumer side and consumer representation on the board.

The Hon. R.I. LUCAS: Does the South Australian government have a policy position in terms of the increased skill set base, given the legislation is likely to pass? Indeed, is the South Australian government going to be suggesting an additional nominee for the position of commissioner?

The Hon. K.J. MAHER: I am advised that the selection process does not allow states to put forward individuals and that the COAG Energy Council is already going through an expression of interest and selection process for possible new people to fill this role. So, it is something that the COAG Energy Council is undertaking and retains control over.

The Hon. R.I. LUCAS: Correct me if I am wrong, but I assume the COAG Energy Council comprises the South Australian Premier or the South Australian energy minister.

The Hon. K.J. MAHER: My advice is that the COAG Energy Council comprises the energy ministers.

The Hon. R.I. LUCAS: On that basis, I assume it is entirely possible for the South Australian energy minister to nominate someone, or is that not possible? Does it have to be self-nomination?

The Hon. K.J. MAHER: I am advised that anyone can nominate in the process, but recommendations are made through an independent selection process.

The Hon. R.I. LUCAS: Can I clarify that? So, the final decision will be taken by the energy ministers—the COAG Energy Council—but when you say 'an independent process', does that mean the energy council's commission; that is, the group of consultants or experts to provide the recommendation?

The Hon. K.J. MAHER: My advice is: yes, in effect there is an independent selection panel that has been put together to make those recommendations.

The Hon. R.I. LUCAS: Can I clarify that the independent selection panel is not a senior energy bureaucrat from each of the jurisdictions who is answerable to the ministers? When you talk about 'independent', does it mean someone unrelated to the jurisdictions' energy advisory bodies, groups or departments?

The Hon. K.J. MAHER: I am advised that is correct. My advice is that there are no public servants on that committee.

The Hon. R.I. LUCAS: In relation to the decisions of the COAG Energy Council, is that a requirement for unanimity in terms of who should be the additional commissioner? It has not been uncommon in the past for big jurisdictions in the Eastern States to have a particular view as to who should be on a particular body. A smaller jurisdiction like South Australia may well say, 'We don't think that person is suitable.' What is the voting arrangement on the COAG Energy Council? Does it need the agreement of all jurisdictions and all energy ministers, in essence, or can the big states outvote South Australia?

The Hon. K.J. MAHER: The protection in the bill—I think it is in part 2, clause 4(3), for the purposes of what we are talking about—provides for two-thirds of eligible ministers to agree to that.

The Hon. R.I. LUCAS: So, it is still technically possible for the big states to outvote South Australia, but they would have to get the two-thirds majority—that is the reality. Is that the normal voting procedure for the COAG Energy Council; that is, do most decisions of the energy council normally require a two-thirds majority?

The Hon. K.J. MAHER: My advice is that this is a new measure that is being introduced now. There had been other ways in which consensus was reached or votes were taken.

The Hon. R.I. LUCAS: I understand that this is a new measure, but a number of ministerial councils operate on the basis of consensus—and the minister would be familiar with the operation of ministerial councils. If one of the smaller states, like South Australia, does not agree on a national curriculum matter in education issues, for example, that is, essentially, almost a veto in terms of it being able to progress as a national initiative.

Are the normal operations of the COAG Energy Council similar, and therefore this provision, which is a two-thirds provision, obviously is less than consensus and it would be possible for the bigger jurisdictions to outvote South Australia, for example, if we were strongly opposed to a particular appointment?

The Hon. K.J. MAHER: My advice is that for this particular council, for matters of policy, the voting arrangements had been a super majority if consensus is not reached, but it tends to be a consensus model that is used as—

The Hon. R.I. LUCAS: What is a super majority?

The Hon. K.J. MAHER: A super majority is N minus two. You have to get a super majority of N minus two. In effect, my advice is that you could have two voting against but no more—an N minus two super majority—but for matters of laws and regulations that are unanimous, consensus is required.

The Hon. R.I. LUCAS: My final question is: in relation to the current expertise on the body, do any of those persons have any relevant personal experience in terms of the private sector operation of entities in the National Electricity Market?

The Hon. K.J. MAHER: I am advised that I cannot give a definitive answer on that. We do not have the complete employment history of all, but it is likely that at least in one of the cases they had done consulting work with private companies.

The Hon. R.I. LUCAS: Can I ask the minister, through his adviser, to take it on notice. I am happy to receive a response by way of a letter post the passage of the bill. My specific question is: it is interesting if someone has been an adviser, but in particular I would be interested to know whether someone has actually had skin in the game, that is, has had management or an equity position in a private sector operator in the National Electricity Market. I am happy to take that on notice.

