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NATIONAL ELECTRICITY (SOUTH AUSTRALIA) (NATIONAL ELECTRICITY LAW—AUSTRALIAN ENERGY MARKET OPERATOR) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 13 May 2009. Page 2704.)

Mrs GERAGHTY: Madam Acting Speaker, I draw your attention to the state of the house.

A quorum having been formed:

Mr WILLIAMS (MacKillop) (15:43): We now come to the third of the bills being considered by the house today to make significant changes to the way that our national electricity and national gas markets operate. This bill, by and large, along with the other two matters that we debated earlier today, allows for the establishment and operation of the Australian Energy Market Operator as a national single operator for our energy markets, both electricity and gas.

In regard to the national electricity law, there are only small changes but there are a couple of new functions that this legislation brings to the new market operator, and I will cover those in a moment. Firstly, the bill basically changes the name from NEMMCO to the Australian Energy Market Operator at many places throughout the act and, as I said, establishes a few new functions and makes some other amendments to allow this to happen.

The principal new function is that the Australian Energy Market Operator will also carry out the role of a national transmission planner. This will overtake the work which in South Australia was previously carried out by the Electricity Supply Industry Planning Council (ESIPC). I expressed my concern earlier in the day with regard to one of the other bills that the ESIPC, which I think has performed a brilliant function for the South Australian community, will no longer exist, and I also expressed some concerns that the new national body may not have the exact interest in the South Australian context that was previously undertaken by ESIPC.

There are some other matters that concern the opposition in regard to these changes and, as the minister has already expressed, it is difficult to get these sort of changes to provide national legislation, because South Australia (being the lead legislator on the national electricity market, as it has been since the mid-1990s) passes legislation through the parliament, and the other jurisdictions, I understand, adopt the same legislation not by passing a piece of legislation but simply by passing a bill to adopt the South Australian legislation.

Obviously, it is difficult for the various ministers from the various jurisdictions to come to agreement on the exact wording of that legislation. Different jurisdictions use slightly different phraseology in their legislation, and parliamentary counsel from the various jurisdictions have slightly different ideas about the way legislation should be drafted. That, in itself, makes this sort of legislation difficult, but it also leads to the odd compromise as we go forward, and I think one of the compromises here relates to the changes to national transmission planning.

One of the other issues that has arisen is that because this is now taking jurisdiction over both electricity and gas, the regime for attributing fees and costs to the various industry players has become much more complex. Having one market operator for electricity and a number of market operators for gas was relatively easy to administer in terms of setting levies and fees to recover the costs of operating NEMMCO (in the case of electricity.)

That has obviously become much more difficult and complicated and, as time passes, we will see how close we have come to getting it right. I understand that there are some transitional arrangements that will hopefully allow time for the new arrangements to come into place. I hope that we will not see too many further amendments to overcome some problems which might be totally unrecognisable at this stage, but I will be surprised if we do not.

The new Australian Energy Market Operator will be somewhat different from the previous NEMMCO inasmuch as, under the new regime, market participants will be able to be members of the Australian energy market operator commission. That is right, isn't it?

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: Company; not commission. I am not suggesting that I am fully au fait with the intimate detail of this legislation, as it is complex and esoteric. The change is that market participants can now belong to and be players in the company, and that throws up more difficulties. I will take the opportunity to ask the minister questions on this issue at the committee stage but, to my mind, and in the opposition's view of the world, there will be inherent conflict between market participants as players and competitors in the field with some of them having a role within the Australian Energy Market Operator.

Principally, under this legislation, the AEMO will be given powers to demand certain information from participants in the areas of both gas and electricity, and that information is obviously then available to the AEMO. For the life of me, I cannot see how individuals can separate their role as part of the organisation and their role as part of an organisation that is one of participants, whether that be in the area of transmission or electricity generation. I can see some significant difficulties in trying to manage that issue.

I understand the reason for having available people with such industry expertise, but I cannot understand why you would put them into the role of being an integral part of the operator with access to all that sort of information. So, the opposition has some questions with respect to information gathering and how the confidentiality of that information will be maintained.

I recall that, when the earlier legislation that established the national electricity law and the national gas law passed through this place, industry's key complaint about it was that there had been ongoing argument during its development about what would be part of the law and what would be part of the rules.

Industry's complaint then (and I have no doubt that it is ongoing) was that if a matter was part of the rules there was a process to amend those rules, and that process was set out in the relevant legislation. However, as I said in my opening remarks, to get agreement across the nation to change the act is very time consuming and quite difficult, if possible at all. Again, I think industry will make the same complaint in regard to what is in the law and what is in the rules.

Some of the issues that come to mind in relation to national administration of the market involve a couple of experiences we had in South Australia earlier this year, when we had quite sudden and significant blackouts and load shedding. At the time, there was great public debate, and I recall that the minister was involved, making statements about how the information on where load shedding would occur should have been made available. The Premier said the same thing, and then the minister came back and said, 'Well, notwithstanding what I think about it being made available, it is—

The Hon. P.F. Conlon: It's not what I said.

Mr WILLIAMS: I have your quotes here, actually, minister.

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: On Sunday 1 February you told The Advertiser you would be seeking a 'please explain' meeting with NEMMCO representatives about load shedding on Friday when you attended a Ministerial Council on Energy meeting in Canberra: 'He said he would ask about "procedures for communication into load shedding".'

The Hon. P.F. Conlon: That's not the information you're talking about; it's held by ETSA.

