Bills

Statutes Amendment (Rates—Electricity Generation) Bill

Introduction and First Reading

The Hon. F. PANGALLO (15:55): Obtained leave and introduced a bill for an act to amend the Electricity Corporations (Restructuring and Disposal) Act 1999, the Local Government Act 1999 and the Outback Communities (Administration and Management) Act 2009. Read a first time.

Second Reading

The Hon. F. PANGALLO (15:56): I move:

That this bill be now read a second time.

I rise to introduce my private member's bill, the Statutes Amendment (Rates—Electricity Generation) Bill 2025. This bill is about fairness and cost-of-living relief for all 1.8 million South Australians, including, and especially for, the 600,000 or so who live in regional South Australia. The bill has been some time in the making to ensure that we get this right. It fixes a 25-year-old mistake, and it will fix it before the impact from the mistake becomes massively worse.

First, a quick history. Just a quarter of a century ago the Olsen state government was very busy privatising the state's electricity assets. Many of us have lived to regret that action and the negative impacts privatising all our utilities, including electricity, has had on our state. We do not have cheaper power and the energy sector is a complex mix of generators, wholesalers and retailers, with an overarching energy regulator and a raft of complex federal and state legislation. Any prospect of returning these utilities, their assets and, in some cases, profitable businesses to public ownership is probably a horse long bolted, although it is theoretically possible, as Queensland has demonstrated with its six publicly owned energy entities.

To achieve privatisation in South Australia the government of the day introduced the Electricity Corporations (Restructuring and Disposal) Act 1999, which for today's purposes I will call the ECRD Act. Schedule 1 of the ECRD Act regulates the calculation of council rates on land used for electricity generation. The ECRD Act, in conjunction with regulations under the Valuation of Land Act 1971, currently does two things that need to be addressed:

1. When calculating the value of land it prevents the taking into account of electricity-generating plant. This reduces the capital value of the land and reduces the council rates that are levied for that property.

2. The ECRD Act also enables the Governor to make proclamations to reduce—and only reduce—council rates on land used for electricity generation. Once one of these proclamations has been made to reduce council rates, it cannot be revoked except through an act of parliament.

That is partly why we are here today dealing with this issue in parliament. The end result, according to the figures I have seen, is that electricity generators in South Australia are, for all practical purposes, underpaying council rates to the tune of over $6 million a year. Who ultimately pays for this shortfall? It is the families in regional South Australia—that is, local businesses, farmers and every other ratepayer, including pensioners, low income earners and mums and dads, who have to pay more because one sector, the electricity generation sector, are not paying their fair share.

To bring that point home, I can give you a dozen case studies. For example, Wattle Range Council in our South-East are losing about $1.2 million each year in rates from electricity generators, which would be paid if that electricity generation was in Victoria rather than in South Australia. Wattle Range Council have made a public commitment that, if my bill passes, they will reduce rates to all other ratepayers by 5 per cent.

So what were legislators trying to do in 1999? Why is it that the electricity generation sector is entitled to discount council rates that most businesses are not entitled to? The theory was that, if prospective buyers of our electricity generation business were offered a discount on future council rates, they might be induced to pay a higher price to purchase our electricity assets. The trouble with this theory is that power companies do not make investment decisions based upon the cost of council rates.

In forming my views on these issues, I have been assisted by research by independent consultants the AEC Group, who are experts in the resources, energy and infrastructure industries. In February 2020, the AEC Group published their report, titled 'Rating equity in SA and the financial impacts on local government's ability to support growth'. The AEC Group research found the two main factors influencing the location of energy generation plant investment are (1) the proximity to sources of power, whether that source be coal, wind or cheap land for solar energy, and (2) access to the national electricity grid.

The AEC Group report also found that council rates are a negligible component of the operating costs of an electricity generation business. Indeed, rates are simply a cost of doing business for power generation companies, as they have found in Victoria. A recent report by the conservative Institute of Public Affairs think tank found that federal subsidies for the 50 largest wind farms, of which 70 per cent are fully or partially foreign-owned, amounted to $1.04 billion last year. Around 75 per cent of wind and solar farms are foreign-owned, and several energy retailers are also foreign-owned, including Alinta Energy, EnergyAustralia and Tango Energy being owned by Hong Kong or Chinese state entities. Simply Energy is a French company. Clearly, investment in renewable energy projects in Australia is a very attractive proposition for foreign entities.

