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House of Assembly - Fifty-Fourth Parliament, Second Session (54-2)
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Bills

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

Second Reading

Adjourned debate on second reading.

(Continued from 16 June 2020.)

Mr PEDERICK (Hammond) (15:48): I want to raise some points today in regard to the Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill 2020. The Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill 2020 amends the Electricity Act 1996 and the Gas Act 1997 to enable implementation of a new retailer energy productivity scheme (REPS).

The Retailer Energy Efficiency Scheme (REES) is a South Australian government energy efficiency scheme that provides incentives for South Australian households and businesses to save energy by establishing energy efficiency targets to be met by electricity and gas retailers. The retailers meet these targets by delivering eligible energy efficiency activities to households and businesses.

The Retailer Energy Efficiency Scheme was established by the Electricity Act 1996 and the Gas Act 1997, and associated regulations—the Electricity (General) Regulations 2012 and the Gas Regulations 2012. The REES underwent a review in 2019 and the review recommended that the scheme be expanded from 2021 to include energy demand management and energy demand response activities.

The proposed new retailer energy productivity scheme (REPS) will include activities that reduce household or business end-use energy consumption, reduce household or business end-use energy costs for the same household or business outcome, and/or provide broader energy market benefits, such as reduced wholesale electricity prices, reduced electricity network costs and improved energy system security.

Amendments must be made to the Electricity Act 1996 and the Gas Act 1997 to ensure all energy productivity activities can be supported in the scheme, particularly energy demand management and energy demand response of the kind outlined above. The final REPS design will be contained within regulations consistent with existing practice for the scheme.

I think it is absolutely vital that we make things more efficient in regard to energy in this state, especially when we look back and see what happened before we came to power. We saw the former government rush headlong into renewables. There is no problem with transitioning to renewables as such but, when you do it far too quickly, you see situations like we had on 28 September 2016, when the lights went out right across South Australia, affecting 850,000 households and businesses.

It is outrageous that something like that could happen in this day and age—it was only about four years ago. We were actually sitting in this chamber on that day. It was sometime after 4pm when things shut down. We were fortunate, in this place, that our emergency generators kicked in and kept the place alive. We still hosted some meetings that night, but obviously the dinner service was scrapped.

It was extremely difficult, not just here in the city but right across the regions in South Australia. In fact, I think the only place that had any lights on was Kangaroo Island, because they had a generator system to keep them going. Why did we have such a cascading failure? It was because of this headlong rush into renewables and not transitioning sensibly by taking up more use of gas and just transitioning steadily.

We as a state have picked up the use of solar energy and wind energy and embraced that. I certainly have installed solar panels on my properties and they do a great job in reducing power costs, which was the main reason I did it. Many thousands of South Australians have done the same thing. We also have a massive number of wind farms, wind turbine technology and wind turbine generated power across the state.

What we saw in this headlong rush by the former government was that the coal-fired power station at Port Augusta shut down and the Leigh Creek coalmine shut down. They employed something like over 600 people between them. Not only did we lose a lot of that surety for keeping the lights on and keeping business functioning but we also lost that sustainability of the grid.

My father-in-law, Richard Abernethy, used to work at the Port Augusta power station. This is what happens when you rush headlong without taking a good look at what is going on. That is why it is so good that we as a government and the Liberal Party are looking with the regulators at the interconnector through to New South Wales, which will be about a $1½ billion dollar project. Obviously, we have the Heywood interconnector and we have the interconnector that runs through the Riverland as well, connecting South Australia to Victoria, which then, through a backhanded way, connects us into New South Wales and Queensland.

The sooner we get interconnection built through to New South Wales, the sooner we can utilise the assets that we have here in solar generation and wind generation, so that when the sun is shining and the wind is blowing—obviously both of those things do not happen all the time—and we have an abundance of those two sources of power, we can be connected through to New South Wales, apart from the two interconnectors we have through to Victoria, and share that power far more efficiently with the grid. In saying that, when we are short on those sources of power—and obviously we have gas generators here as well—we can import power from New South Wales. There is still a significant amount of that generated by coal.

These productivity arrangements are where we need to go and the Retailer Energy Efficiency Scheme will put those incentives in place for South Australian households and businesses to make sure they save energy costs. To save energy costs, it is pretty simple: you save what energy you need to use and give people those incentives and that helps everyone on a collective basis.

We have seen what has happened in the past when the former government had to rely on diesel generation. This is the government that was racing headlong into renewables and next thing there are hundreds of millions of dollars spent on diesel generators that would burn 80,000 litres of diesel an hour. You would not need a truck servicing these generators. I think that you would want to have access to a ship. To my knowledge, we have not had to utilise these generators.

I must commend our government and the direction that the minister, the member for Stuart, has taken in regard to managing energy in this state. They are obviously cognisant of the fact that we are connected into the grid with Victoria but that into the future we need that vital interconnection into New South Wales that will give much more productivity and reliability and will reduce costs to South Australian electricity users.

It is interesting that in the past the former government were big fans of more interconnection, but all of a sudden when it became our policy coming into government they decided they did not like it. It is interesting to note that. Efficiencies that can be brought right across the state will assist household and business end-use energy costs. It will provide broader energy market benefits, such as reduced wholesale electricity prices, reduced electricity network costs and improved energy system security.

