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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2007-10-16 Daily Xml
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AUSTRALIAN ENERGY MARKET COMMISSION ESTABLISHMENT (CONSUMER ADVOCACY PANEL) AMENDMENT BILL

Introduction and First Reading

Received from the House of Assembly and read a first time.

Second Reading

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (18:01): 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.

The Bill I am introducing today significantly strengthens the consumer advocacy arrangements for both gas and electricity through the establishment of a consumer advocacy funding body to facilitate consumer engagement with industry. The legislative basis for the proposed consumer advocacy arrangements forms part of the national 'economic' legislative package of energy reforms, the first part of which is the National Electricity (South Australia) (National Electricity Law—Miscellaneous Amendments) Amendment Bill 2007.

The current national consumer advocacy arrangements were developed by the National Electricity Code Administrator in 2001 recognising that consumers should have the same rights to be involved in National Electricity Market decision making as service providers in the market. On 4 November 2005, the Ministerial Council on Energy endorsed new arrangements to strengthen consumer advocacy across the Australian energy sector to provide a long term framework for energy advocacy and to include gas advocacy in the energy funding mix. The new framework will also have a focus on small to medium end-users. The new arrangements will replace those currently in place under clause 8.10 of the National Electricity Rules.

The Ministerial Council on Energy decided that in order to provide for long-term energy advocacy arrangements which dealt with both gas and electricity and to enable clear and transparent governance and accountability mechanisms, the most appropriate mechanism to implement the new consumer advocacy arrangements would be through amendments to the Australian Energy Market Commission Establishment Act 2004.

This Bill establishes the Consumer Advocacy Panel (the Panel) as a constituent, but independent, part of the Australian Energy Market Commission. This will clearly recognise the Panel's role in the Australian energy market rather than just gas or electricity. While the Australian Energy Market Commission will be responsible for the administration of the new Consumer Advocacy Panel, to ensure the independence of the Panel is not compromised, the Bill clearly states the Panel's functions in allocating grants and commissioning research are not subject to the direction or control of the Australian Energy Market Commission or Ministerial Council on Energy.

The Panel is comprised of a Chair and four other Panel members, who will be responsible for grant allocation activities and commissioning research in both the gas and electricity sectors. Regulations to be made under the Bill will include criteria with which any grant funding must be consistent.

The Panel is empowered to identify areas of research which would benefit consumers. The Bill also provides for a cap on research projects that the Panel can initiate to a maximum of 25 per cent of the Panel's total annual grant budget. This is to ensure that the emphasis remains on using funds that are available for advocacy purposes.

The Panel is required to seek to promote the interests of all consumers of electricity or natural gas while paying particular regard to benefiting small to medium consumers of electricity or natural gas. The proposed focus on small to medium consumers is not designed to limit consumer advocacy and research funding to a defined group, but recognises that small to medium consumers are less likely to have detailed knowledge of the operations of the energy market and are less likely to have the financial resources to support advocacy. Nevertheless, all energy consumer advocates will be eligible to be considered for funding. Small to medium consumers will be defined in the regulations as those that use less than 4GWh of electricity or 100TJ of natural gas per year.

The Ministerial Council on Energy will have responsibility for appointing the Chair and other Panel members. It will also approve the grant allocation guidelines. The Chair and other Panel members will be selected on the basis of their technical expertise and will need to be independent of sectoral representation. The Panel will be supported by an Executive Director and staff.

The Panel is required to publish a draft of its annual budget on its website for public comment. This provides an opportunity for the public to scrutinise the Panel's budget and to provide submissions. In addition, the Panel's budget is subject to approval by the Ministerial Council on Energy. The operations of the Panel, including all financial transactions on its behalf, will be subject to scrutiny by the Auditor-General as part of their auditing of the Australian Energy Market Commission.

The Australian Energy Market Commission will be responsible for grant funding and other costs that relate to gas advocacy and the National Electricity Market Management Company will be responsible for grant funding and other costs that relate to electricity advocacy. As market measures similar to that of the electricity market operator have yet to be developed for natural gas, the Australian Energy Market Commission will be the funding body for gas related advocacy projects until such market operator mechanisms are developed.

The Panel will have the discretion in determining the appropriate ratio of funds, between electricity and gas, required to fulfil its administration needs as well as grant funding for joint benefit projects. It is anticipated that at the early stages of the new consumer advocacy arrangements that there will be a higher proportion of funds directed towards electricity advocacy rather than gas advocacy as the gas market has not yet reached the same level of maturity as the electricity market. Hence, the funds for joint benefit projects and the administrative costs of the Panel in the initial years may be more broadly funded by National Electricity Market Management Company market customer fees.

In summary, the Bill recognises that active participation by energy users and suppliers is important to the development of a more innovative and responsive energy market, achieving effective competition and maximising the benefits of market reform of the energy sector. The far-reaching consequences of the current program of reform underline the need for effective participation by both end users and suppliers. In particular, the growing convergence of electricity and gas markets will require effective and strategic consumer advocacy funding across the whole energy sector.

This Bill has the full support of all Commonwealth, State and Territory Ministers on the Ministerial Council on Energy.

I commend the Australian Energy Market Commission Establishment (Consumer Advocacy Panel) Amendment Bill 2007 to Honourable Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

This clause is formal.

