Statutes Amendment (National Energy Laws) (Binding Rate of Return Instrument) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 6 November 2018.)

The Hon. M.C. PARNELL (17:07): I rise to support the second reading of this bill. As we see on many occasions during the parliamentary year, national energy laws are brought into the South Australian parliament first because we are the lead legislators.

This is almost a broken record but, as I say on every one of these occasions, as much as we would like to amend some of these bills my experience of the last 12 years is that neither Liberal nor Labor has been prepared to countenance any amendments to national energy laws. I maintain that is an abrogation of our responsibility as legislators because I think we could actually make some improvements to many of these national laws if only we were given the latitude to do so.

This particular bill is not as contentious as some of the other ones we have dealt with. I have had a look at some of the stakeholder positions that were taken during the public consultation on the draft of the bill back in April this year, and there is general support across the board so I do not think there will be a problem with the bill passing.

The importance of getting the formula right in terms of rate of return is pretty simple. Ultimately, consumers end up paying, and when you have these natural monopolies with their regulated asset base and their guaranteed rate of return the consumer's interest has to be front and foremost, otherwise business will do what it does and extract every last dollar it can from the resource it is controlling.

I will briefly put the only questions I want to raise on the record now. They relate to the power imbalance that exists between representatives of consumer organisations and the industry sector itself. I refer to the submission that was made by the Public Interest Advocacy Centre on 13 April. Whilst generally supportive of this bill, they point out that this resource imbalance means that in a particular competition case in New South Wales the energy networks ended up paying legal costs of around $90 million fighting the case. The consumer advocates had half a million dollars to spend. There is a serious imbalance of resources.

One important aspect of this bill is that it provides for a consumer reference group. There will be a body of people representing the interests of consumers and they must be listened to and their views taken into account. The Public Interest Advocacy Centre points out that in order for this consumer reference group to be effective it must also be appropriately resourced. By resourced they mean that they need payment for the time that is spent and they need funding to be able to commission research that is in the interests of consumers.

So these are the questions I would ask the minister to take, and if he is able to give an answer in the committee stage that would be good. What are the proposals or plans for the Australian Energy Regulator to fund this community reference group? What do they have in mind? Is there a budget? Will the representatives of the various consumer bodies be paid to attend the meetings?

In fact, to put a little more context to it, the sort of people we are talking about, the people the Public Interest Advocacy Centre represent, are groups like the Salvation Army, St Vincent de Paul Society, Physical Disability Council, Anglicare, Good Shepherd Microfinance, Financial Rights Legal Centre, Tenants' Union, Mission Australia. These are not people who are loaded with money and what money they do have they spend for the benefit of the community. So that is my main question in my second reading contribution: how will the consumer reference group be funded?

The second question that I will put on the record is that the bill provides a get out of gaol free clause, a clause that basically says, 'Here are the rules, but if you do not follow them it does not really matter.' We see that in legislation a lot. Proposed new section 18R—Failure to comply does not affect validity, reads as follows:

Failure to comply with this Subdivision does not invalidate or otherwise affect a rate of return instrument.

I understand why they put these clauses in because what they are trying to avoid is a catastrophic result flowing from an official miscounting of days on a calendar and not giving someone exactly the right amount of time to comment or some minor thing, so I get why we put these things in.

But my question is: what comeback is there for, say, representatives of energy consumers when the process has not been followed? Is there anything they can do? The clause says that the rate of return instrument will not be invalidated, but what is the response? Where would people go if they were dissatisfied with the process that the Australian Energy Regulator followed? With those brief words, the Greens will be supporting the second reading of this bill.

The Hon. C.M. SCRIVEN (17:13): I am the opposition's lead speaker on this bill, which we will be supporting. These changes are a result of the COAG Energy Council's agreement to amend both the National Electricity Law (NEL) and the National Gas Law (NGL)—a decision taken in July 2017. The changes will create a rate of return instrument for regulatory determinations by the Australian Energy Regulator and the Western Australian Economic Regulation Authority. This instrument will be binding, in contrast to the current situation where the authority's rate of return guidelines are not binding, meaning that they can use different approaches to the rate of return for each network business determination.