The Hon. K.J. MAHER: I am happy to take it on notice and ask that a response be forwarded post passage.

The Hon. M.C. PARNELL: I have some new questions, but I want to pursue the line of questioning of the Hon. Rob Lucas, because it seems clear that there are fractious relations between various jurisdictions. With this new two-thirds rule that is in there (and I will get the minister to clarify whether I have this right or wrong) we have nine jurisdictions in Australia: six states, two territories and the commonwealth. Western Australia is not part of the National Electricity Market, and I think Northern Territory is not, so maybe that gets us back down to seven. Does that mean that it takes five jurisdictions to agree, so seven minus two? Do I have the numbers right?

The Hon. K.J. MAHER: My advice is that WA is included for this purpose because of the operation of the national gas market. The Northern Territory recently applied the national electricity law, so they would be included, so it would be nine, so the relevant number of two-thirds with nine is pretty simple at six.

The Hon. M.C. PARNELL: I thank the minister for his answer; it was not something I had thought about before the Hon. Rob Lucas started that line of questioning. The issue I want to raise in relation to this bill concerns the effectiveness of the Australian Energy Market Commission in setting rules that will govern the National Electricity Market.

There was a heading in one of the online energy journals back in September which referred to Mr Ross Garnaut (whom everyone has heard of), the energy expert. The headline was 'Garnaut slams AEMC move to delay 5-minute settlement switch'. That will not mean a lot to a lot of people, but it is of critical importance to the energy market; it is about changing the settlement rules which currently allow for gaming of the system by fossil fuel generators, and it disadvantages some of the more nimble and fast-responding renewable generators and battery storage.

This dispute came to a head because the AEMC did finally agree to the five-minute settlement rule, but postponed the implementation of that rule until July 2021—in other words, years out. That resulted in a lot of criticism from the renewable energy sector and the storage sector, which basically saw this as an attempt to prop up the fossil fuel industry. As well as Ross Garnaut's criticism, reported in the press, The Australia Institute also came out saying, 'Battery technology and renewables are being deliberately hobbled by the incumbent's vested-interest resistance.' Basically, the criticism was that the AEMC was deliberately going slow.

The question that directly relates to this bill is: if, as I understand it, part of the rationale for the bill is that the AEMC has an increased workload and that there was a desire to have an increased diversity on the board, is there any indication that the AEMC will work faster under this new arrangement? Are they more likely to approve real changes in a timely fashion rather than delaying them for years and years? That is the single biggest criticism of this organisation in the energy sector.

The Hon. K.J. MAHER: My advice is that part of the aim of this is to make it more efficient and more effective but also, as I stated earlier, to make it more representative of the greater range of views. That is why one of the areas being looked at is a consumer representative as well.

The Hon. M.C. PARNELL: I thank the minister for his answer. I have another question which relates to the mechanism by which these laws are changed. Again, I ask the minister to correct me if I have this wrong, but my understanding is that South Australia is the lead legislator. That means that for any of these national energy market, national electricity or national gas laws, South Australia legislates and all the other states apparently have an automatic incorporation mechanism. So, they have their own laws, which say that whenever South Australia passes it, it becomes law. I see nodding, so I assume the minister is in agreement with that.

My question is: what capacity, if any, does South Australia have, as lead legislator, to put things on the agenda that might not otherwise be put on? In response to earlier questions, we talked about the COAG Energy Council and the fact that you have all these other jurisdictions on it. Is there any capacity for South Australia, as lead legislator, to either change any of these national bills or, in fact, to promote amendments to these bills that may be adopted by other states?

The Hon. K.J. MAHER: I think instructive is one of the answers to the Hon. Rob Lucas's question in terms of the method of operation for decision-making with the COAG Energy Council. We are the lead legislator, and the honourable member is right in that my nodding my head did indicate that when we change our legislation it takes effect in other states: basically, other states say, 'See SA'. But as an answer to an earlier question, for legislative change it requires unanimous agreement of the COAG Energy Council. So, although we are the lead legislator, nothing could be done without that unanimous agreement of energy ministers. We could not, of our own volition, change the law, then have it change everywhere else, without that agreement from the COAG Energy Council.

The Hon. M.C. PARNELL: I thank the minister for his answer. That pretty much confirms what I thought, but I will just take this opportunity to put on the record: I don't like it, to paraphrase a certain Senator. I do not like it, and the reason I do not like it is that in terms of the tiers of government and the balance of powers, effectively we have the executive, albeit the executive of different jurisdictions, making decisions that bind the legislatures of those various jurisdictions.

