Statutes Amendment (National Energy Laws)(Regulatory Sandboxing) Bill

Second Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:42): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation and explanation of clauses inserted in Hansard without my reading them.

Leave granted.

The Government is amending the national energy legislation to introduce a regulatory sandbox toolkit.

The energy sector has experienced many changes in recent years, as it transitions to a low carbon future. This evolution includes the emergence of innovative technologies and business models in the national energy markets. These new initiatives can bring significant benefits to consumers.

It is therefore essential that the regulatory framework that supports Australia's energy market can adapt and respond to technological advancements to operate in the long-term interests of consumers.

The introduction of a regulatory sandbox toolkit aims to make it easier for businesses to develop and test these innovative energy technologies and business models. This type of innovation in the energy sector can lead to better services and lower costs for consumers.

A regulatory sandbox is a framework within which participants can trial innovative concepts in the market under relaxed regulatory requirements, on a time-limited basis and with appropriate safeguards in place.

The objective of a regulatory sandbox toolkit is to encourage innovation, which has the potential to contribute to the long-term interests of consumers, rather than simply to facilitate an increased number of trials.

The National Energy Laws (Regulatory Sandboxing) Bill 2022 presented to you today, seeks to implement changes to the National Electricity Law, National Gas Law and National Energy Retail Law to introduce a regulatory sandbox toolkit.

In the development of this package it was considered that various regulatory tools, both existing and new, could be used to facilitate proof-of-concept trials. These tools could be applied according to their suitability to a proposed trial.

It was considered that the existing regulatory framework may limit opportunities for trials of innovative products and business models which may provide significant benefits to consumers. As such two tools have been developed to provide greater flexibility in the regulatory framework.

The first introduces a new Australian Energy Regulator (AER) regulatory waiver power that can provide time-limited regulatory relief to eligible trials.

The second introduces a new power for the Australian Energy Market Commission (AEMC) to make a trial rule. This includes an amended rule change process for proof-of-concept trials that could be used if an eligible trial required new rules or the alteration of existing rules for a limited time to be conducted.

With regard to a trial waiver, a one-stop shop is considered necessary to undertake a trial project under this process. The AER is considered the appropriate body for considering and providing such exemptions given their role as the Regulator of the national frameworks.

The Bill includes a broad power for the AER to grant specific exemptions and waivers to facilitate the conduct of proof-of-concept trials, subject to the 'trial projects guidelines' the AER develops in consultation with the market bodies and relevant stakeholders.

This tool could be used if an eligible trial required an exemption from a specific rule (or rules) in the National Electricity Rules, National Energy Retail Rules or the National Gas Rules.

Registration requirements have been identified as a potential barrier to trial projects proceeding. The requirement to be registered is set out in the Laws.

Whilst the Laws provide for an exemption to these requirements, the responsible body is the Australian Energy Market Operator (AEMO) for certain registration categories and the AER for other registration categories. The Bill therefore provides for the AER to be the body that provides any necessary exemption from registration requirements for trial projects.

The Bill also ensures that the AER may only grant a trial waiver if it has taken into account the innovative trial principles introduced in the Bill and any matter required by the rules.

With regard to a trial rule, this new tool could be used if an eligible trial required new rules or the alteration of existing rules for a limited time to be conducted. The development of a separate rule-making power overcomes issues with the current rule making process which is considered too lengthy and represents too high a barrier for the purposes of a limited trial rule. The proposed trial rule change process will be conducted by the AEMC in under 10 weeks and encompass the National Electricity Rules, National Energy Retail Rules and the National Gas Rules.

It is possible that some proof-of-concept trials may require more than one of the regulatory sandbox tools to proceed. For other proof-of-concept trials, existing arrangements may be sufficient, and they may not need any of the sandbox tools to proceed.

Overall, the Bill seeks to achieve the following outcomes:

The Bill introduces a set of innovative trial principles in the national energy laws. These principles must be taken into account by the market bodies when determining whether a trial project is genuinely innovative in connection with granting a trial waiver or making a trial Rule.

Amending the functions and powers of the AER to make trial waivers for trial projects.

Provision for the AEMC to make trial Rules for trial projects.

Introduction of a more streamlined process for the assessment and making of trial Rules.

Provision for the AER to monitor and enforce trial waivers, and associated conditions, and trial Rules and any requirements as set by the AEMC.