All those things are vital as we move into the future to make sure we have the most efficient network that we can have, the most reliable network that we can have and the most cost-efficient network that we can have for our households and businesses in this state. I commend the bill.

The Hon. A. KOUTSANTONIS (West Torrens) (16:00): I can indicate to the house that I am the lead speaker for the opposition on this matter. The Statutes Amendment (Electricity and Gas) (Energy Productivity) Bill has nothing to do with almost any of what the previous speaker was talking about. Given your silence, sir, no doubt you are allowing me to indulge in some response.

The DEPUTY SPEAKER: Let's see how that goes, member for West Torrens.

The Hon. A. KOUTSANTONIS: Good to see it is a fair hand for all members.

The DEPUTY SPEAKER: Yes. I have said in this place before, if members can relate their contribution on a particular bill back to their electorate, then I am actually happy with that.

The Hon. A. KOUTSANTONIS: I can first relieve the house to know that the opposition will be supporting this measure, although we will be asking some questions in committee. I understand that generally stakeholders are supportive of this measure. Let's talk about the origins of the bill. The Retailer Energy Efficiency Scheme was a scheme that was started nearly 10 years ago, I think, maybe even longer. There is a scheduled 10-year review, and that review was tabled in this parliament last December by the minister, I understand, although I stand to be corrected on that.

I will just read from the executive summary of the report tabled in the parliament, Review into the South Australian Retailer Energy Efficiency Scheme, December 2019. The Retailer Energy Efficiency Scheme (REES) commenced in 2009 under two acts: the Electricity Act and the Gas Act. It is governed by part 4 of the Electricity (General) Regulations 2012 and the Gas Regulations 2012. The threshold consideration in the review, we are told, is whether the scheme should continue beyond 2020.

I am pleased that the review has recommended that we continue to have a form of REES to December 2030, although I note the government has introduced amendments to the bill to amend parts of it to remove the term 'efficiency' and substitute it with 'productivity' throughout the bill. The review recommended that the REES apply from 1 January 2021, and the report goes on to say it is to have the following key features:

A ten-year continuation with two five-yearly target resets and a review to be conducted in 2029.

Retailers will be obligated to deliver the scheme.

So we are maintaining an obligation on retailers to deliver the scheme. The report continues:

Set the scheme objective to be: 'To improve energy productivity for households, businesses and the broader energy system, with a focus on low-income households. This will reduce energy costs and greenhouse gas emissions, whilst improving human health.'

The opposition is pleased that low-income households are specifically mentioned in the report. I am yet to see where low-income households are mentioned in the amendment bill. That is not to say it is not mentioned in the body of the bill, which may maintain it. I will make some remarks on that when we get into the committee stage but by and large, given that the focus will still remain on low-income households, the opposition is broadly supportive. The report continues:

Have an energy productivity target expressed [in a gigajoule]

Include a residential target—

I am assuming within that gigajoule target. I understand that, within the parameters of the committee stage, I can hopefully ask the minister whether he will include that or whether that is an extra requirement. The report continues:

Include a priority…target, comprising the current Scheme priority group as well as rental households—

which is a welcome addition—

Include a regional obligation on retailers—

which I think is very important. Regional communities deserve to have energy productivity in the REES applying to them in an equal way, given the tyranny of distance. They recommend an:

…obligation on retailers in circumstances where activity is delivered in regional areas fall below 15 per cent of the overall target, in the year following the shortfall.

So they include a regional obligation if the target falls short in that year for regional communities. Key features also include:

Incentives for demand response activities as well as energy savings in the commercial and residential sectors—

which I think is exciting. It continues:

Require customer co-payments for all commercial and industrial activities and residential activities except for priority group households.

I understand that that is a change, and that was not delivered to me in the briefing. My understanding of the REES is that households are levied about $13 to $15 per year. Audits are done on your home and augmentations are made to your home to improve energy efficiency. That is usually expressed in the most common way: changing light globes, putting energy efficient light globes in people's homes. Sometimes it is door snakes, sir. You would be surprised how much difference a door snake can make. Insulating windows with strips and all sorts of other augmentations can improve the energy efficiency of a home. In some extreme cases, there are other works that are much more expensive.

I see here that requiring a customer co-payment is a new requirement. I will be interested to know the minister's view on that and whether or not he will support it; I assume he will. I would like to understand whether that will be means-tested. What is the threshold? How does the state identify people who are low income and not low income? Are they relying on them being a part of a bracket of the commonwealth tax code rather than the state tax code, or is it people simply receiving some kind of concession, like a pensioner or disability concession? I would be interested to know who the cohort is made up of.

They also recommend, of course, transparency measures; transparency is always a good thing. The report recommends the removal of residential audits and an obligation on retailers to meet the annual energy audit target featured in the REES that apply from 1 January next year. I assume that is because it is being replaced with a productivity target measured in gigajoules. I would be interested to hear what the minister has to say about that.