In my early days in this place, when I was young and foolish, I moved lots of amendments to national energy laws, electricity laws, gas laws, and the refrain from the government benches was always the same: 'You can't do that. You're not allowed to change this piece of legislation, because members of the executive from different states have got together in Canberra, and they've agreed differently, so therefore we can't change it.'

I want to make the point that, whilst I am all in favour of trying to achieve national uniformity in legislation, when it comes to energy I think even at risk of channelling the energy minister, Mr Tom Koutsantonis, in another place, he has talked about how the system has failed us and how South Australia needs to go it alone at different times, how we need to put special rules in to override the national system because we are so let down by it. It strikes me that it is inconsistent then to maintain that this parliament is effectively a rubber stamp for the executive, as evidenced by decisions of the COAG Energy Council. So, I will put that on the record. That is a spray.

The second spray I will put on the record is that, notwithstanding that the government and, I suspect, the opposition do not support tinkering with these national laws, an amendment that I think is absolutely necessary—but I think the Clerk or the President would have ruled me out of order had I tried to move it because the title of the bill relates to the governance of the AEMC—is that we really do need to look at the objects of the AEMC and we need to include climate change considerations. Unfortunately, the way it was constructed several years ago, they take into account market conditions, efficiency and security of supply, and they are all important, but it is not their job to take into account the climate emergency and our imperative to reduce our carbon emissions.

We need to insert those decision-making criteria back into all of these different national bodies, starting with the Australian Energy Market Commission. If they had it as part of their marching orders that they had to take the environment into account, I suspect they would have been quicker out of the blocks in approving some of the rule changes that specifically advantage renewable energy and battery storage. Having got that second spray off my chest, they are my only questions.

The Hon. R.I. LUCAS: Just one brief comment in relation to what the Hon. Mr Parnell has raised. It is certainly my view that nothing that occurs can restrict the power of the South Australian parliament to do what it so chooses. If the power of the argument from the Hon. Mr Parnell or others was sufficient to sway a majority in this house to amend a nationally agreed piece of legislation, that is entirely proper. I cannot see that anyone could rule the Hon. Mr Parnell or anyone out of order in terms of moving an amendment.

He is right, however, to indicate that, generally, the government and the alternative government have adopted positions that these have been nationally agreed and therefore there is a very high threshold. I think there have been the occasional minor examples, but my understanding of the situation would be that if South Australia, as the lead legislator on this, stood on its digs, and in particular the Legislative Council said that we would not pass this bill until this amendment was made, the government would have to take it back to the COAG energy ministers council and seek agreement, and if they could get the agreement then that amendment would be part of the nationally agreed position.

If the COAG Energy Council did not agree, then that would be the end of the bill. The government just would not proceed with the legislation because, on that particular front, they do not have the agreement of the COAG Energy Council to proceed. Ultimately, my belief is that the Legislative Council in the South Australian parliament has the power to amend legislation as it comes before us.

It has consequences and he is quite right to say that on many occasions he has sought to move amendments and the government, Liberal or Labor, and the opposition, Liberal or Labor, have said, 'We don't agree with that because this has been nationally agreed and for us to be picking it apart would mean that the whole thing would fail. We think the public interest is best served by having the bill that has been nationally agreed, even though you have improved it in this particular area, or not.'

My personal strong view is that nothing prevents the Hon. Mr Parnell, on this occasion or any future occasion, moving an amendment. He ultimately would have to convince a majority in this chamber to support that and that would then result in a process the energy minister would have to take back to the COAG Energy Council to see whether or not the other jurisdictions would agree.

The Hon. M.C. PARNELL: By way of clarification, because possibly I did not make myself clear, I accept everything that the Hon. Rob Lucas has said. When I offered the opinion that I would be ruled out of order, I did not mean to suggest that I would be ruled out of order because I was trying to mess with a nationally agreed system. I thought that I would be ruled out of order because I would be trying to go beyond the title of the bill, which is to do with the governance of the AEMC, whereas the amendments I suggested I would like to move relate to the objects of the AEMC.

Whilst I know that there is a fair bit of latitude coming from the top table, I have not moved that amendment. I am just flagging that next time one of these Australian Energy Market Commission laws comes up that has a broader title that does not just involve governance, for example, I might reprise the Greens' position, which is that we think the objects are deserving of amendment as well.

Clause passed.

Remaining clauses (2 to 9) and title passed.

Bill reported 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) (12:57): I move:

That this bill be now read a third time.

Bill read a third time and passed.

Sitting suspended from 12:57 to 14:18.