My point in setting this out is that the current legislation was based on bad policy right from the outset. The promise of discount rates was never going to impact on investment decisions and would never have anything but a negligible impact on the sale price of the state's electricity assets. What we do know is that privatisation of electricity assets in South Australia stopped when the Rann government was elected in 2002, so the policy objective of the rates discount ceased to fulfil its original purpose. Since then, I am told, no state government has analysed whether the purpose of the rate discount was achieved, and no state government has ever investigated whether the rates discount is achieving any other policy objective.

The AEC Group research shows that for a quarter of a century we have been giving away millions of dollars in valuable public revenue to one sector of the economy and making everyone else pay more for no good reason. I say to the honourable members in this place: if anyone opposes my bill, if anyone tries to defend the status quo, please ask them what policy objective is served by continuing the rates discount for electricity generators. There is not one.

My next observation is that in a quarter of a century the electricity industry has completely changed. Back in the 1990s, we had a handful of big gas and coal generators occupying a small amount of land. Since then, we have seen an explosion of solar, wind and other forms of renewable energy, as well as new gas-fired generation. Seventy-five per cent of this explosion is owned by foreign entities.

An increase in output in theory is a good thing, but I have to note at this point that it is simply not true that renewable energy will bring down power prices for South Australian consumers, as recent history has shown us. There is precisely zero cause for future optimism about energy prices coming down. The claim that renewables would push down prices has been decisively proven wrong.

Last week, the Energy Regulator told us that the benchmark east coast electricity price would rise by 9 per cent, bringing to $1,300 the increase in the average energy bill since 2022. It is an indisputable fact that the two major parties' commitment to achieve net zero carbon dioxide emissions by 2050 and 43 per cent by 2020-30, as legislated under the Climate Change Act 2022, is an economic disaster for Australia.

Remember that China, India, Russia and now the US are not committed to cutting emissions, so the playing field is far from even. The problem that this bill deals with is that every new parcel of land used for electricity generation in South Australia attracts the mandatory rates discount. Every new parcel of land so used means less revenue for the local council, and that means that other South Australian ratepayers pay proportionately more.

According to the Australian Energy Market Operator (AEMO), which regulates the national energy market, South Australia could see a three to fivefold increase in electricity generation in the next decade. Again, that is great news in many respects. However, $6 million in foregone rates today could be as much as $25 million to $30 million of rates foregone in a decade. Who will make up this shortfall? Again, it is the ordinary families, small businesses, farmers, every South Australian ratepayer.

The legislation as it currently stands creates a huge cost-of-living issue for all South Australians, and a huge liability for councils. In their recent submissions to a NSW parliamentary inquiry, NSW councils revealed a chaotic process that benefits developers, many foreign owned, over rural and regional communities struggling to cope with a barrage of wind and solar proposals, transmission towers and large battery systems.

Many New South Wales and Queensland councils, where renewable approvals are galloping ahead of other infrastructure and planning, are realising this is an unfolding disaster. We do not want to replicate this in South Australia. If we do not fix the problem, it will become massively worse, and an even greater burden on South Australians. By contrast, my bill is based firmly on a number of clear principles, and I want to set these principles out for the record. These principles are in fact the state government's own principles for better regulation, which, in turn, are based on COAG's best practice regulation principles:

1. There should be a clear case for action before addressing a problem. As I have outlined today, the policy objective behind the current rating restrictions in the ECRD Act and associated instruments was flawed to begin with and is completely pointless today. However, it continues to have negative unintended consequences.

2. Government action should be effective and proportional to the issue being addressed. Again, there does not appear to be any analysis as to whether the rating restriction is doing anyone any good, and when it comes to proportionality, it is very difficult to imagine that giving away $6 million each year is a proportionate response to any issue. This looks like a completely disproportionate response to me. Is there any other sector subsidised to this extent in South Australia? I think not.

3. Ensuring that regulation remains relevant and effective over time. This is another principle that seems to have been ignored. The purpose of the restriction may have been to help privatise South Australia's electricity infrastructure in the 1990s. Most energy generators operating in South Australia were not even around in 1999. These companies are getting a rates discount that was not even intended to apply to them. There is no good reason to keep operating under a statute that no longer has or fulfils a policy objective.

