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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-09-09 Daily Xml
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NATIONAL GAS (SOUTH AUSTRALIA) (SHORT TERM TRADING MARKET) AMENDMENT BILL

Introduction and First Reading

The Hon. P. CAICA (Colton—Minister for Agriculture, Food and Fisheries, Minister for Industrial Relations, Minister for Forests, Minister for Regional Development) (12:09): Obtained leave and introduced a bill for an act to amend the National Gas (South Australia) Act 2008. Read a first time.

Second Reading

The Hon. P. CAICA (Colton—Minister for Agriculture, Food and Fisheries, Minister for Industrial Relations, Minister for Forests, Minister for Regional Development) (12:10): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

A key energy commitment of the Ministerial Council on Energy (MCE) is being delivered through new legislation to increase transparency and improve efficiency in the Australian gas market, for the benefit of South Australians and all Australians.

In April 2004, the MCE agreed to a gas market reform program that would accelerate the development of a reliable, competitive and secure gas market which would further increase the penetration of natural gas. In December 2004, MCE approved a set of Principles for Gas Market Development as a basis for developing the Australian gas wholesale market.

The MCE subsequently established the Gas Market Leaders Group (GMLG) as a key industry forum to develop a Gas Market Development Plan that is consistent with the MCE Principles for Gas Market Development. The GMLG was established with an Independent Chair and broad representation from all sectors of the natural gas market, including;

gas producers;

gas transmission and distribution network owners and operators;

gas retailers;

gas retail and wholesale market operators (eg, VENCorp, REMCo or GMCo); and

gas users.

The GMLG's Gas Market Development Plan was completed in June 2006. Included as part of the Development Plan was a recommendation to establish a single national gas market operator as well as three initiatives focussed on improving information disclosure and market transparency:

the Natural Gas Services Bulletin Board;

the Gas Statement of Opportunities; and

a Short Term Trading Market (STTM) for wholesale gas.

The single national gas market operator was established as part of the Australian Energy Market Operator (AEMO) following the passage of enabling legislation earlier this year. AEMO assumed responsibility for both the gas and electricity markets on 1 July 2009.

The Natural Gas Services Bulletin Board was established in 2008 with the commencement of the new National Gas Law (NGL) and is now administered by AEMO. The legislation supporting the Gas Statement of Opportunities came into force with the establishment of AEMO in July and the first Gas Statement of Opportunities will be published by AEMO in December this year. The amendments to establish the STTM complete the implementation of the Gas Market Development Plan's initiatives to improve information disclosure and transparency in the gas market.

The GMLG has provided an important ongoing forum for stakeholders to participate in the development of these important reforms, with the MCE at its most recent meeting expressing their appreciation to the GMLG and its independent Chair, Mr Ted Woodley, for their significant contributions to the STTM design and other gas reform initiatives over the past four years.

Objectives

The STTM establishes a mandatory price based balancing mechanism for gas delivered to, and withdrawn from market hubs that will replace existing mechanisms between retailers, self-contracting users and shippers. The STTM will initially operate in South Australia and New South Wales at hubs around Adelaide and Sydney. The market has been designed to allow additional hubs in all jurisdictions to be added in the future.

The proposed trading market will not replace bilaterally negotiated long term contracts which will continue to form the basis of gas markets. Rather, it integrates long term contracts with current market conditions through a more flexible, responsive exchange system that provides opportunities to both new and established players.

The STTM will provide clear market signals to existing participants, potential entrants and consumers. These signals should encourage more informed investment and risk management decisions while facilitating secondary trading between shippers and users as well as for gas-fired power generators and for trading over interconnecting pipelines. In addition, the STTM is designed to facilitate greater demand side response by users, particularly at times of supply constraints while enhancing market liquidity.

The STTM, with its integration of long standing contracting framework and new competitive mechanisms, will provide a solid foundation for the next phase of gas market reform as it continues to evolve and expand across Australia. It also builds upon the existing achievements of the National Electricity Market (NEM) and continues the convergence between Australian energy markets.