2—Commencement

The measure will be brought into operation by proclamation.

3—Amendment provisions

This clause is formal.

Part 2—Amendment of Australian Energy Market Commission Establishment Act 2004

4—Insertion of heading

The Act is now to be divided into distinct parts.

5—Amendment of section 3—Interpretation

These amendments relate to defined terms that are associated with the provisions of this measure. One definition to note is that small to medium customer will have the following meaning:

(a) of electricity—a consumer whose annual consumption of electricity does not exceed a level (expressed in megawatt hours) fixed by regulation for the purposes of this definition;

(b) of natural gas—a consumer whose annual consumption of natural gas does not exceed a level (expressed in terajoules) fixed by regulation for the purposes of this definition.

6—Insertion of heading

This is a consequential amendment.

7—Amendment of section 6—Functions

This amendment will make it clear that the AEMC will have other functions conferred under this or any other Act or law.

8—Substitution of section 18

This amendment will enact a provision that protects a Commissioner or a member of the staff of AEMC from personal liability for an Act or omission in good faith in acting or purporting to act under the Act. The relevant liability will lie instead against the AEMC.

9—Amendment of section 26—Accounts and audit

These amendments will make it expressly clear that the account established by AEMC under Part 4 will form part of the accounts of AEMC and will be subject to audit under section 26 of the Act.

10—Amendment of section 27—Annual report

The report of the Panel under Part 4 will be incorporated into the annual report of the AEMC.

11—Insertion of Parts 3, 4 and 5

This clause inserts two new Parts into the Act.

New section 28 will provide for the establishment of the Consumer Advocacy Panel.

New section 29 will set out the functions of the Panel. The functions will be principally focussed on supporting research and other projects that are intended to benefit consumers of electricity or natural gas (or both). A key function will be to consider and assess applications for grant funding. It will also be made clear that the Panel can itself initiate research projects to be funded under this scheme.

New section 30 will require the Panel to have regard to relative objectives set out in a National Energy Law and, when promoting the interests of all consumers of electricity or natural gas, to pay particular regard to benefiting small to medium customers.

New section 31 provides that, subject to the Act, the Panel is not subject to direction by the AEMC or the MCE in the performance of its functions.

New section 32 sets out the process by which members of the Panel will be appointed and the relevant qualifications for office.

New section 33 provides that a member of the Panel will be appointed—

(a) for a term (not exceeding 4 years) specified in the instrument of appointment; and

(b) on conditions (including conditions as to remuneration) specified in the instrument of appointment.

New Section 33(3) will ensure that a member of the Panel maintains a degree of independence from the energy industry.

New section 34 provides that a member of the Panel may be removed from office for—

(a) breach of, or non compliance with, a condition of appointment; or

(b) misconduct; or

(c) failure or incapacity to carry out official functions satisfactorily.

New section 35 provides that the office of a Panel member will become vacant in specified circumstances.

New section 36 will allow the AEMC to make acting appointments associated with the membership of the Panel.

New section 37 provides that there is to be an Executive Director of the Panel. The Panel will also have such other staff as are reasonably necessary for the effective performance of its functions. The Executive Director and staff will be employed by the AEMC but the AEMC will not be able to give directions to staff so as to derogate from the independence of the Panel.

New section 38 relates to the meetings of the Panel.

New section 39 regulates any conflict of interest that may arise in a matter under consideration by the Panel.

New section 40 is an immunity provision.

New section 41 will require the Panel to prepare annual budgets for—

(a) administrative costs associated with the work of the Panel, including the remuneration of Panel members and the costs of employing its staff; and

(b) the allocation of available funding.

A budget will be subject to the approval of the MCE.

The Panel must, in preparing a budget—

(a) seek to maximise the amount of funding available for the allocation of grants by keeping administrative costs associated with the work of the Panel to a minimum; and

(b) ensure that money that is proposed to be made available for research projects initiated by the Panel does not exceed 25% of the Panel's total budget for funding projects; and

(c) clearly distinguish between—

(i) money that is proposed to be made available for research projects initiated by the Panel; and

(ii) money that is proposed to be made available for research projects put forward by other persons or bodies.

New section 42 provides for the responsibility of the AEMC and of NEMMCO for the administrative costs of the Panel.

New section 43 provides for the responsibility of the AEMC and of NEMMCO for meeting the grant funding requirements of the Panel.

New section 44 provides that the amounts to be provided by NEMMCO and the AEMC for the purposes of this Part are to be made available under an agreed scheme or, in default of an agreement, on a quarterly basis in advance.

New section 45 provides that the criteria for grant allocation are to be determined by the MCE and promulgated in the form of regulations under the Act. The Panel will then develop guidelines for grant allocation after consulting with the AEMC and other interested stakeholders.

New section 46 will facilitate the provision of grant funding for approved projects.

New section 47 will require the Panel to prepare an annual report.

New section 48 provides that the Public Sector Management Act 1995 and the State Procurement Act 2004 will not apply in connection with the operation of the Act.

12—Renumbering of section 28—Regulations

This is a consequential amendment.

Schedule 1—Transitional provisions

The schedule sets out various transitional provisions associated with the enactment of this measure.

Debate adjourned on motion of the Hon. D.W. Ridgway.

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