Mr WILLIAMS: I will ask you some questions on it in committee, minister, because I am sure you would love to put on the record exactly what you did find out. There was quite a bit of public disquiet at the time, I recall, and it is backed up by quotes in here that you were calling for reports and inquiries and all sorts of things. To the best of my knowledge and recollection, nothing has come back into the public domain as a result of calling for those reports, and I guess the minister is hoping it has all gone away.

I do note that new section 115A may well overcome the problems that the government was having in explaining itself then, because I think it is incumbent on the new market operator to ensure that the relevant minister is in the loop and knows exactly what is going on.

The Hon. P.F. Conlon: That wasn't the problem.

Mr WILLIAMS: Now the minister is saying that was not the problem; he was in the loop. We will have an opportunity in the committee stage, because I am keen to get to the bottom of it, and I am sure the minister is, as well.

One of the other aspects of this legislation is that we have talked about the national planning function which the new market operator will have as opposed to ESIPC. Only yesterday in the house the Premier made a ministerial statement where he talked about South Australia's green energy. His ministerial statement was headlined 'South Australia is Australia's renewable energy powerhouse' and stated:

We currently host 56 per cent of the nation's wind power, 90 per cent of its geothermal investment and nearly 30 per cent of its grid-connected solar systems, which is by far the highest in Australia.

That is possibly correct; it is possibly incorrect. We currently host 56 per cent of the nation's wind power. It is very cute to make a statement like that. The reality is, who is that power being consumed by? Is that power being sold in South Australia or interstate? I have posed this question to the minister on previous occasions, and I will keep hammering away at it and one day we might get an answer.

I reason I keep posing the question is that, if South Australia is hosting 56 per cent of the wind power generation and the majority of that power is actually being consumed by consumers in other states, who actually is responsible for providing the transmission services from the generators in South Australia to, say, the consumers in New South Wales? The reason I say New South Wales is that it is the New South Wales government Mandatory Renewable Energy Target (MRET) scheme which has been one of the drivers to the development of wind power and other alternative green power sources in Australia.

The initial driver was the Howard government's original MRET target of 5 per cent, from memory. That was a significant driver and kicked off investment in wind power across the nation. South Australia was, indeed, the recipient of a large proportion of that investment in wind power, principally because South Australia enjoys a very good wind resource. You do not have to be a Rhodes scholar and you do not really have to be a student of geography to understand why. We are situated relatively close to very good wind resources blowing across the Southern Ocean and hitting our coast. We also have some hills—I cannot call them mountains—which increase what they call the ram effect; that is, when wind coming off a flat ocean hits the land surface and then is forced up by hills, it increases the wind speed as it goes over the top of the hills. It is known as the ram effect. It is a very good wind resource.

Mr Kenyon interjecting:

Mr WILLIAMS: The member for Newland is getting the gist of what I am saying. If you are someone who wants to invest in wind power, you do a couple of basic sums. You work out how much your investment will be and what your return will be. Obviously, the better the wind resource, the greater the return. The further the wind resource from the consumer, the lower your return will be. When you do the relevant calculations to work out where the best place to build is, obviously South Australia comes out in front of many other parts of Australia in those equations.

That does not mean that the South Australian government has been in any way responsible for achieving 56 per cent of the nation's wind power interstate. It is being driven by MRET schemes, and significantly from the federal government and quite significantly from the New South Wales government, which upped the ante with regard to that. The Victorian government was going to do the same, but I think (from memory) they did not get across the line on that, but I stand to be corrected.

The big question that the Premier should be answering is—and, hopefully, the minister will go some way to answering this question, although he has not previously—how much of the wind power generated in South Australia is consumed in South Australia? That is, how much is consumed insomuch as electricity consumers paying the extra tariff to justify the generation of that green power? I suspect that the figure is quite low. I suspect that the majority of the actual extra tariff is paid by consumers elsewhere, principally in New South Wales.

Yesterday, the Premier went on to say that about 90 per cent of geothermal investment and nearly 30 per cent of grid-connected solar systems were in South Australia. Again, South Australia just happens to have a very good geothermal resource. Interestingly enough, from the Premier's perspective and his history, the reason we have a large geothermal resource in South Australia is that we have radioactive rock. It is geothermal in South Australia and the Far North of South Australia is nuclear power. Let us not kid ourselves. The heat generated in the granite underlying a fair bit of the Far North of South Australia is generated by radioactive decay, and it is from harnessing that heat that we derive the geothermal power.

Again, historically, the Howard government put in substantial sums of money to support investment in South Australia. I am not too sure that the Rann Labor government has put one cent into it, but I might be wrong. The PACE program may have put a small amount of money into one of the projects.

Mr Kenyon: Two.

Mr WILLIAMS: The member for Newland is saying 'two', and I will accept that. I know the member for Newland keeps a very close eye on what is happening in the minerals area and I would accept that he would not be trying to give me a bum steer on this one, and I accept that. The vast majority of taxpayer funds that have gone into this technology did, indeed, come from the federal Howard government.

Just as an aside, the Premier went on to say that our current target is to generate 20 per cent of our electricity from renewables by 2014 and that this target was considered tough when it was set. That is rubbish. I know that my colleague the member for Davenport received a briefing at the time. We were debating the relevant legislation when that target was set, and the departmental officers told the member for Davenport at the time that the target of 20 per cent would be achieved well before the target date. We were not only well on track, but the target was a gimme.

The Hon. P.F. Conlon: It wasn't because of the work I did?

Mr WILLIAMS: No, it was not because of the work you did. It was because—

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: I am just explaining—

The Hon. P.F. Conlon: Come on; how many wind farms did we have?

Mr WILLIAMS: The minister does not listen. I will just explain. The Howard government's MRET scheme and then the New South Wales MRET scheme were the principal drivers of the development of wind farms in South Australia.