Subject to the passage of the enabling legislation, it is intended that the STTM commence in winter 2010.

The NGL Amendments

These amendments to the NGL contain the key provisions that provide the legislative framework for the STTM. This framework provides for the operational provisions of the STTM to be detailed in dedicated chapters of the National Gas Rules (NGR) and in a new set of Market Procedures. The changes to the NGL and NGR were developed by MCE in consultation with GMLG. The successful partnership between industry and jurisdictions has been a hallmark of gas market reform and has been critical in the development of the STTM.

The NGL provisions have been guided by the wider MCE legislative framework that has developed over the past five years. Where appropriate, provisions have been prepared with reference to similar provisions for the Victorian wholesale market and retail markets and precedents in the NEM.

The amendments to the NGL were released for public consultation in the first half of 2009, followed by the amendments to the NGR in August-September 2009.

The main elements of the NGL amendments are outlined below:

Application of the STTM

The STTM is intended to operate initially in New South Wales and South Australia in clearly defined hubs within the metropolitan areas, which will be specified in the NGR. To facilitate this process, the new s91BRA provides that the STTM provisions will only apply in jurisdictions which have legislated to adopt them. South Australia is adopting the STTM as part of this package and it is anticipated that New South Wales will adopt the provisions prior to the start of the market. Other jurisdictions may choose to adopt the STTM in the future.

AEMO's Statutory Functions

Amendments to s91A empower AEMO to perform its 'STTM Functions'. These are defined at a high level in the new s91BRB which permits AEMO to operate and administer the STTM and to make Procedures covering the operation of the market. The detail of how AEMO will perform these functions will mostly be dealt with in the NGR.

Market Participation

The new Subdivision 2 of Division 2A provides support for Rules governing registration to participate in the STTM and prohibits the injection of gas into a hub by a person who is not registered. These provisions are modelled on the market participation provisions being placed in the NGL for the Victorian wholesale market and the retail markets. They provide high level support for registration while leaving the detail of the registration process in the NGR.

STTM Procedures

Subdivision 3 of Division 2A allows AEMO to make the STTM Procedures. It is modelled on the procedure making powers for the Victorian wholesale market and the regulated retail markets. The process for making Procedures in Part 15B of the NGR will apply to these Procedures.

STTM Information

Section 91FEA obliges the following classes of people to provide information to AEMO if required by the Rules:

(a) an STTM trading participant;

(b) a service provider;

(c) a storage provider;

(d) a producer; and

(e) another person who is prescribed by the Regulations.

Failure to provide information under this provision will attract a civil penalty while providing false or misleading information is an offence under s91FEC.

AEMO will not be empowered to use market information instruments to gather information for the STTM.

Title to and Quality of Gas

The new ss91BRF and 91BRG requires any Registered Participant delivering gas to a hub to demonstrate that they have title to that gas and that the gas meets any applicable quality standards. The Rules will specify how title to gas is transferred in the STTM and which gas quality standards apply.

Urgent Rule Change

The definition of 'urgent rule' in s290 of the NGL has been amended to allow urgent rules to be made if failure to make the rule would threaten or prejudice the operation of a regulated gas market. This change makes this provision consistent with its equivalent in s87 of the National Electricity Law.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause is formal.

2—Commencement

The measure will come into operation by proclamation.

3—Amendment provisions

This measure will amend—

(a) the National Gas Law, as set out in the National Gas (South Australia) Act 2008; and

(b) the National Gas (South Australia) Act 2008.

Part 2—Amendment of National Gas Law

Division 1—Short term trading market amendments

4—Amendment of section 2—Definitions

This clause provides new definitions for the definition section (section 2) of the National Gas Law.

5—Amendment of section 3—Meaning of civil penalty provision

This clause amends section 3 of the National Gas Law to add to the meaning of civil penalty provision.

