Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 21 July 2020.)

The Hon. C.M. SCRIVEN (17:22): I indicate that I will be the lead speaker on this bill, and the opposition will be supporting this measure. The origin of this bill is that the Retailer Energy Efficiency Scheme was a scheme that started around 10 years ago. There was a scheduled 10-year review, and that review was tabled in this parliament last December. The report, 'The Review into the South Australian Retail Energy Efficiency Scheme, December 2019', explains that the Retailer Energy Efficiency Scheme (REES) commenced in 2009 under two acts: the Electricity Act and the Gas Act.

It is governed by part 4 of the Electricity (General) Regulations of 2012 and the gas regulations of 2012. The threshold consideration that the review was looking at was whether the scheme should continue beyond 2020. The review recommended that the REES should apply, should continue through to 2030, and that it should apply from 1 January 2021, and also that it should have the following key features: a 10-year continuation, with two five-yearly target resets and a review to be conducted in 2029. Retailers will be obligated to deliver the scheme. We are maintaining that obligation on the retailers.

The report continues that the scheme's objectives will be to improve energy productivity for households, businesses and the broader energy system, with a focus on low income households. This will reduce energy costs and greenhouse gas emissions, whilst improving human health. The opposition is pleased that low income households are specifically mentioned in the report. It is a very important initiative for low income households in particular and, given that that focus is remaining, the opposition is broadly supportive of this measure.

The Hon. F. PANGALLO (17:24): I rise to speak in support of the Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill 2020, which amends the Electricity Act 1996 and the Gas Act 1997. As far as I can tell, this simple bill is to enable implementation of a new Retailer Energy Productivity Scheme (REPS) to replace the Retailer Energy Efficiency Scheme (REES), which has been in place for 10 years. I say 'as far as I can tell' because the bill itself is very scant, leaving the detail to regulations, which, of course, we have not seen.

An independent review into the South Australian Retailer Energy Efficiency Scheme, completed by Common Capital and provided to the government in December 2019, found the REES has been an effective policy tool. The Common Capital evaluation found the REES was effective at delivering its objectives. It was efficient by delivering a net economic benefit while meeting those objectives. It was equitable by delivering benefits to households and low income households across the state and was administratively simple, keeping costs in line with similar schemes.

The review found the scheme, as it is, works. It has reportedly saved businesses $750 million in five years, and households over $150 million over the same period. The review made a number of recommendations, including that we continue to have a form of REES to December 2030. In fact it recommended that the REES itself continue from 2021. The review of the REES made a series of recommendations, which I will not list here but note most are not actually included in this bill.

Indeed, what is more noticeable about this bill is what it does not include. There is no mention of low income households, but I understand the intention is they be included. There is no mention of a new requirement for a customer co-payment. There is no detail about whether these measures are means tested or not. There are no details of proposed new energy demand management and energy demand response activities. There are no details about the incentives for demand response activities or energy savings in the commercial and residential sectors. There are no details about what would be very welcome new commercial and industrial activity such as upgrades of vans, pumps and motors.

A REPS is apparently intended to include a priority target, comprising the current scheme priority groups as well as rental households, but we have no detail of this. I understand there will be a regional obligation if the target falls short in that year for regional communities, which would be very welcome, but I do not see these details in the bill before us. This bill seems to merely remove the term 'efficiency' and substitute it with 'productivity'. It deletes 'energy efficiency shortfall' and replaces it with 'energy productivity shortfall'. It deletes 'REES' and deletes 'efficiency' and leaves the rest to the regulations. The final REPS design will be contained within regulations.

Leaving the details to the regulations is high risk. I have many times in this place stated my strong preference that the detail be in the legislation to the maximum extent possible. I am not alone in this concern. My concern at leaving the bulk of the provisions to regulations is shared by the Minister for Energy and Mining, Dan van Holst Pellekaan. He himself admits he is not generally in favour of leaving an enormous number of the provisions to regulations as this bill does. Let me quote directly the minister in the House of Assembly on 1 July 2020:

Yes, he—

Tom Koutsantonis—

is quite right: there is an enormous amount in the regulations. That is not new or different, but it is frustrating, though.

I remember sitting through this process as a shadow minister comfortable with the principles of some bills but understanding that the devil was in the detail. If the regs went one way, then happy days; if the regs went another way, it would be a disaster.

He went on to say:

It is a pretty straightforward bill but, yes, the regulations are very important.

As we continue to experience a very cold South Australian winter, we also know we will very quickly begin to experience our climatic extremes of very hot summers as we did in 2019-20. Both of these extreme seasons bring enormous demand not only on the power supply systems but also on households and businesses who have no other option but to use the power they can often ill afford, especially during these times of high unemployment, business downturn and collapse and recession due to COVID-19.