The Hon. P.F. Conlon: When did that come in? Was it in when you were in government? Was it in for several years when you were in government, and how many wind farms did you have?

Mr WILLIAMS: Come on, minister. We all know what the drivers were, and I know—

The Hon. P.F. Conlon: How many years was it in when you were in government?

Mr WILLIAMS: We all know what the drivers were, and as soon as the MRET targets had been met the investment fell over and the rate of investment stalled. We all know that. In fact, one of the larger companies worldwide that produced equipment for wind farms set up a factory not far from my electorate, just over the border in Victoria, and the factory closed down not long after it was established because the federal MRET targets were met and people stopped buying the equipment. I think I have some understanding of how the market is operating.

The Premier also said (and he was talking about solar), 'We introduced the first solar feed-in law in Australia.' Well, breaking news for the house: I will be moving an amendment to those laws in this place tomorrow morning, and I invite the minister to come in and support it. We will be fixing up some of the problems and oversights that have been caused by the legislation—the so-called first solar feed-in law in Australia—because it is somewhat deficient. The amendments have already been through the other place, so all we need is the minister's support and we will then be able to claim that, belatedly, we have caught up with the rest of Australia and we have a feed-in scheme that works and does the right thing by people who go out and invest in photovoltaic solar.

The Premier went to say that the government would increase the target to 30 per cent. Again, the question is: does that mean we will be generating electricity in South Australia that is exported to other consumers in other states, or is he saying that 30 per cent of electricity consumed in South Australia will come from renewable sources? There is a huge difference between those two propositions. The Premier and the minister know that, but they would like to say that they are doing a wonderful job, because large investments have been made here due to the wind resource rather than the actions of the government.

It is a bit like claiming that South Australia is so wonderful because we have the largest uranium mine in Australia. The only reason we have the largest uranium mine in Australia is because we have the largest uranium resource in Australia. It is exactly the same. It has nothing to do with the current government. In fact, if members of the current government had had their way over the last 20 or 30 years we would not have that mine in South Australia at all. But that is digressing somewhat. The national market—

The Hon. P.F. Conlon: It's also a lie.

Mr WILLIAMS: It is not a lie. Your Premier tried to scuttle—

The Hon. P.F. Conlon: Members of the current government, you said.

Mr WILLIAMS: No, I said members of the current government.

The Hon. P.F. Conlon: Yes.

Mr WILLIAMS: Well, the Premier is a member of the current government.

The Hon. P.F. Conlon: A huge supporter of uranium mining.

Mr WILLIAMS: He tried to scuttle Roxby Downs in 1981. The book that he wrote is down in the library, in fact a copy is on my bookshelf. I have read every word in it. I know the history of the Premier with regard to uranium. In fact, in the concluding pages of the book he urged South Australians to boycott BP fuel stations because BP was a significant shareholder in Western Mining. I happen to have a good memory.

I had a most interesting experience several weeks ago. I was in New South Wales looking at water issues across both the Murray and Murrumbidgee rivers. I started the tour through that part of the world with Snowy Hydro and had a look through the Snowy Hydro scheme and had a very good briefing from the CEO of Snowy Hydro.

I was unaware of the significance of the national electricity market to Snowy Hydro's operation and profitability and, to my surprise, the way the company now positions itself within that market. Principally because Snowy Hydro has a generation source which can start generating within 90 seconds and get to full capacity within five minutes, it has set itself up to provide, basically, an insurance service to other generators across the nation and has found that a much more profitable part of their business than actually producing electrons.

The minister said earlier in the day that with electricity you actually have to produce the electrons, not create them, free them up from wherever they are held, and Snowy Hydro, because of the national market, now operates a business which provides an insurance service to other generators which are bidding into the market all the time (every half hour), as does Snowy Hydro.

It was very interesting to receive that briefing and see how mature the national electricity market has become and how an operator such as Snowy Hydro has found a niche in the market which serves its business very well, and it obviously developed a new business model around that, but it also provides a very important reliability service to other generators. I am sure that that has added security to our electricity market per se.

Another comment that I would like to make is that in this morning's debate on the first of these bills my colleague the member for Flinders suggested that there could be some problems with having a national operator rather than an in-state operator, particularly with regard to transmission planning. The minister suggested that my colleague had got it all wrong, and that was the problem with the Liberals, that they are total believers in the market. I think the minister said something long the lines of, 'You Liberals, you love the market but you like to be socialists when it suits you.'

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: Well, it might be news to you, minister, just as people on your side of politics—and might I say belatedly—have discovered the strength of the market, I think people on this side of politics have always understood that the market is not the be all and end all and a mixed economy is probably the way to go. As I have quoted previously, the market can be a fantastic servant but it is a very tough master.

Market failure does happen from time to time and we do need market intervention. When we do have market intervention we have to get it right, and time will certainly tell whether the minister's federal colleagues have got it right with regard to the global economic crisis, and that is very serious market intervention, but it is something that we accept. On our side of politics, we accept that market intervention is—

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: Sorry? We opposed it?

The Hon. P.F. Conlon: You opposed the stimulus package. The Liberals opposed the stimulus package.

Mr WILLIAMS: We started it. It was Peter Costello who started putting billions of dollars away in future funds and infrastructure funds for the future, minister. At least we on this side of the house understand that, at some time, someone has to pay the money back. We understand that. That is something that people on your side of the house have failed to understand.

Ms Breuer interjecting:

Mr WILLIAMS: Well, suggest to your minister that he not get me stirred up on these things. I just want to make the point that we on this side of the house do accept market intervention and we do accept good legislation but, where necessary, we question whether we are getting good legislation. That is why I have posed my questions in this contribution.