I want to add one more principle: state governments have policies and objectives. State governments encourage some activity and they discourage others. In doing so, I fully appreciate it is legitimate for the government of the day to subsidise or tax particular organisations in furtherance of their policies. What is not legitimate is for a state government to further their policy objectives by giving away local government money to big power generation businesses.

When it comes to council rates, it should be the democratically elected representatives of local communities who make decisions about what rates need to be collected, who is entitled to a rates discount and what council services those rates collected are spent on. If the state government want to fund a policy objective, state government should fund it with their own money, not fund it at the expense of local government.

A few extra points: most people accept that we have to pay rates and taxes to keep our services and communities functional. Whilst we may not be too enthusiastic about paying them, we recognise that local government needs a certain amount of money each year to provide services to pay for its facilities or to fund infrastructure like roads, bridges, rubbish, stormwater planning and services such as libraries. If one group of ratepayers gets a rates discount, the remaining rates impost falls disproportionately on other ratepayers.

We cannot in good conscience look residents, farmers, small business people and people in regional SA in the eye and say, 'You are less deserving of a discount than the big electricity generator companies.' It is not right to ask all these other hardworking ratepayers to shoulder an additional financial burden to give big electricity generators a free ride.

This bill is not a new charge: it is the end of a rates holiday. It is the end of a massive rate relief scheme that no-one but big electricity generators get any benefit from, and that we are all disadvantaged by. It will take the payment of rates back to a level playing field. Whilst electricity generator companies are not paying their fair share of rates, councils are still required to provide their services. Roads, bridges and other infrastructure need to be built and maintained, not to mention the pressure that these developments put on local schools, housing and other services.

SA currently has thousands of wind turbines, with more being constructed. The Snowtown Wind Farm has 369 wind turbines, the Goyder council has close to 1,000, and I am told that in the District Council of Goyder a 100-tonne truck with a massive crane travels around from property to property within the council area to service the 800-odd huge wind turbines—not to mention the number of heavy vehicles constantly trucking equipment and personnel in and out during construction and repairs.

As heavy vehicles of this sort travel around they do enormous damage to country roads that were never built for this amount of traffic and these consistently heavy loads. Councils have to repair these roads. Goyder council tells me that they must spend more on repairing roads for these businesses than they are able to raise in rates. So who pays for the cost of repairing this damage? All of the other ratepayers.

I mentioned the AEC Group research earlier, and I will refer to their research again to bust a few myths that have been put about over the years. An increase in the operating costs of electricity generation companies cannot be passed on to consumers by way of high electricity prices. Individual companies sell power into the national grid and, because of the nature of the National Energy Market, each generator is a price taker. If their costs—such as the cost of council rates—increase, energy generator companies are unable to pass these costs on to the local consumers of electricity.

Over the past 20 years, when councils have expressed concern about the mandatory rates discount, governments of the day have expressed concern about the impact on investment. The AEC report completely debunks that thinking. In fact, the research shows very strong levels of electricity generation investment in those states where those companies pay fair council rates.

I am yet to hear any argument justifying the retention of the rating restrictions my bill seeks to fix. What public policy objective does the existing legislation further? Why should other South Australians pay higher rates so that big electricity generators can have a special discount that no-one else gets the benefit of?

Turning now to the operation of my bill, the bill does the following things:

1. As I set out earlier, the current ECRD Act and associated legislative instruments prevent councils from levying full rates on land used for electricity generation. My bill removes those prohibitions.

2. The ECRD Act also prevents an increase in council rates over this land, except through an act of parliament. My bill removes that unworkable restriction.

3. Instead, my bill provides for council rates on land used for electricity generation to be regulated pursuant to the Local Government Act 1999, as occurs for all other types of ratable land.

4. In lieu of rates, my bill would impose a charge on the land use for electricity generation. My aim is for the bill to follow the legislative scheme in Victoria where a charge is applied based upon a statutory formula calculated according to the megawatts of electricity that is generated. The minister will have some flexibility in the details of the scheme by making a notice in the Government Gazette.

5. This flexibility will enable a fair solution where, if the electricity generation plant—for example, a wind turbine—is situated within a larger piece of land—for example, a farm—it is not the bill's intention for the farmer to be out of pocket.