The review recommends a smooth transition, which is always good. I am interested to understand how the restriction of the carryover credits from the current scheme will operate with a transition to the new scheme and whether they will be abandoned, counted. These are matters that I would like the minister to express in his closing remarks to the parliament, if he can do that or, if he cannot find that out, if he could do it between the houses and provide that to the opposition that would be greatly useful.

The review recommends the following features to be part of the implementation framework, I will read it from the report on page 3. It goes on to say, and I quote:

No 900 GJ limit for commercial lighting upgrades—

so no threshold on commercial properties. It continues:

Allow commercial lighting upgrades to be delivered more than once per premises, where it can be demonstrated the lamps being replaced had not previously been replaced for the purposes of the scheme.

I think that makes sense. If you have already spent some money at your premises, I think this means if there are further augmentations that can be made or further lights that can be changed, you are not excluded because you have done some work previously, which I think is okay. It also includes:

Introduction of new commercial and industrial activities, such as upgrades of fans, pumps and motors.

One of the biggest expenses commercial operations have in maintaining lower power prices is the operation of energy intensive equipment they have, usually fans, pumps, condensers—all sorts of things.

It goes on to say that they want to align some of the scheme's activity with interstate schemes, where appropriate. That does concern me a little bit. I am not quite sure if other states are as progressive as South Australia, but I am sure the minister can outline that. It could be a completely harmless recommendation that the opposition is happy to support. The review is talking about a framework to align the scheme with interstate schemes and overcome the landlord-tenant split incentive problem.

What incentive is there for a landlord to improve the energy efficiency of a home for which they do not pay power costs? It will be interesting to see how the minister finds a way to overcome that because that is a big issue with the concerned sector, especially SACOSS. A lot of their clients are in rental accommodation and there is almost no incentive whatsoever for a landlord to put in energy efficient equipment because the landlords do not pay the power bills. It is an interesting problem to try to overcome.

I am concerned about 'assist customers with financing for deeper retrofits'. I am not quite sure I like the idea of a government-run scheme that is encouraging greater indebtedness of businesses in exchange for work being done to improve energy productivity or efficiency. It will be interesting to see what the minister's view on that is. There is also 'other mechanisms'—whatever they may be—'to incentivise deeper retrofits in priority group households', the ones we mentioned earlier.

According to the tabled report, the background is that under the REES energy retailers are set annual targets for delivery of energy efficient activities to households and businesses. Retailers with larger residential customer bases are set targets to deliver a prescribed amount of energy efficiency activities to priority group households and to provide energy audits to priority group vulnerable households. The minister currently sets the target for that to be achieved under REES and they are apportioned to each retailer with an obligation to implement a list of pre-approved energy efficiency activities that can help meet the retailer's obligation to these targets.

The review was given three points and a consultant, Common Capital, was commissioned. I do not know how they were engaged and whether that was through a competitive process or whether it was simply someone that the agency already had on their books. That is also something I would be very interested to know, because this is a very, very important 10-year review. I would be fascinated to know whether or not there was a competitive process to choose Common Capital, not that I cast any aspersions on their work.

Apparently the parliament has been informed that the independent evaluation conducted by Common Capital found that the scheme has been an effective policy tool. That is interesting, because the Liberal Party went to the election I think twice promising to remove REES to try to lower power prices, in 2010 and 2014. Here we are today with the minister tabling a report that he commissioned finding that it was an effective policy tool and scheme. I think that shows that the former shadow energy ministers—not the current energy minister but the ones preceding him—who argued to remove this scheme were wrong and that Labor was vindicated in keeping this scheme operating.

It found that it was effective at delivering its objectives, it was efficient by delivering a net economic benefit while meeting those objectives, it was equitable by delivering benefits to households and low-income households across the state, and it was administratively simple, keeping costs in line with similar schemes. I go back to the point that on two occasions the Liberal Party wanted to abolish this scheme altogether.

The cost-benefit analysis of the scheme performance found that the scheme delivered, over its lifetime, 180,000 energy-efficient upgrades to households, businesses and low-income households from 2015 to 2017 and delivered a positive net economic benefit of $156 million to the state's economy. It supported $8.5 million in gigajoules of energy savings for South Australian households and businesses, and it is on track to deliver $1 billion in energy bill savings to South Australian households and businesses over a life of implementing energy efficiency activities, from 2015 to today, over a five-year period—$1 billion. That is not my finding, it is the government's.

There was $328 million in energy savings for household bills, of which $155 million in energy bills were for priority low income households; that is, because of the REES, low-income households saved over $150 million in their power costs. This is a scheme that members opposite wanted abolished. Importantly for conservative members of the house, there was $720 million in savings for the business community of South Australia through the REES—extraordinary numbers.

It reduced greenhouse gas emissions by over 450,000 tonnes in two years and is on track to reduce emissions by over one million tonnes from activities over five years, from 2015 to 2020. It performs well when you compare it with other Australian jurisdictions. So the scheme gets a tick on all counts: it is simple and cost-effective, it helps people who need it the most, it creates jobs, it helps businesses and households and it helps the environment, and the members opposite wanted to kill it. It is a shame, but I am pleased that we are seeing it continue in a different iteration.