Provision for the AER and AEMC to revoke a trial waiver or trial rule respectively should the need arise. For example, if conditions or requirements placed on a trial waiver or rule are breached.

The Bill also makes provision for the South Australian Minister responsible for administering the relevant laws to make an initial set of National Electricity Rules, National Energy Retail Rules and National Gas Rules associated with the amendments on regulatory sandboxing. Significant public consultation on the sets of initial rules has already been undertaken.

Finally, an innovation enquiry service will form part of the toolkit, however this can be operated within the existing regulatory framework. It was considered innovations that are in consumers' interests could be encouraged by establishing a clearer process for proponents of proof-of-concept trials to approach energy market regulatory bodies for feedback and guidance on regulatory issues and regulatory options to avoid unnecessary delays and costs for eligible trials. The AER will be responsible for its implementation including determining when the service will be launched and resourcing requirements.

By introducing a regulatory sandbox we are providing for a regulatory framework that is better equipped to respond to the rapid change in the energy sector and deliver benefits for customers through innovation.

I commend the bill to the Chamber.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of National Electricity (South Australia) Act 1996

4—Amendment of section 2—Definitions

Certain definitions are inserted for the purposes of the measure, including trial project, trial Rule and trial waiver.

5—Insertion of section 7B

The innovative trial principles are inserted as section 7B:

7B—Innovative trial principles

The innovative trial principles are set out.

6—Amendment of section 15—Functions and powers of AER

An additional function is conferred on the AER relating to monitoring and investigating the conduct and outcomes of a trial project undertaken under a trial Rule or trial waiver.

7—Insertion of Part 3 Division 1D

New Division 1D is inserted into Part 3:

Division 1D—AER trial waiver functions

18ZJ—Definitions

A definition of proponent is inserted.

18ZK—Interpretative matters

Certain interpretative matters are provided for.

18ZL—Trial waiver

The AER may grant a trial waiver, being an exemption from section 12 of the Law or the Rules, or a provision of the Rules.

18ZM—Conditions of trial waiver

A trial waiver must be subject to any conditions required by the Rules and may be subject to any conditions the AER considers appropriate.

18ZN—Consultation on trial waiver

Consultation requirement that the AER must comply with before granting a trial waiver are provided for.

18ZO—Publication etc of trial waiver

A copy of a trial waiver must be published on the AER's website.

18ZP—Duration of trial waiver

A trial waiver has effect from the day specified in the trial waiver and for the period (not exceeding 5 years) specified in the trial waiver.

18ZQ—Extension of trial waiver

Provision is made for the AER to extend a trial waiver by a specified period.

18ZR—Compliance with trial waiver

A proponent is required to comply with the conditions of a trial waiver.

18ZS—Revocation of trial waiver

The AER is authorised to revoke a trial waiver.

18ZT—Other matters

Certain other matters relating to the granting of a trial waiver are set out.

8—Amendment of section 34—Rule making powers

The powers to make Rules in the Law are expanded to include any matter or thing related to, or necessary or expedient for, the purposes of a trial Rule, trial project or a trial waiver.

9—Amendment of section 87—Definitions

A definition of trial Rule is inserted. A trial Rule is included in the definition of market initiated proposed Rule. Other amendments are consequential.

10—Insertion of section 88C

New section 88C is inserted:

88C—AEMC must take into account innovative trial principles in certain cases

A requirement to take into account the innovative trial principles in making a trial Rule is provided for.

11—Insertion of section 90DA

New section 90DA is inserted:

90DA—South Australian Minister to make initial Rules relating to regulatory sandboxing

The South Australian Minister is empowered to make initial Rules relating to regulatory sandboxing. Certain requirements relating to the making of such Rules are imposed, including publication requirements.

12—Amendment of section 92—Contents of requests for Rules

In addition to the Regulations, provision is made for the Rules to prescribe requirements relating to requests for Rules.

13—Amendment of section 94—Initial consideration of request for Rule

In addition to the Regulations, provision is made for the Rules to prescribe requirements relating to requests for Rules.

The other amendments are consequential.

14—Insertion of section 96AA

New section 96AA is inserted:

96AA—Publication of final Rule determination for trial Rule

Provision is made in relation to the time within which a final Rule determination for request for a Rule that is a trial Rule must be made. Sections 96 and 96A are disapplied in relation to a request for a trial Rule.