I personally know there are rental property households who are dangerously burning candles at night and having to rug up as they cannot afford lighting or heating. I know there are households who will not use the oven because it uses too much power. Sadly, I know a lot of elderly people who go to bed early rather than use power for heating or cooling. I strongly recognise and support the need for improved energy efficiency and productivity schemes that levy households to fund efficiency measures to alleviate this kind of power and utilities stress on households.

Similarly, I know many businesses have had to cease trading or have had to downsize because of crippling energy costs. Many have been able to move to solar, which is a considerable capital investment that does reduce their power costs, but for some their reliance on the grid is still a big expense to their business. Of course, I welcome any legislation aimed at reducing greenhouse gases, increasing our access to renewables and reducing our reliance on other states for power, especially during periods of peak demand.

The government went to the election promising a reduction in power prices of $302 per annum per household and has recently restated this in government advertising. It is now time to deliver on this promise. I am not convinced this bill will, in itself, do this. I will be interested in a year's time to see if households and businesses have enjoyed the predicted savings.

The fact is that, in South Australia, privately owned SA Power Networks (SAPN) has a stranglehold on the power distribution network business thanks to the Olsen Liberal government's decision to privatise the former government-owned ETSA business in the late 1990s to give SA Power Networks a 200-year monopoly where South Australia kept most of the risk and SA Power Networks made all of the money. In fact, it pays very little tax.

I am old enough to remember the days when all our critical utilities—gas, electricity and water—were in public ownership, with profits invested in infrastructure and lower power prices for the greater good of the South Australian public, not the share prices or the profit margins of large multinational companies. To date, privatising ETSA to SA Power Networks has not produced savings for the average consumer, energy customer or household, but it has been great for SA Power Networks' Hong Kong-based owners.

I sincerely hope this bill does deliver on its stated objectives for South Australian households and businesses. As the minister himself has acknowledged, that support is a leap of faith because this bill really leaves most of the work to subordinate legislation via regulations, and we all know the sleight of hand this government is capable of via regulations. I will be asking more questions as the bill progresses through the Legislative Council. With those comments, I conclude my remarks.

The Hon. D.W. RIDGWAY (Minister for Trade and Investment) (17:34): I thank the Hon. Clare Scriven and the Hon. Frank Pangallo for their contributions on this important Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. C.M. SCRIVEN: We were told in the briefings and elsewhere that there was a focus on low income households continuing in this bill. Could the minister outline how that is occurring?

The Hon. D.W. RIDGWAY: I am advised there will be a priority target for households; when the scheme is implemented it will certainly have a priority target for households.

The Hon. C.M. SCRIVEN: Could the minister explain a bit more about what that means?

The Hon. D.W. RIDGWAY: It would be a priority group of consumers, like low income households and low income people. My understanding is that the priority target is a cohort of people we will be looking to try to support.

The Hon. C.M. SCRIVEN: I thank the minister for his answer. Will that mean there is an exemption for those households from any consumer co-payment?

The Hon. D.W. RIDGWAY: The scheme is still being devised and constructed, but the advice is that those people should not have to co-contribute. In fact, they would not have to pay any extra, that priority cohort we are talking about.

The Hon. C.M. SCRIVEN: I appreciate that a lot of this will be worked out in the regulations, but is the minister able to give some indication of what the likely threshold will be, how people will show they are low income households? Will it be people who are, for example, on a concession card or some other mechanism? What sort of things are envisaged by the government?

The Hon. D.W. RIDGWAY: Under the current electricity concession scheme there is a list of eligible people, people in situations where they are eligible. I am advised we will add renters to that list as well. It is already available, and I assume it is available in the Electricity (General) Regulations, and that group of people is listed.

The Hon. C.M. SCRIVEN: When the minister says that renters will be added, presumably that is not everyone who is renting. There are plenty of households that are renting that are not low income, so how will that be assessed?

The Hon. D.W. RIDGWAY: The government is consulting on that at the moment. You are absolutely right, Hon. Ms Scriven, that there are renters who will not be facing any hardship, who just rent because they choose to rent. That is what the consultation is really about at the moment, to work out how we can find something that is fair and equitable so that those who cannot afford it are not charged, if you like, but also to make sure that those who can afford to pay continue to pay. We are still consulting on that. It will be worked out the next few months.

The Hon. C.M. SCRIVEN: The review refers to a regional obligation on retailers. Will that be included, because obviously that is not specifically in the bill as it stands? What will that involve, and how will it differ from the current situation?