There was vast consultation. I understand that SACOSS were consulted, as well as EnergyAustralia, Origin, AGL, ERM, the Australian Energy Council, the Ombudsman, the Energy Efficiency Council, Business SA, Lumo and a whole series of organisations in the concern sector, including UnitingCare Wesley, Your Energy, Demand Manager, Ecovantage and the Energy Savings Industry Association. From what I can tell from the published reports, there was overwhelming support for the scheme. You could see the self-interest of some of the retailers compared to the concern sector; it was pretty obvious. But I think that the government has, by and large, found a good balance.

I get to the findings and recommendations of the report, and this is where the rubber starts hitting the road. After the consultant found that the scheme works on all these different levels, he recommended to the South Australian government that we:

(a) Continue to have a retailer energy efficiency scheme beyond 31 December 2020.

(b) Commence the new REES on 1 January 2021, for a ten-year continuation with two five-yearly target resets and a review to be conducted in 2029.

(c) Restrict credit carryovers from the current scheme to 20 per cent of the 2020 target.

I am interested to know how the minister is going to do that. The recommendations continue:

The credit carryover restriction is proposed to apply in 2021 only, and carried-over credits will be converted to reflect the credit values applying from 2021.

Given that we are no longer looking at efficiency and productivity, I am not quite sure how you carry over these credits to productivity from a scheme that was looking at efficiency, but I am sure the minister's advisers can help explain that to the house.

Most stakeholders supported the continuation of the REES beyond 2020 and some even suggested that it be longer than the six-year framework. So we have reached a threshold now where, after the climate wars, we have moved an inch where an energy efficiency/productivity scheme that levies households to fund efficiency measures is now bipartisan. That is a good outcome, and I commend the current government for seeing the error of their ways previously. They want to have a new objective. Rather than efficiency, they want to move to, and I quote:

…improve energy productivity for households, businesses and the broader energy system, with a focus on low-income households. This will reduce energy costs and greenhouse gas emissions, whilst improving human health.

That is a good objective; however, that objective has not found its way into the body of amendments before us. I understand there may be regulations the government wishes to implement after the bill has passed, but these are the questions I would like to ask of the minister.

But it is not unusual for the objectives to be amended from time to time. We did. I did, as energy minister. In 2014, it was changed to reduce household and business energy use with a focus on low-income households, providing energy costs and greenhouse gas emission benefits. So from time to time, they are changed. It is not necessarily reflected in legislation but it would be nice to know exactly how the government hopes to do that. In terms of regional and remote participation, the review recommends that the South Australian government, and I quote:

Include a regional obligation on retailers in circumstances where activities delivered in regional areas fall below 15 per cent of the overall target, in the year following the shortfall.

They also go on to recommend to avoid future network costs. The energy productivity recommendation was:

(a) Avoid future network costs and put downward pressure on wholesale electricity prices by incentivising demand response activity as well as energy savings in the commercial and residential sectors.

(b) Have an energy productivity target, expressed using a gigajoules (GJ) metric.

This is very important. The government went to the election promising a reduction in power prices of $302 per annum. They are nowhere near it. The member for Newland went out to every household in his electorate and said, 'Vote for me and I will lower your power prices by $302 per year in real terms within four years.' They are nowhere near it. The member for Heysen did the same. The member for King did the same. She went door to door and boasted about how much she had doorknocked in King, promising to lower power prices by $302 per year. She is nowhere near that target. She should be held accountable for that by her constituents.

They should be hoping and praying that something like this may assist because in terms of network charges SA Power Networks (SAPN) have no better business anywhere in the world than they have here thanks to the Treasurer of South Australia, the Hon. Rob Lucas MLC. The contract that he signed in the 1990s last century gifting them control of our distribution network has made South Australia's distribution network the most profitable in the entire stable of SAPN's parent company. They make more here than anywhere else in the world, courtesy of members opposite.

They make a lot of money. They have even created their own companies now to do the repair work. Get this: SA Power Networks used to employ South Australian contractors to do their line work. What they do now is they go to their regulator and they get an approval to do a certain amount of line work. They have created their own company now, which they own, and, surprise, surprise, they win all the contracts—not a bad way to do business at all.

It is not good for the consumer, not good for the long-suffering energy customer and not good for households but great for its Hong Kong-based headquarters. And Rob Lucas has a lot to answer for for that contract, which was released after the confidentiality period required in cabinet and which we were able to release publicly to see exactly what Rob Lucas signed us up to for nearly 200 years of a monopoly transfer—a transfer of wealth not risk, and not to South Australian businesses but to foreign-owned businesses that are located offshore in non-democratic countries that do not have our best interests at heart.

The member for King and the member for Newland should be very concerned if they cannot meet that target because the Labor candidates in those seats will be reminding everyone of a promise that the members for King and Newland made about lowering power prices by $302 per year which, of course, they are nowhere near meeting. But this goes, hopefully, some way to lowering network costs, but we will see, because they are fundamentally changing this energy efficiency scheme to a productivity scheme.