The problem that I think we will see as we go forward is having members of the industry as participants in the market operator. I think that poses some serious problems and challenges for the national market as we go forward. The government obviously does not share those concerns. It is bringing this legislation to this place, I can only assume, with great confidence that it is the best legislation that we can have at this time.

I have indicated that we will be posing some questions during the committee stage. We want to drill down into some of the aspects and get on the record the minister's thoughts as to why we need particular wording and particular clauses. However, I can inform the house that, as with the other two pieces of legislation, the opposition will be supporting this. We established the national market and we want to see the national market improve as time goes by and continue to work for the benefit of consumers in South Australia. In our opinion, it has been most beneficial for consumers in South Australia and, I would suggest, consumers in other states.

There are some concerns with some aspects of this, such as putting gas and electricity into the one basket. I canvassed those concerns earlier. I talked about the challenges with regard to establishing a recovery of cost regime across both enterprises. Bringing the various gas operators under one roof would, of itself, be a challenge, but bringing them under the same roof as the electricity market operator poses an even greater challenge. The opposition looks forward to the next stage and seeing how this pans out as we go forward over the next period. I conclude my remarks.

Mr PEDERICK (Hammond) (16:19): I rise to make a few comments regarding these bills, especially in regard to the Statutes Amendment (Australian Energy Market Operator) Bill 2009. I want to give some background on the national electricity (South Australia) bill, which was introduced back in May 1996 by the then minister for infrastructure, John Olsen. Once enacted, this bill would make provision for the operation of a national electricity market. The reform of the Australian electricity industry had been underway earlier than that, with special premiers' conferences in the early 1990s, leading to the appointment of the National Grid Management Council.

The council published a paper in 1993 which made a number of recommendations. COAG agreed to the recommendations in 1994, and in 1996 ministers from New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory agreed to give effect to the recommendations. These recommendations were for regulatory arrangements for the national electricity grid, namely to create a uniform national electricity law and accompanying code.

That law was presented as a schedule to the bill introduced by John Olsen and this law was to be enabled by application of laws. Legislation in each jurisdiction and the code would be effective pursuant to the law. South Australia vigorously pursued and won the role of lead legislator. South Australia remains the lead legislator on the national electricity act and, as such, these bills before us today will be enacted throughout jurisdictions in the same manner.

At this time, the transmission networks of New South Wales, Victoria, South Australia and the ACT were interconnected and, since that time, Queensland and Tasmania have joined the network. Western Australia and the Northern Territory will probably never participate in the national market because of the significant transmission distances.

The act enabled electricity produced by generators to be traded through a common electricity pool, serving the interconnected states and territory. The newly appointed NEMMCO and NECA would coordinate the dispatch of electricity and the administration of the code respectively. Following this, in June 2001, there was general dissatisfaction with the original governance arrangements for the national electricity market. COAG resolved that a national energy policy was needed.

Subsequently, the Ministerial Council on Energy (MCE) was appointed and conducted an independent review of the strategic direction for energy market reform. The MCE agreed to a series of far-reaching reforms of the energy market to be pursued progressively by the relative jurisdictions. They recommended to COAG that NECA be abolished and two new statutory commissions be established—an Australian Energy Market Commission and an Australian Energy Regulator. These bodies were established under national electricity law and commenced operation on 1 July 2005.

In April 2007, COAG agreed to establish a single industry funded, national energy market operator to be called the Australian Energy Market Operator for both electricity and gas. All three of the bills we are debating today support amendments necessary to instigate that arrangement. It is interesting that, with the grid being interconnected over quite a bit of the Eastern States and now connections through to Tasmania, we have had significant issues over time with load shedding. Also, at times—especially in my electorate of Hammond where I have some powerlines run out to end of line as there is in the Mallee out to Pinnaroo—we can still have significant dropouts of power. When I say significant dropouts, these can be anything up to 24 hours long in a severe case.

Many people and many businesses in the Mallee have been forced to augment their businesses with generators that start up automatically when the power is off for a certain amount of time because obviously there can be severe spoilage in shops like grocery stores. I had quite a bit of contact with the local butcher in Pinnaroo, but there were also many farmers and other associated businesses in the Mallee that could be interconnected with power.

I know that there are discussions underway for solar energy to be set up in the Coorong council area, and I think that could generate great benefits not just for the state but for the local area. I would like to think that many more opportunities for the sale of power could be instigated especially in an area like my electorate where there is a lot of space. It would certainly help with the power outages that we are seeing.

I am saddened to hear that, even if some of these schemes were put into place, it would not necessarily mean that the power would be directed down through the Mallee. I noted with interest several years ago that Australian Zircon was setting up out at Mindarie and trying to get power diverted through from Tailem Bend on a new line up through Karoonda and Mindarie towards Loxton, and, as a spinoff, power coming off the line would have benefited the Lameroo/Pinnaroo region as well. Sadly, that did not happen. The power was directed down from Riverland with a line from that end.

Notwithstanding that, I do understand that there are plans in the future for more power to be generated in the Mallee, but it will not come soon enough for some businesses. With the lack of allocations and lack of water supply from the River Murray, many horticulturalists, apart from the ones already operating out there in the Mallee Wells area growing potatoes, onions, carrots and so forth, are struggling to get enough power supplies out there. In fact, many pivots for irrigation are running on diesel. Electricity can be expensive, but diesel generation to power the pivots can be very expensive as well.

There are certainly many demands for power not just in my electorate but throughout the state. It was just back in the '60s when power went through where I live at Coomandook, and it is sad when I think that 40 or 50 years later we have times, such as during the heatwaves in February, when there is not enough power to go around. Yes, there is more demand on power. I believe that as a community we have probably got a bit softer; we are all used to living in air conditioning so there are far more people using air conditioners.