The rate of return allows electricity and gas businesses that are regulated to recover their efficient financing costs. This goes some way to ensuring that those businesses are viable and can maintain their infrastructure as well as having the ability to invest to meet reliability standards, among others.

The binding nature of the rate of return instrument is intended to reduce the amount of uncertainty that currently exists for regulated businesses, for investors, for consumers and for the regulator. It is also intended to reduce the regulatory burden through less debate of rate of return issues and, therefore, less time and cost to stakeholders.

The rate of return makes up the largest revenue component for energy network businesses, so these changes will be one step in stabilising energy prices over time. I am advised that energy ministers considered this to be an important step. Indeed, the opposition commends minister Frydenberg and the members of the COAG Energy Council, which of course at the time of the decision included South Australia's Labor minister prior to the change of government, for progressing these changes.

South Australia is the lead jurisdiction for passing the legislation on behalf of all member states, and this is a national reform that should be supported. The opposition does not have any questions in committee. We are very pleased with these reforms, and I commend the bill to the chamber.

The Hon. D.W. RIDGWAY (Minister for Trade, Tourism and Investment) (17:15): I thank honourable members—the Hon. Mark Parnell for his contribution and the Hon. Clare Scriven on behalf of the opposition for her contribution—and commend the bill to the chamber.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 5 passed.

Clause 6.

The Hon. M.C. PARNELL: I nominated clause 6 because that is where most of the action is in terms of inserting new Division 1B—Rate of return instrument. This is in relation to electricity; the situation is the same in relation to gas, which is clause 15 (we only need to deal with it in one spot). I will give the minister a chance, if he can, to respond to my questions about the consumer reference group and how it is to be funded. The second question I had was about what redress there is if the proper process is not followed.

The Hon. D.W. RIDGWAY: In relation to the consumer reference group to which the honourable member referred, I have been advised that it is funded by the Australian Energy Regulator, which of course has its own budget and is funded by the commonwealth, and they are doing all that. We can take on notice to get the make-up of the people involved, and who is on that consumer reference group. Could the honourable member repeat the second part of his question for me?

The Hon. M.C. PARNELL: I thank the minister for taking that on notice. I think the actual membership—it is a new group, so we do not know who it is, so if the minister can come back with who is on it, and also its budget. The second part of the question referred to new clause 18R, which basically says that failure to follow these processes does not invalidate the rate of return instrument, which is the final product. My question is: is there is any comeback, other than complaining to the Australian Energy Regulator? What could groups do if they were dissatisfied with the process that was followed?

The Hon. D.W. RIDGWAY: I am advised that this is a catch-all clause. If somebody thinks there has been a breach, they could seek a judicial review. My advice is also that it is a catch all, so that some little minor technical breach does not invalidate it all. It has been designed so that, if there is a major breach, clearly there is a process to go through and maybe a judicial review, but not something of a minor nature.

The Hon. M.C. PARNELL: I thank the minister for his answer. I have only one other question and I might ask it now to assist the committee in rapidly moving through the rest of the bill. It is a question that combines elements of clause 2—Commencement and also clause 15, which is in relation to the National Gas Law. The question is quite a simple one: will this bill, when it becomes law, affect the current application by Australian Gas Networks to get a new gas pipeline to Mount Barker? That is currently underway. I think there is a draft determination being granted. I think there is a final one at around about the end of the month. Will anything in this legislation affect that process?

The Hon. D.W. RIDGWAY: I am advised that the answer is no.

Clause passed.

Remaining clauses (7 to 21) and title passed.

Bill reported without amendment.

Third Reading

The Hon. D.W. RIDGWAY (Minister for Trade, Tourism and Investment) (17:21): I move:

That this bill be now read a third time.

Bill read a third time and passed.