We know from a review that the scheme as it is works. We know that it has saved businesses $750 million in five years alone and households over $150 million, so we know that, as a benefit, we have over $1 billion and lower greenhouse gas emissions. The government has given us a scheme and a report that works, and now they are changing it and the changes will be owned by members opposite. I do not have access to the expert advisers that the government does who are the ones advising the government on this scheme, but we must keep faith with them.

The report goes on to recommend in terms of commercial/industrial activity eligibility for the scheme that the government not include a limit for commercial lighting upgrades. I assume that means that there is no limit to the energy value of the lighting upgrades that can occur, but it is simply limited by the money in the scheme—I am just extrapolating; I could be wrong—and again, as I said, allows multiple upgrades at the same premise: if it had one before, it can have one again.

They are also recommending that the South Australian government incentivise upgrades in larger businesses by introducing new commercial industrial activities, such as upgrades of fans, pumps and motors, incentivise larger businesses by introducing new methods, such as the NABERS baseline method, the power factor correction method and the project impact assessment method. I will confess to the house, I am not an expert on those methods, and I would like the minister to provide me a briefing offline on how those methods work so that I can get a greater understanding of what they are.

It then refers to a residential target, which makes sense, and a priority group target, which includes rental households with a definition of a priority group and a review to update the scheme rules to allow for opportunities for the landlord-tenants split incentive program.

This is the part where I think it gets a little bit controversial, but I am happy to be convinced by the government. The review recommends:

a) Require co-payment for all residential activities, except for priority group households.

b) Incentivise residential activities that reduce peak demand or increase demand response capability.

c) Consider options to assist customers with financing for deeper retrofits.

d) Consider other mechanism to incentivise deeper retrofits in priority group households.

What are those mechanisms? If you are a priority group and you are a landlord, your land tax has gone up and council rates have gone up because of the bin tax. I am not quite sure what incentives the government is going to offer or can offer a landlord for a deeper retrofit in a priority group. I have concerns about co-payments for residential properties, but I am happy to be convinced by the government that this makes sense. I would like to know what is the value of the co-payment. What level do we get up to?

If we go through the actual bill, from what I can tell basically most of the amendment bill just deletes the word 'efficiency' and substitutes 'productivity', deletes 'energy efficiency shortfall' and replaces it with 'energy productivity shortfall', deletes 'REES' and deletes 'efficiency'. It does the same to the Gas Act, and that is it. That is all the bill does, and the government will release regulations later to tell us exactly how the scheme will work.

The opposition is going to support the government on this measure. We have a few concerns but nothing that I think would require any amendments or any parliamentary delays. However, I found interesting the remarks by the previous speaker about the headlong rush into renewables. I am not sure if the member for—

Mr Pederick: Hammond—you will work it out one day.

The Hon. A. KOUTSANTONIS: —yes, I will; you are easily forgettable—Hammond was here in parliament when the scheme was introduced to incentivise solar panels. The then Labor government wanted a short five-year scheme to incentivise solar panels being put on roofs with a feed-in tariff. The Liberal Party combined with the Greens to increase that scheme to make it last nearly two decades, and pay a very large tariff, and then today complained about a headlong rush into renewable energy. A cursory look at that scheme would show that the Liberal Party are guilty of what they have accused us of, but it is fair to say that people in those schemes are very pleased.

With those few words, I thank the minister for his briefing. I thank the minister for making his officers available. I do not think there will be any concerns about this legislation, other than the matters I have raised in my second reading remarks. It is going to be very difficult to get the answers I want out of committee because the questions in the bill relate to the deletion of certain words and the insertion of others. Most of the review into the Retailer Energy Efficiency Scheme and the way the government is going to operate it will be available through the regulations, which will not be tabled for a while.

I would ask for the committee's indulgence to ask a few questions of the minister. If it is not possible and the house is not up to it I would like to arrange another briefing between the houses with the minister and his officers just to go through exactly how the scheme will work and how the co-contributions will work. I am very concerned about the financing options talked about in the review. I do not like the idea of businesses entering into greater levels of debt now, when obviously commercial activity and industrial activity are weaker because of COVID, and the government is bringing out a scheme to make us more energy efficient but it is going to require co-payments and it may require borrowings. That does concern me a little bit.

But by and large I am glad the review was tabled and published. It does prove that the REES worked. In fact, it vindicates the current minister because his predecessors wanted to abolish REES, and the minister was the first Liberal minister to reverse that policy in support of REES. He deserves credit for that, for making up his own mind about the benefits of the scheme. As I said earlier, there is $328 million in savings to homes, $720 million in savings for businesses and nearly a million tonnes of CO₂ reduced because of this scheme. So we have a scheme that works, we know it works, we know it is efficient and we know it is easy to administer. People understand it and now we are changing it.

The opposition is taking a leap of faith with the government on this matter, but I think intuitively the minister is right: energy productivity and demand response measures are probably a better way to decrease network costs in the long run because building bigger and more expensive networks is not the way forward. I commend the government on this and I look forward to a speedy passage through the house with a few questions in committee. If the minister cannot answer them now, I am happy to have a briefing afterwards.

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (16:34): I appreciate that. I meant no disrespect by the fact that I could not be here; I just had another very pressing engagement, so I was not able to hear all the shadow minister's contribution. Yes, he is quite right: there is an enormous amount in the regulations. That is not new or different, but it is frustrating, though.