You would think that, with a state government that has a population target of 2 million in this state, power generation would keep up with demand. In February, during the heatwave, a record number of people died for various reasons. I am not sure how many were directly attributed to the heat, but I am sure that it did not help them. There were about 72 bodies in the morgue, and it is very sad in the modern world that we cannot maintain power supplies to keep a modern community functioning. There is certainly much work to be done.

On Black Saturday, when there were a whole heap of issues happening, a national grid even collapsed around us. There were fires heading down towards Loy Yang to the massive coal-powered power plant down there in Victoria. It is a big open cut operation, so big that if anything is in the way they dig up the highway and move the road or take over properties. I understand that there were 12 bulldozers working flat out to protect that plant because that is one of the main power sources not just for Melbourne and Victoria but for the national grid. It is to be noted that, in latter years, Tasmania has been hooked into the grid. Its interconnector collapsed in 30°, and that troubles me because I believe that, at 30°, you are barely getting warm.

Mr Williams interjecting:

Mr PEDERICK: Thank you, member for MacKillop. It would be warm down at Millicent. It is worrying that the system could not handle that temperature. I believe that it tripped out a couple of times and threw everything into chaos; load shedding had to occur, and the whole system was under pressure.

Recently, the member for MacKillop and I went to look at the Snowy Hydro scheme, the Murrumbidgee and the upper River Murray. I must say that they were excellent hosts at Snowy Hydro, but they need better skills or more training so that they can have axes or chainsaws in their vehicles, as the member for MacKillop and I had to more or less find our own way off the mountain because we were not getting too much support in some areas; however, that is another story. I certainly was not going to sleep on a cold mountain at night, but everyone managed to have a laugh about it later.

Mr Piccolo: Which mountain did you say?

Mr PEDERICK: The Snowy Mountains.

Mr Piccolo: I thought you said Brokeback Mountain.

Mr PEDERICK: No, I don't think so. I was intrigued with Snowy Hydro and the way it operates. It generates power only when it lets water go, and it only lets water go when it wants to generate power, so it does not spill water from its system just for the hell of it; it is always done for a purpose. It is interesting to note that, essentially, they run as an insurance operation, insuring other operators against the peaking prices of power, which can max out to $10,000 a megawatt hour.

Essentially, the small operators put a contract in place with Snowy Hydro, which insures them to make sure that power can be supplied when it reaches those higher figures. They have set up their operation so that they can have their turbines switched on within 90 seconds, which is virtually instantaneous. I know that one person commented that he had watched a couple of sets of turbines crank up in less than a minute.

It is quite an intriguing operation. When we visited, two people were managing the operating centre with about two dozen computer screens and big panels up on the wall. Bids are put in on power lots for different periods. It is extremely well managed, and you would think that they had it sewn up, but they said that there were still some issues sometimes when, for whatever reason, they did not quite pick the moment in the market. However, it certainly works well for them when they can switch on virtually instantaneous power and back up when the grid is under stress.

Snowy Hydro noted that, when the pressure was on during Black Saturday, one unit out of a total of 32 was out for service. Everything else was running at full noise, and they managed to have everything else going and turning out the maximum amount of power they could. I do commend them for that they do, and it intrigued me how they managed the system.

It is important that in the future we maximise our power generation. Obviously, there are long leads of interconnection. There is always debate about where to run the power to, but obviously the point of highest economic demand will generally receive the power. I was at Prominent Hill the other day for the operation of the mine; it is an impressive operation with a new power line going into operation there. I was intrigued with the whole operation; it just goes to show that mining camps and mining operations have gone a long way since I worked at the Moomba gas field and Cooper Basin 25-odd years ago, when you see every room with satellite TV and internet access.

Mr Williams: And a shower!

Mr PEDERICK: And a shower. It is good to see the company looking after its employees with mobile phone coverage in the immediate area.

There are other developments in the state, especially in the mining field, with BHP Billiton's expansion of Roxby Downs and ensuing works which also involve Olympic Dam, and infrastructure close to Adelaide with the sulphur dock unloading area through to the expanded rail line out to Olympic Dam and also the works involving the Port of Darwin. There is certainly plenty of work happening or about to happen on the West Coast of this state. On Eyre Peninsula, Iluka is just starting to crank up with mineral sands, and Centrex and other companies will need power supplies over there. We will need to grasp what we can. I know lots of work is happening with geothermal energy, but that is a little way off being contained, and if it can be harnessed in the future that will be a great boon to this state.

As I said before, there will be plenty of opportunities for solar power, and we have a reasonable amount of wind power, but a lot of that gets transferred to the eastern states. In the future I think that CETO wave technology will be a great way to power infrastructure like desalination plants. It is infrastructure which is mounted on the sea bed and which can not only pump water but also pump enough water to generate twice as much power as is needed for the desalination plant that may be operating there at the time.

There will be plenty of need happening in this state over time, and we hope that all the arrangements we are debating today with moving forward in managing our energy needs will be a boon to this state. Let us hope that outages will be at a bare minimum, because they cause a lot of havoc to people, not just those using computers in IT, which is everywhere these days, but also in production, retail and everywhere along the chain. With that, I conclude my remarks.