The Hon. D.W. RIDGWAY: I am advised that what we are consulting on at the moment is, if there is not enough activity in a region and it falls below the target, then we would set a target in the region. We really want to consult to make sure that we get the target right in the region.

The Hon. C.M. SCRIVEN: Can the minister explain what he means by 'get the target right'? I am sorry, it is not clear to me and possibly others in the chamber how that is a regional obligation on retailers and what it actually means.

The Hon. D.W. RIDGWAY: I am advised that we would let the market determine what activity would happen in a region but that they would be required to deliver some of the benefits that are outlined in this bill and the regulations and, if they do not, the following year you would set a target for them that they would have to achieve.

The Hon. C.M. SCRIVEN: Would failure to achieve that target involve penalties to that retailer?

The Hon. D.W. RIDGWAY: I am advised that the way the scheme works, if they do not deliver on it, there would be penalties.

The Hon. C.M. SCRIVEN: Are there any recommendations that were contained in the review that the government does not intend to include in the regulations? The reason I ask, as the Hon. Frank Pangallo has also indicated, is that the bill itself is very light on and we are told that all of the matters that are in the review, virtually it seems apart from the change in wording, will be in the regulations. My question is: are there any recommendations that the government does not intend to adopt?

The Hon. D.W. RIDGWAY: I am advised that substantially, yes, they will all be in the regs but we are still consulting with all of the stakeholders to fine-tune it, as we said earlier. As you rightly point out, the legislation is light on; it is all in the regulations and we are still consulting.

The Hon. C.M. SCRIVEN: Just for clarity, is the minister saying that the intention of the government is to include all recommendations, unless there is just some tweaking around the edges based on feedback, but that might be not to just throw out any of the recommendations holus bolus but simply to make perhaps some slight changes in terms of the amount or something like that?

The Hon. D.W. RIDGWAY: That is my understanding. The advice is, yes, we are going to try to include all the recommendations but, as I am sure members are aware, when you finally deliver these programs and activities, sometimes you need to tweak them a little bit to make them work. The intention of the government is to include all of the recommendations at this stage but it will involve some tweaking.

The Hon. C.M. SCRIVEN: Can the minister advise who that consultation is currently being done with? Who is being consulted?

The Hon. D.W. RIDGWAY: The Department for Energy and Mining is doing all of that consultation and it is wide public consultation. I do not have the list of the stakeholders that we are engaging with with me today, but my advice is it is particularly broad consultation.

The Hon. C.M. SCRIVEN: In terms of that consultation, it is with stakeholders but, given the general public is one of those stakeholders, it certainly sounds from what the minister is saying that the intention is that it is with the general public as well. Is that being done through advertisements in newspapers, online or other methods to try to engage people who might have an interest in this?

The Hon. D.W. RIDGWAY: I am advised that it is all being done through the department's website.

The Hon. M.C. PARNELL: I want to ask a little bit about the practical difference between energy efficiency and energy productivity, because really the thrust of this bill, the main thing it does, is it changes the word 'efficiency' for 'productivity'. The minister's second reading explanation is fairly thin, but it does make the point that energy efficiency is a subset of energy productivity and there are some extra things that retailers can do to satisfy their obligations that fall within the definition of productivity but might not fall within the definition of efficiency. The minister in the second reading says:

Energy productivity activities include energy efficiency—

so that is a subset—

and other activities that shift the periods when energy is being used.

He goes on to say:

Activities that shift when energy is used do not necessarily reduce the total amount of energy being consumed. They may result in an overall increase in energy consumption but a lower energy bill.

This follows from the Hon. Clare Scriven's questions. It is pretty easy to understand a retailer going around to, for example, low income households and replacing inefficient light globes with more efficient light globes—that is really easy—or helping them with the fridge.

The Hon. C.M. Scriven: Door snakes.

The Hon. M.C. PARNELL: Door snakes. I still remember the classic case of the beer fridge in the shed, where the door had broken and a cardboard sheet had been sticky taped over the freezer compartment, so I can sort of get that, but what I am trying to work out is, when an energy retailer is dealing with a low income household—say a rental household—what can they actually do to shift the time of consumption of energy, because we do not have smart meters, we do not have time-of-use charging. How is this going to manifest itself in practice? How are you going to help low income people use energy at different times?

The Hon. D.W. RIDGWAY: I am advised that there will be a whole range of opportunities for different tariffs that reward you for using electricity at different times, and one of those could easily be shifting your hot water, if you have electric hot water, to the middle of the day when you are not home and the rooftop solar is going gangbusters. Instead of having your hot water heating in the morning or at night, you can actually have it when there is plenty of energy available. Also, we expect that over time there will be a whole range of new products coming to the market that are designed to maximise the opportunity to use the cheap supply of electricity.