I remember sitting through this process as a shadow minister comfortable with the principles of some bills but understanding that the devil was in the detail. If the regs went one way, then happy days; if the regs went another way, it would be a disaster. That is not something that is being done deliberately, but it is something I know the shadow minister understands is often part of the process.

With the support of one of my key advisers, who will be here very shortly, we will give as much information as possible during the committee stage. If there are things that we cannot help with, then we will certainly provide the best briefing we can between the houses. It is a pretty straightforward bill but, yes, the regulations are very important.

Bill read a second time.

Committee Stage

In committee.

Clause 1.

The Hon. A. KOUTSANTONIS: With your indulgence, sir, if you were listening to my remarks, which I know you do studiously when you are in the chair, by and large the amendment bill just deletes words and replaces them with new words. The bulk of my questions are on the tabled report that formulates the basis of the amendments. I do not wish to compromise the committee at any stage, so I will be asking questions about the thinking behind changing 'efficiency' to 'productivity'. If it comes in conflict with the house or with the committee, I am happy to do this between the houses. I do not want to waste the time of the parliament.

The CHAIR: It sounds reasonable, member for West Torrens. I assume your questions relate to the clauses?

The Hon. A. KOUTSANTONIS: Okay, title: how many of the recommendations into the review has the government accepted?

The Hon. D.C. VAN HOLST PELLEKAAN: We have tabled the report but have not implemented them yet and have not made a final decision, but the expectation is that all of them will be delivered. I put a very clear caveat on that: all of them I am comfortable with in principle, but I reserve my right to adjust that. That is the best answer I can give you.

The Hon. A. KOUTSANTONIS: The government has made a virtue out of tabling regulations on other matters and other bills before other committees of the parliament as a guide for the committee to know exactly what the outcome of the bill is. I do note that the short title of the bill is 'energy productivity', which changes it from 'energy efficiency', so the government has made a threshold decision to move from efficiency to productivity. What I am confused about is that if you have made that threshold decision and it is not on the basis of the report, on what basis is it?

The Hon. D.C. VAN HOLST PELLEKAAN: Where I think I can help the member is that it is not a threshold decision to change from efficiency to productivity. My view is that productivity includes efficiency, so it is actually expanding it. All the things that were available under the REES, and are available under the REES, would still be available under the REPS, so it is a broadening out, not a shift from one to the other.

The Hon. A. KOUTSANTONIS: The government is being advised on a gigajoule metric for energy productivity. I note that for some changes, such as lamps, it is mentioned in the report that you are not using a gigajoule target. What is the target in doing these measures? If productivity is the objective and the report recommends you express that in gigajoules—what is the productivity in terms of gigajoules?—and the report then recommends for some commercial activities to not use gigajoules, what is the measure? What is the requirement on a retailer when gigajoules is not the relevant target for a business? Is it dollars?

The Hon. D.C. VAN HOLST PELLEKAAN: The answer is that all the targets would be in gigajoules and support, in regard to conversions and formulas and how to transfer an implementation of a project, if you like, towards a gigajoule target, exists and will be shared with the proponent as and whenever necessary.

Clause passed.

Clause 2.

The Hon. A. KOUTSANTONIS: Given your previous answer, and again I note you have said previously that you have not accepted the report yet, the report on page 19, point 5.6 of the recommendations, says 'not include' a gigajoule target for commercial lighting upgrades. It is not a big point. I am not trying to dig a ditch over this, but how does a retailer know how much to invest in an upgrade in a commercial premise if it is not restricted by gigajoules, or are you rejecting this recommendation and will be having a gigajoule?

The Hon. D.C. VAN HOLST PELLEKAAN: Just to be sure we are not at cross-purposes here, are you talking about the Common Capital report or the government's?

The Hon. A. KOUTSANTONIS: I am talking about the government's Review into the South Australian Retailer Energy Efficiency Scheme. I am going on the document your office gave me.

The Hon. D.C. VAN HOLST PELLEKAAN: I do not doubt it, but we are all human and we are just looking for page 17 at the moment.

The Hon. A. KOUTSANTONIS: That is alright. We can do it between the houses. I am not fussed. This report, Review into the South Australian Retailer Energy Efficiency Scheme, that was tabled—

The Hon. D.C. van Holst Pellekaan interjecting:

The Hon. A. KOUTSANTONIS: It was not tabled? This one here?

The Hon. D.C. VAN HOLST PELLEKAAN: Yes.

The Hon. A. KOUTSANTONIS: That report is the one I am quoting from. The findings and recommendations on page 20 talk about incentivising upgrades in larger businesses, such as upgrades of fans, pumps and motors, which I think is common sense. It is going to require a co-payment for industrial activities.

The body of the report talks about financing opportunities. Is the government considering establishing a financing mechanism, or is the government contemplating partnering with the commonwealth, with its financing opportunities for green initiatives? Is the government saying to retailers and their customers, 'If you wish to upgrade, your co-contribution will be X. You can finance it yourself or you can put your money up'? Is the government going to be offering its own financing model?