The Hon. P.F. CONLON (Elder—Minister for Transport, Minister for Infrastructure, Minister for Energy) (16:39): A great deal was said, but I do not think most of it was really relevant to the bill we are discussing. On renewable energy, all I can say is that what is plain is that the opposition spokesperson was pained by every success of the government, and particularly Mike Rann, and that is why he devoted so much time to renewable energy and to the PACE scheme, I have to say, too, which I thought really was an effort, because so deep and abiding is his dislike of Labor. You could tell by the pompous way he lectured everyone and how they know everything on their side. The born to rule mentality shone through. He hates the success of the Labor government and he has a lot more to hate for a lot longer yet. That is all I need to say about the nonsense that was spouted about renewable energy and the PACE scheme.

Mr Williams interjecting:

The Hon. P.F. CONLON: I will not debate the issue, but I will say that the MRET scheme was in place during the time of the previous Liberal government, a point that the previous Liberal government refuses to acknowledge. Of course, their success under the MRET scheme was to have no wind farms in South Australia at all—none—

Mr Williams: They were well on the way.

The Hon. P.F. CONLON: The only wind farm that I can remember that was proposed had been locked up in the previous energy minister's office. I think Tarong was the name of the company, and if you ask it, the deadlock was broken after the election of a Labor government.

Mr Williams interjecting:

The Hon. P.F. CONLON: He mentions Babcock & Brown. The first one, the defects were cured by us. I think if he wants to talk about Babcock & Brown in the Millicent area, we should go to the locals for some advice. I can well remember the advice from the Wattle Range Council and former mayor Don Ferguson that the wind farm was going nowhere until the election of the Labor government, and I do not think anyone—

Mr Williams interjecting:

The Hon. P.F. CONLON: Well, go and ask him. That is what he said. I think that anyone who would think that Don Ferguson is somehow a Labor supporter does not know the former mayor. If he wants to debate the issue, I will do it at the appropriate time on the appropriate bill. Oddly enough, I would like to direct the attention of members to the bill before the house. It is the third in a series of bills that gives effect to the establishment of the Australian Energy Market Operator. It has two primary functions. It brings together the markets for electricity and gas in the company and charges the market operator with that piece which has been recognised for a long time by many commentators which is missing from the current regulatory system, and that is an adequate system of transmission planning.

I can indicate that I think the first Ministerial Council on Energy meeting I ever went to in 2002 identified some defects in the system. One was the absence or the vacuum in policy making in the system. The solution which was sought was the establishment of the Australian Energy Market Commission, which now is the rule making body. It recognised that NECA had been a failure: it was abolished. The other thing that had been recognised as a failure in the system was the absence of transmission planning, and this is what is sought to cure that.

Can I say the process of this reform has been longstanding, and without meaning to be insulting, it certainly has been informed by far better debate than we had today from the opposition on this matter. The process of reform has been a long one, as it necessarily is when things are done through the Ministerial Council on Energy. I am asked to assure the opposition that this is the best solution. I can tell you that, having spent this much time on it, it is the best possible solution; and the nature of a federal system, the nature of any system that builds in democratic safeguards and divides power, is one which means that an accommodation from a wide range of views has to be sought. There has been accommodation sought for a long time and this is the best possible solution in the views of the ministers involved.

I think it is best if I now answer the questions of the opposition during the committee stage. I just say that I would prefer to answer questions on this bill and not something else, but I am quite happy—if the opposition spokesperson is determined to waste the time of this house on his personal peeve with a successful Labor government—to deal with that. I have absolutely nothing to fear in the energy debate from members opposite; I will answer any questions they have. If the member wants to turn it into some other debate, then I am quite happy to dispose of him in that regard, too.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 16 passed.

Clause 17.

Mr WILLIAMS: Can I point out to the committee that clause 17 is quite extensive; in fact it runs to many pages. I hope that the committee will indulge members on this. I think if we were restricted to three questions on this we probably would not—if we get some good answers and good explanations from the minister then we may well not need more than three, but it is—

The CHAIR: I am happy to allow exploration of the technical details. I get testy when it enters into debate.

Mr WILLIAMS: I am finding it a bit difficult because some of the things that are concerning me jump back and forth between a number of the subclauses of clause 17. My questions are principally to do with the clauses pertaining to seeking information and orders to seek information, and how much information and what sort of information can be given to the minister.

I will start with new section 50A—AEMO to account to relevant minister for performance of adoptive functions. During my second reading contribution, as you would recall I spoke about the blackouts that we had back in February and the community debate about what information could be given and what could not. Subsection (1) provides:

AEMO must, at the written request of the minister of an adoptive jurisdiction, provide information about the performance of its adoptive functions with respect to that jurisdiction.

Does that mean that, if we had a blackout and the government wanted information with regard to what parts of the community were going to be blacked out and under what circumstances, that information would be forthcoming?

The Hon. P.F. CONLON: Can I indicate, firstly, that the member for MacKillop, when speaking about load shedding in his second reading contribution, it appeared to me, was confusing two things, one of which was the report that we had sought from NEMMCO on load shedding and the other was a fairly pointless debate about a list of information held by ESIPC instituted by the previous government. From memory, it was no more than a list of feeders.

The view of ESIPC was that if that information was released it would not inform people, because it did not even tell people in what order things would occur as there would be a need to align any load shedding with the size of the feeder in a particular area. So, anyone who saw the list and saw their suburb at the top of the list would believe that they were next to be cut off, but they would be misinformed. I did not think it would do any harm for people to release that, but I respected the wishes of the industry group at the time.

That did not apply to information from NEMMCO, which was a different set of information altogether. What I asked NEMMCO at the time was whether it could improve its communication with the public as load shedding occurred, recognising that such events are often instantaneous.

I might point out at this stage that what was said earlier by the member for Hammond about the many problems with load shedding is not actually true. There have been two events of load shedding since we came to government, and they both occurred during that week. That is simply a fact.