15—Amendment of section 102—Final Rule determination

A requirement for the AEMC to give its reasons relating to a final Rule determination taking into account the innovative trial principles is inserted.

16—Amendment of section 103—Making of Rule

The AEMC is required to specify an expiry date for a trial Rule (which must be no more than 5 years after the date on which the trial Rule commences operation).

17—Insertion of sections 104A to 104D

New sections 104A to 104D are inserted:

104A—Extension of trial Rule

Provision is made for the AEMC to extend a trial Rule by a specified period.

104B—AEMC may impose requirements on proponent of trial project on making trial Rule

The AEMC must give consideration to revoking the trial Rule on the recommendation of the AER.

104C—AEMC may revoke trial Rule on recommendation of AER

Provision is made for the AEMC to impose requirements on proponent of trial project on making trial Rule.

104D—Special provision for revocation of trial Rule

Certain Divisions of the Part are disapplied in relation to the making of a Rule that revokes a trial Rule and certain requirements are imposed on such a revocation.

Part 3—Amendment of National Energy Retail Law (South Australia) Act 2011

18—Amendment of section 2—Definitions

Amendments that are substantially similar to the amendments to the National Electricity Law are made to the National Energy Retail Law.

19—Insertion of section 13A

13A—Innovative trial principles

20—Insertion of Part 5A

Part 5A—AER trial waiver functions

121A—Definitions

121B—Interpretative matters

121C—Trial waiver

121D—Conditions of trial waiver

121E—Consultation on trial waiver

121F—Publication etc of trial waiver

121G—Duration of trial waiver

121H—Extension of trial waiver

121I—Compliance with trial waiver

121J—Revocation of trial waiver

121K—Other matters

21—Amendment of section 204—Functions and powers of AER (including delegations)

22—Amendment of section 235—Definitions

23—Insertion of section 236A

236A—AEMC must take into account innovative trial principles in certain cases

24—Amendment of section 237—Subject matters of Rules

25—Insertion of section 238AA

238AA—South Australian Minister to make initial Rules relating to regulatory sandboxing

26—Amendment of section 246—Contents of requests for Rules

27—Amendment of section 249—Initial consideration of request for Rule

28—Insertion of section 252A

252A—Publication of final Rule determination for trial Rule

29—Amendment of section 259—Final Rule determination

30—Amendment of section 261—Making of Rule

31—Insertion of sections 262A to 262D

262A—Extension of trial Rule

262B—AEMC may impose requirements on proponent of trial project on making trial Rule

262C—AEMC may revoke trial Rule on recommendation of AER

262D—Special provision for revocation of trial Rule

Part 4—Amendment of National Gas (South Australia) Act 2008

32—Amendment of section 2—Definitions

Amendments that are substantially similar to the amendments to the National Electricity Law are made to the National Gas Law.

33—Insertion of Chapter 1 Part 3 Division 2A

Division 2A—Innovative trial principles

24A—Innovative trial principles

34—Amendment of section 27—Functions and powers of the AER

35—Insertion of Chapter 2 Part 1 Division 1B

Division 1B—AER trial waiver functions

30U—Definitions

30V—Interpretative matters

30W—Trial waiver

30X—Conditions of trial waiver

30Y—Consultation on trial waiver

30Z—Publication etc of trial waiver

30ZA—Duration of trial waiver

30ZB—Extension of trial waiver

30ZC—Compliance with trial waiver

30ZD—Revocation of trial waiver

30ZE—Other matters

36—Amendment of section 74—Subject matter for National Gas Rules

37—Amendment of section 290—Definitions

38—Insertion of section 293A

293A—AEMC must take into account innovative trial principles in certain cases

39—Insertion of section 294EA

294EA—South Australian Minister to make initial Rules relating to regulatory sandboxing

40—Amendment of section 298—Content of requests for a Rule

41—Amendment of section 301—Initial consideration of request for Rule

42—Insertion of section 304A

304A—Publication of final Rule determination for trial Rule

43—Amendment of section 311—Final Rule determination

44—Amendment of section 313—Making of Rule

45—Insertion of sections 314A to 314C

314A—Extension of trial Rule

314B—AEMC may impose requirements on proponent of trial project on making trial Rule

314C—AEMC may revoke trial Rule on recommendation of AER

314D—Special provision for revocation of trial Rule

Debate adjourned on motion of Hon. L.A. Curran.