The CHAIR: Before the minister takes that question, member for West Torrens, you pre-empted some of your questions at the beginning. We are on clause 2, which deals with commencement, so it is a bit of a long bow.

The Hon. A. KOUTSANTONIS: The whole thing is a long bow, sir.

The CHAIR: It looks like the minister is preparing to answer it, but just bear in mind we are talking about a bill with clauses. I am prepared to take the question. You understand; you pre-empted it yourself—

The Hon. A. KOUTSANTONIS: I am a digger down on my luck, sir.

The CHAIR: —that some of the questions would come from the report that you are referring to now.

The Hon. A. KOUTSANTONIS: Yes.

The CHAIR: Your question really should be how the government intends to deal with those recommendations, if at all, in relation to this bill.

The Hon. D.C. VAN HOLST PELLEKAAN: We are not suggesting that there will be a government funding program, but we are suggesting that we will do our very best to find partners who might be willing to work in with this. A good example of that is the Home Battery Scheme, where the state government has money towards the subsidy of the purchase price of the battery, but some federal money came in from Clean Energy Finance Corporation, which is administered through RateSetter, which supports loans for the balance of the purchase price of the battery and potentially the solar as well.

It is early days. We are consulting on that. It will not be taxpayers' money going towards it, but it will be taxpayers' effort, if you like, to try to put some support package like that together for these businesses.

The Hon. A. KOUTSANTONIS: On a matter close to your heart, sir, regional communities—

The CHAIR: Indeed.

The Hon. A. KOUTSANTONIS: —on page 15, the report states 'include a regional obligation on retailers'. I imagine that will be expressed in the regulations that will be ultimately introduced. This is a part I am struggling to understand. The report recommends that the South Australian government:

(a) Include a regional obligation on retailers, in circumstances where activities delivered in regional areas fall below 15 per cent of the overall target, in the year following the shortfall.

I am guessing you are setting a statewide target. How does the government know how much of that target is to be assigned to regional communities? Is it on the base of power use? Is it on the base of population? I would love to know exactly how that is done.

The Hon. D.C. VAN HOLST PELLEKAAN: Good question. This issue is very close to the Chair's heart and very close to my heart as well. What the member probably understands is that, for the providers, it is a lot easier to be in the metro area and a lot easier to deliver in the metro area. We have found—and I am sure that, in previous years, your government found it too—that it was sometimes difficult to get this work done in regional areas not because the regional businesses did not want it but, if you have a choice, a region-based supplier goes there.

We considered that in regard to the REES and in regard to saying: should we set a target? We are looking at it now with the productivity adjustment. It is not finally determined, but I am minded to try to develop a sensible, responsible target to be sure that we can overcome what is often the reluctance of the supply side to go out to regions so that regions do not miss out on the opportunity.

The CHAIR: Last question on clause 2, member for West Torrens.

The Hon. A. KOUTSANTONIS: The report tabled by the government is now recommending a co-payment for all residential activities. It is my understanding that REES does not allow for co-payments in residential activities. I could be wrong, but that is my understanding. This is a new requirement the government is considering introducing. I understand the minister said he has not adopted it yet, but it seems as though we are all heading in that direction.

Given consumers are already paying for the scheme out of their bills—and I assume that levy will not be removed, and that there is nothing in the amendment bill that removes that levy—why would consumers pay twice, I suppose: once out of their bills and then a co-payment again with the retailer? Can the minister explain to the house what his thinking is?

The Hon. D.C. VAN HOLST PELLEKAAN: Yes. What we are considering is helping with the larger, more expensive, deeper retrofits that otherwise would not happen without some sort of a co-payment. In principle, it seems the right way to go. If we decide, if I decide, if the department decides that you could do five things over there or you could do this one, maybe we will not go that way. The intent is to look very seriously at whether there is a genuine benefit in offering a co-payment for projects that would not go ahead without it. Is there enough benefit in that project going ahead to warrant the co-payment?

The Hon. A. KOUTSANTONIS: Supplementary question to that, before we move the clause: will the minister means test that co-payment? That is, will you have to reach a threshold of wealth before you are required to make a co-payment or will the priority target households be exempt from that co-payment?

The Hon. D.C. VAN HOLST PELLEKAAN: I have just been advised that if we do it, it will not apply to the priority customers, but, again, it is early days, how that would work.

Clause passed.

Clause 3.

The Hon. A. KOUTSANTONIS: The perennial problem with energy efficiency schemes is: how do you incentivise landlords, especially in a cohort of priority groups? Landlords do not pay power bills and they do not pay network costs: they are all borne by tenants, unlike water and council duties, so it is a very difficult situation. The report recommends that you do it. I still do not know how you should do it. I was never able to grapple with it, so I would be interested to know what the minister's thinking is on how he can overcome this burden.

The Hon. D.C. VAN HOLST PELLEKAAN: Yes, the member is right. As a government, we wrestle, as I am sure your government did, with how to support the people who need it, when they do not have the capacity to do it. The work that is being done with the priority group of household renters, who can be in the program for other reasons too, is very much about finding ways to incentivise—and perhaps stern incentivisation—retailers to contribute.