6—Amendment of section 4—Meaning of conduct provision

This clause amends section 4 of the National Gas Law to add to the meaning of conduct provision.

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

This clause allows the AEMC to make Rules governing the operation of the Short Term Trading Market (STTM).

8—Amendment of section 91A—AEMO's statutory functions

This clause amends AEMO's statutory functions to allow it to operate the STTM.

9—Insertion of Chapter 2 Part 6 Division 2A

This clause inserts a new Division governing the operation of the STTM.

Division 2A—Short term trading markets

Subdivision 1—Preliminary

91BRA—Application of this Division

This section provides for the adoption of this Division by jurisdictions.

91BRB—AEMO's STTM functions

This section lists AEMO's STTM functions.

Subdivision 2—Short term trading markets

91BRC—Market participation

This section lists participants in the STTM.

91BRD—Registration required for market participation

This section requires participants in the STTM to register.

91BRE—Certificates of registration etc

This provision allows AEMO to issue certificates certifying that a person is registered to participate in the STTM.

91BRF—Title to gas

This section prohibits participants from delivering gas to an STTM hub unless they hold title to the gas.

91BRG—Gas supplied to STTM hub must meet quality specifications specified in the Rules

This section prohibits participants from delivering gas to an STTM hub unless the gas meets applicable gas quality standards.

Subdivision 3—STTM Procedures

91BRH—STTM Procedures

This section enables AEMO to, in accordance with the Rules, make STTM Procedures.

91BRI—Nature of STTM Procedures

This section outlines the requirements around making the STTM Procedures.

91BRJ—Compliance with STTM Procedures

This section outlines the need for AEMO and applicable parties to comply with a STTM Procedure.

10—Insertion of new Subdivision heading in Chapter 2 Part 6 Division 6

This clause inserts a new Subdivision heading.

11—Insertion of Chapter 2 Part 6 Division 6 Subdivision 2

This clause inserts a new Subdivision into the law concerning STTM information.

Subdivision 2—STTM information

91FEA—Obligation to give information to AEMO

This section requires certain classes of people to provide information to AEMO for the operation of the STTM.

91FEB—Person cannot rely on duty of confidence to avoid compliance with obligation

This section prevents parties from relying on duties of confidence to avoid complying with a request for information.

91FEC—Giving to AEMO false and misleading information

This section provides a criminal penalty for providing false or misleading information.

91FED—Immunity of persons giving information to AEMO

This section provides immunity for persons giving STTM information to AEMO unless they act negligently or in bad faith.

12—Insertion of section 294B

294B—South Australian Minister to make initial Rules related to AEMO's declared STTM functions

This clause allows the South Australian Minister to make initial Rules governing the STTM.

13—Amendment of Schedule 1—Subject matter for the National Gas Rules

This clause makes various amendments to Schedule 1 to allow Rules concerning the STTM.

14—Amendment of Schedule 2—Schedule applies to statutory instruments

This clause makes minor technical amendments to Schedule 2.

15—Amendment of Schedule 3—New Part 12

This clause amends Schedule 3 to allow AEMO to make the initial STTM Procedures.

Division 2—Other amendments

16—Amendment of section 2—Definitions

This clause inserts a definition of market operator service.

17—Amendment of section 91A—AEMO's statutory functions

This clause amends section 91A to allow AEMO to conduct market trials.

18—Insertion of Chapter 2 Part 6 Division 11

This clause inserts a new section.

Division 11—Other matters

91KD—Disclosure of information for purpose of market trials

This section allows disclosure of information for the purposes of a market trial.

19—Amendment of section 290—Definitions

This clause inserts a new definition of urgent Rule.

Part 3—Amendment of National Gas (South Australia) Act 2008

20—Insertion of section 23

The new provisions relating to the short term trading market will only apply in relation to a particular jurisdiction if the law of that jurisdiction so provides. This clause will apply the provisions to South Australia.

Debate adjourned on motion of Mr Hamilton-Smith.

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