You may not believe it, but it is simply a fact that that load shedding that occurred through the loss of load only occurred twice. There have been other network-related blackouts, many of those, but not load shedding where it is understood as shedding load because of a lack of capacity to meet that demand. I just need to make that point.

In terms of South Australia, my understanding is that new section 50A of subdivision 1 refers to the advisory capacity of the former AEMO. Subdivision 3 is about network functions and it refers to the former Victorian VENcorp, which is incorporated in the market operator which actually has responsibility for the transmission. Just what is the question about? Is the question about information that we would seek in terms of the advisory functions, or is it in general, because there is going to be an awful lot of information that will not be sought by us about the operations of VENcorp, and I do not think it should be sought by us.

Mr WILLIAMS: Are you saying that these particular clauses are peculiar to the Victorian jurisdiction?

The Hon. P.F. CONLON: Clause 6 refers to AEMO's additional advisory functions. It refers to those provisions that apply to South Australia. That is new section 50B and all of the remaining new sections, 50C through to 50J.

Mr WILLIAMS: Thank you for that, minister; that makes more sense. I have to admit that I did not receive the briefing from the minister's department: my colleague in the other place did, so I apologise. I am just trying to establish, at least in my own mind, how this is going to work. My understanding is that ministers to date have been somewhat at arm's length from NEMMCO, but as I read through this—

The Hon. P.F. Conlon interjecting:

Mr WILLIAMS: —well, apart from their function through the Ministerial Council on Energy—new section 50A provides:

AEMO to account to relevant minister for performance of adoptive functions.

Division 3—which you have just told the committee is applicable to South Australia—provides:

Information etc to be provided to ministers.

New section 51—Ministerial request, provides:

(1) The MCE or a minister of a participating jurisdiction may ask AEMO for information, a report or other services.

(2) The request may be accompanied by a written statement of the purpose for which the information, report or other services are sought.

'May'—so, it seems to me that the relevant minister has an extensive new power to ask AEMO for all sorts of information. The minister does not even have to say why he or she is seeking the information. New section 51A provides:

(1) AEMO must comply with the request under this division.

It then goes on about protected information.

The Hon. P.F. CONLON: New section 50A provides:

(1) AEMO must, at the written request of the minister of an adoptive jurisdiction, provide information about the performance of its adoptive functions with respect to that jurisdiction.

New section 50B simply reproduces the advisory capacity of ESIPC in terms of the annual report functions where ESIPC tell us, as you would know, what it believes the state of play will be in terms of demand versus supply over the next three years, and any issues associated with that. So, all it does is produce in this legislative framework a way for me to get AEMO to keep doing the functions of ESIPC in terms of its annual reporting.

Mr WILLIAMS: I assume that that report will become a public document at that point.

The Hon. P.F. CONLON: That would be my intention. I cannot see why it would not. The Planning Council publishes its report, as it does. I can assure you that, when we went through this agonising process, my view about how this should operate was that ESIPC should be reproduced, because it is the best that I have seen of those systems running around Australia.

Mr WILLIAMS: I am buoyed by the responses that I am getting. If I can now draw the minister's attention to what will be new section 51 on page 19. This is what I was getting to a moment ago—that it opens up the possibility for the minister to request all sorts of information. What is envisaged by that particular clause, because my understanding of the existing regime is that the minister, as a sole minister—apart from his opportunity through the Ministerial Council on Energy—does not have that sort of power or relationship with the market operator.

The Hon. P.F. CONLON: I can say that, in practice, it repeats what we do already. There is a request from the MCE, but there is also the longstanding practice of me, as the minister, writing directly to NEMMCO requesting information. There is information that they will provide to me as a minister; there is information they provide to the MCE; and there are certain types of information that they might make a decision that I should not be provided with.

I will check that I am right about this, but I think there is a reference in here somewhere to protected information, which is information determined by the law and rules. I will check that I am right, but I am pretty sure that it does not really do much that is different from what applies at present under NEMMCO, even though it is a different regime. They also have to protect confidential information, and I would imagine that is the sort of information they protect at present when I make a request of them for information. Otherwise, I have always found them to be cooperative.

I point out that the original director of NEMMCO, who was appointed by the former Liberal government and whose appointment was maintained by me, is a person I regularly have a chat with about things that are happening, but obviously his obligations to the market company are such that he would not tell me things that I am not supposed to know. However, he is very open with the things that I should know that are helpful to the discharge of my functions.

Mr WILLIAMS: I think, minister, you have satisfied my curiosity there. My colleague in the other place may take this further. I note that new section 51A states that AEMO must comply with requests from the minister, but it does have an out where it provides that, if compliance with a request would involve disclosure of protected information, that can only be disclosed under the rules.

I turn now to new section 54H—Disclosure of protected information authorised if detriment does not outweigh public benefit. This may be a simple one to answer. I think we had some discussion on this when we were passing previous legislation on the national gas law and the national electricity law. I think it is a fairly sensitive area.

I mentioned during the second reading debate that I have some concerns about market participants now being part of the operating company and the flow of information and the potential for conflict. I am not quite sure whether disclosure of protected information is going to protect individual participants from persons who are their competitors in the marketplace but who are members of the AEMO.

The Hon. P.F. CONLON: I do not think we answered that question. We are not just talking about public disclosure of information but a member of the company getting commercial information about a member.

Mr WILLIAMS: They are both concerns, minister. One is public disclosure. I am assuming that section 70 of the principal act will apply, and that gives a participant access to judicial review. The other question is about internal disclosure to somebody who may belong to a competing organisation.