We see the threshold issue with regard to the landlord being about giving permission, or not, not asking the landlord to invest. It is about the tenant and the retailer investing. It is still an open question whether we could make it happen anyway if for some reason the landlord does not want the upgrades on his or her property. We are looking at that. I think that would be very difficult even if we did want to do that, but we want the tenants to get the benefits of that, so that is where we are going with that.

The Hon. A. KOUTSANTONIS: Will the government need to legislate to give them that authority to compel landlords to allow work to be completed on their homes, or can they do it by regulation?

The Hon. D.C. VAN HOLST PELLEKAAN: I did not say that we will compel landlords. We need to determine what the process would be first and then we would know the answer to that question.

The Hon. A. KOUTSANTONIS: On page 21 of the report it talks about a residential target. Does the minister have an idea of what that target will be?

The Hon. D.C. VAN HOLST PELLEKAAN: No, not yet, but that is part of the consultation that is happening at the moment.

Clause passed.

Clause 4.

The Hon. A. KOUTSANTONIS: The minister just said 'consultation that is happening'. I thought consultation had ended.

The Hon. D.C. VAN HOLST PELLEKAAN: There is subsequent consultation going on on the targets.

The Hon. A. KOUTSANTONIS: Can I ask when that will be open, when it will close and how do you make a submission?

The Hon. D.C. VAN HOLST PELLEKAAN: It is the consultation on the principles that is open at the moment, as you probably know. The consultation on the targets has not commenced and that is why that information is not available, but we have made it clear that that will happen.

The Hon. A. KOUTSANTONIS: My final questions are on the cost recovery of the scheme, that is, the levy that will be on consumers. Will that be decreasing, will it be increasing, what is the split between C&I customers and residential customers, and can you give the committee or me between the houses an estimate of what you think the scheme will raise each and every year until the next review?

The Hon. D.C. VAN HOLST PELLEKAAN: I am not going to be able to help the member with this in too much detail because, as you would understand, we have to actually determine the targets first before we know what the levies will be. I would be very happy to give you as much information between the houses, even things you have not asked for today, if there are subsequent questions, but we will not have this part determined by then because obviously the levies flow through from the targets and that is step 1.

The Hon. A. KOUTSANTONIS: Can the minister guarantee to the committee that the scheme, as amended by the bill today, will not collect less than it has previously?

The Hon. D.C. VAN HOLST PELLEKAAN: It will not collect less?

The Hon. A. KOUTSANTONIS: Less. If it is now collecting on average $13 a year per customer, so everyone's bills are levied as a percentage per kilowatt cent, the question I am asking is: will the total amount collected from the scheme be less with the new productivity measures, or will it be less than it was with the efficiency measures? I would like an assurance from the minister that you will not collect less or that you will not cut the amount collected, which will probably mean it will do less work.

The Hon. D.C. VAN HOLST PELLEKAAN: I would love to give the member that assurance, but the reality is that we are still working through that. It does depend on the targets and then it does also depend on the proposals that come from the retailers. So you set your targets, you look at the types of work you want to have done and then you actually get the concrete proposals from retailers that come with costs.

We want to achieve as much as possible, and we do not want to charge any more than necessary, and that is why I was surprised by the suggestion that we should not charge any less. I understand what you are saying, that you are not going to do any less work, but we want to do both: we would like to charge less and we would like to do more work. We need to set the targets, look at the blocks of work and then get the serious proposals from the retailers before we can know what the targets would cost.

Clause passed.

Clause 5.

The Hon. A. KOUTSANTONIS: This is more a statement than a question. If the minister can indulge me for two or three minutes, I will not keep him much longer. The reason I asked that question is that the retailers do not like the energy efficiency scheme and they will not like the productivity scheme. They do not like any scheme. As far as they are concerned, they are retailers. Their job is to produce power and sell it. Anything else they have to do is an imposition this parliament puts on them because of this scheme.

The Hon. D.C. van Holst Pellekaan: Or buy it and sell it.

The Hon. A. KOUTSANTONIS: Yes, exactly. My concern is about the ability for a retailer to use any change in the definition—changing 'efficiency' to 'productivity'—to give them an excuse to do less. You might say that they cost recover what they spend, so it does not really matter, but I think that the administration costs and the other costs associated with the scheme are pretty simple. They are understandable, and if we do make a change I would hate to see retailers take advantage of it.

I suppose I am expressing faith in the minister to watch this, but I will be conferring with my colleagues between the houses and in the upper house about whether or not we need to introduce an amendment of sorts. That is not what I want to do; I would much rather have an assurance from the minister that he will be vigilant and make sure that the retailers do what they are supposed to do in the intent of the scheme and that there are plenty of provisions within the scheme to protect households from retailers who are trying to escape their obligations under the scheme.

That is a statement; I do not need an answer on it. I will have a talk to the minister between the houses on it, but I can flag that we may be considering an amendment between the houses.

Clause passed.

Remaining clauses (6 and 7) and title passed.

Bill reported without amendment.

Third Reading

The Hon. D.C. VAN HOLST PELLEKAAN (Stuart—Minister for Energy and Mining) (17:03): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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