The Hon. M.C. PARNELL: I thank the minister for that answer. I absolutely understand how the electricity system has changed. It used to be that the best thing you could do was use your electricity at night time, because the gas-fired or the coal-fired power station was chugging away at night, which is why many of us—I do not anymore—still had the old J tariff. In other words, if you heated your water at night, you paid less for your electricity. Your water heater would kick on at midnight or whatever, and you would be using that cheap off-peak electricity.

It has now changed, so with solar panels on a third of houses, or whatever the number is now, we have this peak of electricity during the day, and it actually makes sense to use more power during the day when the electricity is being generated by the sun. What I am struggling with a little bit is that the minister said that it will be possible to have these time-of-day tariffs. Are any such tariffs currently available to households, and would households have to pay for expensive new meters before they could take advantage of time-of-day pricing?

The Hon. D.W. RIDGWAY: SA Power Networks has what they call a 'time-of-use tariff' in the middle of the day. I think the term for it now is a 'solar sponge', so it is actually a tariff that is available in the middle of the day and the challenge then is for the retailers that then pick up on it, obviously because of SA Power Networks. They are doing a separate consultation around that in particular, requiring them to have a standing offer, which is the time-of-use tariff during the day.

I remind the honourable member of the J tariff meter. If you look at the old little clock thing that came on at 4am and turned off at 8am, I am sure it would not be very hard to actually turn the little clock back, if you are the appropriate authority, and have it coming on in the middle of the day. That is a very simple thing to do to actually make the J tariff work at a time of the day when there is plenty of electricity around.

There are some things happening; some very simple, some a little bit more complicated, but there is a separate consultation going on with the retailers to make sure they can have a standing offer on that time-of-use tariff for the middle of the day.

The Hon. M.C. PARNELL: I do understand the validity of the solar sponge argument, but just so I fully understand it, is it a question of chicken and egg? Is it that the retailers are not offering households this time-of-day pricing because there is no incentive for them to do it because energy productivity is not yet recognised as the same as energy efficiency? I am just trying to work out: you are saying that it is possible to have this, but I just do not know of anywhere where it happens.

The Hon. D.W. RIDGWAY: The tariff only started only 23 days ago, so it is a relatively new product, and I think the honourable member can give us a little bit of time to actually prove that up, please.

The Hon. M.C. PARNELL: I thank the minister. This is all valuable information for the public to understand what it is that is actually changing. The Hon. Clare Scriven talked about low income households. You have some households that are not low income that can still make a contribution to helping the electricity system by using energy at different times. I do not own a plug-in electric car—I aspire to one but I do not own one. The owners of electric cars used to complain that they were not allowed to plug in at midnight and get the cheap electricity. They said, 'I can heat my water at midnight with cheap electricity, but I am not allowed to plug my car in at midnight.'

Electric cars would be the same as any other appliance and the peak time to be charging is probably now, in the middle of the day. Is there any scope; are there any retailers who are going to be able to offer electric car charging in the middle of the day both to benefit the consumer but also to satisfy their obligations under this new energy productivity scheme?

The Hon. D.W. RIDGWAY: I am advised that exactly what SA Power Networks are trying to achieve with their solar sponge is to actually have that energy available and under that tariff during the middle of the day, for exactly what you are saying, so that you can charge—in your retirement—your beautiful new Tesla. You can charge that up during the middle of the day.

The Hon. M.C. PARNELL: I thank the minister. I think he has agreed on the record that he is giving me a Tesla, I think I heard him say, which is a very generous parting gift from the minister. I do not want to persevere too much with this but, again, coming back to low income people—the ones the Hon. Clare Scriven was asking about—my recollection is that welfare groups like SACOSS, for example, in the past have been fairly hostile to smart meters that allow time-of-day pricing of electricity.

My question is: has the government been able to negotiate to the satisfaction of the welfare sector that this is in fact a good direction to be heading in, smart meters, time-of-day pricing? My recollection is that they were fairly hostile at least a couple of years ago.

The Hon. D.W. RIDGWAY: The national framework that has been agreed, I think, for new meters especially is that once your meter breaks or you need to install a new meter, you actually have one that does time-of-day metering. From SACOSS's point of view, I do not believe we have had any pushback on that at all—no.

Clause passed.

Remaining clauses (2 to 7) and title passed.

Bill reported without amendment.

Third Reading

The Hon. D.W. RIDGWAY (Minister for Trade and Investment) (17:56): I move:

That this bill be now read a third time.

Bill read a third time and passed.