The Hon. P.F. CONLON: There is a judicial review for a participant but there is also a merits review by, I think, the competition tribunal on disclosure of information. It is dealt with under new section 71A. They have to be able to request information and make a decision about disclosing it. There is a merits review, as I understand it, and a provision for a judicial review. This is detailed in clause 22 of the bill which deals with new section 71A.

Mr WILLIAMS: I will rephrase the question. Section 70(1) of the principal act refers to a situation where a person could be aggrieved by a decision or determination under the law and the regulations or the rules, etc. I am wondering whether that applies to new section 54H, which sets out the process of being able to disclose protected information if it is deemed that the detriment does not outweigh the public benefit. There is a whole process to go through. My question is: at the end of the day, does the market participant still have redress to section 70?

The Hon. P.F. CONLON: Yes.

Mr WILLIAMS: The other part of the question was: how are market participants protected against persons who are a member of the AEMC but belong to competing market participants?

The Hon. P.F. CONLON: It is not unusual, particularly in the energy industry, for a person to be on the board of several companies, and the corporations law applies to protect from conflicts. I am advised that the corporations law would also apply in terms of a director gaining access to information that might be commercial in-confidence in nature relating to a competitor.

I know you are not talking about the general information about one generator that another generator might be able to use. My understanding is that protections under the corporations law would apply, and I assume that it is a subset of the general laws governing conflict. It is quite a technical legal point. I might let them scribble it out and give it to you, but there are protections under the corporations law, and we will refer you to the appropriate protections as soon as we can get that down as clearly as possible.

Mr WILLIAMS: I take it, from that, that the Australian Energy Market Operator is a corporation under the Corporations Act?

The Hon. P.F. CONLON: It is a corporation limited by guarantee, which is precisely what NEMMCO is.

Clause passed.

Clauses 18 to 42 passed.

Clause 43.

Mr WILLIAMS: First, minister, I am assuming that this is applicable in South Australia.

The Hon. P.F. CONLON: Missed by this much again. We have transmission companies in South Australia but VENCorp, in essence, manages the transmission system there and VENCorp will be subsumed into AEMO. This is a specific provision to deal with Victoria's peculiar circumstances under the bill.

In South Australia, the Office of the Technical Regulator (OTR) will be the system. Remember that I said earlier that the planning council's advisory matters are in here and system security matters will go to the Office of the Technical Regulator which will be responsible for system security in South Australia.

Mr WILLIAMS: Again, it gets back to the blackout situation that we had, and obviously the law here will give the minister in Victoria considerable powers. I take it that the minister in South Australia will not enjoy those powers and will not be a part of the development of the load shedding arrangements.

The Hon. P.F. CONLON: In fact, it will probably be closer to government than it was in the past, because in South Australia the information was held by the relevant distribution company and provided to ESIPC. It will now be held by the Office of the Technical Regulator as an employee of the South Australian taxpayer.

Mr WILLIAMS: This is probably my last question. With regard to load shedding, some years ago there was discussion around seeking out significant consumers and taking them off-line in times of peak demand when there were some problems with the system. In February this year, we saw a different type of load shedding where we actually cut power to specific suburbs or certain parts of the network.

It came to my attention probably a week after that incident that, interestingly, one of the major consumers in South Australia, the Kimberly-Clark paper mill in my electorate, went off-line earlier that day before the rolling blackouts in Adelaide. So we did, in fact, have it in South Australia, but I do not think that was handled interstate. I do not think that load shedding occurred from outside of South Australia. In fact, I think Kimberley-Clark was asked by its energy provider if it would go off-line.

Is it envisaged that we would have the sort of load shedding if and when necessary in South Australia that we saw in February or January or will we still have a system where we will target specific high users of energy and give them the opportunity to go off-line on days of short supply?

The Hon. P.F. CONLON: I suspect that you are talking about two separate things. First, I come back to this point: load shedding is most unusual and occurred only in what was, by anyone's standard, the most extreme weather event that I think this state has ever seen—10 days straight of 45°, or at least over 100 in the old measurement.

I have to say that most of the difficulties occurred interstate. I will start with what I suspect happens at Kimberly-Clark. As a big user, it is probably able to turn on and off, which a lot of big users cannot do easily. It may well have a contract with its electricity provider, which is an interruptible contract where, for the purposes of that provider, it will turn them off because they can sell the electricity at a higher price in prevailing market conditions. I assume that is what that is, and it is a purely commercial arrangement between the user and the provider.

At present, there is a further provision, which is called the 'reserve trader provision', where, at the commencement of the summer, which is a typically peak demand period, an assessment is made by NEMMCO of supply versus demand. Arrangements are made by NEMMCO to engage reserve traders; that is, people who are prepared to put their electricity back into the market.

The problem was that the predictions of NEMMCO did not match what occurred in a series of events during an extreme weather event, and that is why we had the rare event of load shedding. One of the proposals that we, as a jurisdiction, have put up to the MCE is that we should consider a rule change for a more flexible use of the reserve trader so that, instead of entering into arrangements at the start of the year, there may be a kind of standing reserve trader provision so that, if it is foreseen that something like this will happen, that can be implemented. The best way of saying it would be a kind of mid week or during the event.

That is something we are pursuing, and we believe that it would put more flexibility into the system. However, the real issue was that the forecast of demand and supply balance did not foresee the extreme events—something that they did not expect to happen at Basslink—coupled with a major transmission failure somewhere in Victoria. In short, I think that you are on the right track, and we are asking for consideration by the AEMC of a more flexible or 'nimble', as we have termed it, reserve trader provision.

Clause passed.

Remaining clauses (44 to 53) and title passed.

Bill reported without amendment.

Third Reading

Bill read a third time and passed.

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