6. What my bill enables is that smaller parcels of land will be separately assessed for the purpose of council rates. The farmer remains the principal ratepayer for the balance of the land and the farmer will not face an increase in their rates as a consequence of part of their land being used for electricity generation. This arrangement is very similar to the rating arrangement in place for telecommunication towers.

7. A charge, such as a fixed charge, could also be applied to land used for electricity storage, such as a large commercial battery. For example, it would include what is called the SA Big Battery at the Hornsdale Power Reserve near Jamestown.

8. The intention of this bill is that fair rates are paid on land used for electricity generation.

9. This electricity generation industry will not be penalised but neither will they receive an unfair and disproportionate benefit that other ratepayers are not entitled to.

10. This bill ensures that all ratepayers and users of council infrastructure and services make a fair contribution to support council services.

I would like to summarise my bill by setting out what it is not. This bill is not anti electricity generation. This bill merely ends a 25-year rates holiday enjoyed by one sector of the economy, and it will benefit business and families, reducing rates by around 5 per cent. Does this government really want to deny them rate relief, particularly in these tough economic times?

I am a great supporter of investment in regional South Australia and a great supporter of new investment by energy generators. What I do not support is one type of business having an unfair tax rates advantage over others unless there are compelling reasons. Whilst some individual landholders can make good money leasing their land to wind and solar farms, and developers shower sweeteners on neighbours and community groups, many local governments are becoming aware of how it is ratepayers will end up being burdened with major disruption and long-term costs that the electricity generators are completely avoiding. As a New South Wales council so succinctly put it:

This situation has been created by the state and federal governments without them having any skin in the game, or even any worthwhile recognition of their impacts.

It goes on:

There is yet to be any new critical infrastructure, new economic programs or access to the electricity generated in this area. This is especially difficult to accept given the subsidies and rebates to potential renewable energy developers.

The bill will not apply to small generators such as households with solar panels on their rooves. Rather, the aim is for it to apply to commercial electricity generators licensed pursuant to the Electricity Act 1996.

This bill is not anti renewable energy. It applies to some renewable generators just as it applies to some fossil fuel generators. It is neutral as to the source of energy, and that is how it should be. This country needs better law and policies to meet Australia's energy needs, but council rates are not the forum for solving these issues, and it is not fair that the average citizen is subsidising big energy generators.

This bill is not anti energy investment, either. The independent AEC Group research demonstrates why my bill will have no impact one way or another on the investment decisions of big electricity generators. The bill has been drafted to not act retrospectively. It will apply to rate assessments issued after commencement. Rates notices will continue to be issued in accordance with the Valuer-General's official valuation of the land at the time of the council's rates declaration.

The bill does not interfere with any commercial agreements between owners and lessees of land. Rather, it will impose a revised rates obligation on the specific parcels of land used for electricity generation without increasing the rates obligations on the landowner for the balance of the land, such as a farmer, private landholder or business.

The bill itself is not anti or pro privatisation per se. I have mentioned privatisation merely to give this council some historical context about how the ECRD Act and associated legislation came into being and why we now need a bill to correct that mistake. The energy sector is doing exceptionally well and will continue to make large profits and deliver large dividends to its shareholders. By ending the quarter-century rates holiday, the bill delivers cost-of-living relief to ratepayers all over regional South Australia. It will have immediate effect. In those councils with electricity generators, the benefits would be felt in every single rates notice and for the foreseeable future.

In summary, the bill is practical, sensible and evidence based. I am encouraged that the Treasurer, Stephen Mullighan, said in 2022 that he is not opposed to fixing the problems addressed in my bill; however, these were not a government priority, so I have done the work for the government again. All of us here have the opportunity to step up and rectify a bad law. We have an opportunity to increase fairness in the council rating system and deliver relief to families and businesses doing it tough.

There is undoubtedly a need for broader reform to ensure that electricity generation benefits all South Australians, but I commend my bill to the council as the first step to address the most urgent changes to restore fairness and equity to rates payable to South Australian councils. In the meantime, Mr President, I acknowledge your acknowledgement of the attendance today in the gallery of the local government representatives you have named. I welcome them all, and I thank them all for their support. Mr Andrew Lamb, sorry that you had to cop a bit of a blast there, but it goes to show the passion that Mr Lamb has in his job as the principal legal officer at the Local Government Association. With that, I signal that I intend to bring this important bill to a vote on 30 April.

Debate adjourned on motion of Hon. I.K. Hunter.