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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-10-29 Daily Xml
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ELECTRICITY (FEED-IN RATES) AMENDMENT BILL

Introduction and First Reading

The Hon. M. PARNELL (16:35): Obtained leave and introduced a bill for an act to amend the Electricity Act 1996. Read a first time.

Second Reading

The Hon. M. PARNELL (16:36): I move:

That this bill be now read a second time.

The purpose of this bill is to fix a loophole—a mistake if you like—in the Electricity Act which was not dealt with adequately when we debated the feed-in tariff bill in relation to solar panels earlier this year. We did not get it right on that occasion because we all—the government and certainly the Greens—assumed that the electricity retailers would do the right thing by their customers and not simply apply the letter of the law in an unfair way.

The issue at stake here relates to the payment for electricity produced by those people in the community who have solar panels on their roofs producing electricity and feeding it back into the grid. The effect of not getting this law quite right when we debated it earlier this year has been a windfall profit for the big electricity retailers, a profit that I estimate at about $350,000 each year. That is money that I say belongs in the pockets of those citizens who have done the right thing by the climate and put solar panels on their roofs; it does not belong in the pockets of the big end of town.

To explain this loophole and why it needs to be fixed, I need to go back to the situation as it occurred on 1 July when the feed-in tariff scheme commenced. Before that date, energy retailers were happy to pay for the electricity they received from households exporting power to the grid from their domestic solar panels, and they were happy to pay for that electricity at what I call a one-for-one rate. In other words, they paid you for your electricity what you paid them to buy their electricity—a one-for-one rate.

The retailers recognised that the electricity produced from these solar panels had a value, and they recognised that it would offset them (the retailers) from having to enter the market to purchase that electricity elsewhere. The electricity that comes from these solar panels is green electricity and, fortunately, most of it is produced during peak periods; that is, mid to late afternoon, in particular, on hot summer days. When the solar feed-in laws that we passed earlier this year came into effect on 1 July, a 44¢ premium began to be paid. It is important to note that this 44¢ is not paid by the electricity retailers. It is not paid by AGL, it is not paid by Origin; it is actually paid for by all South Australian electricity consumers—effectively, all taxpayers, because an overwhelming number of us who pay taxes are also electricity customers. So the cost of that 44¢ premium is spread throughout the community.

The thinking was that this was a premium, in other words, that this was on top of the payment for the electricity; it was an extra payment, not a substitute payment. When we as a parliament debated this bill, and supported the government's position—which was to ask all taxpayers and other electricity consumers to contribute to this 44¢—we saw it as a subsidy, if you like, or an extra bonus on top of the value of the electricity that was produced.

Some retailers chose to recognise that this was effectively a taxpayer-funded premium and continued to pay for the electricity they received from the solar panels; they continued to pay between 16 and 20¢ per kilowatt hour. They were happy to pay that amount; they were paying it before 1 July and they continued to pay it after 1 July, and they paid it in addition to the 44¢ that was the legislated premium that they were required to pass on—that amount having been collected from other customers. Customers of those companies began receiving about 60¢ per kilowatt hour for the excess electricity that they were producing and exporting to the grid. One company, TRUenergy, for example, paid 20¢ a kilowatt hour on top of the 44¢, so its customers were getting 64¢ per kilowatt hour for every excess unit of electricity they produced.

Other retailers—and the big ones I particularly have in mind are Origin and AGL—chose to use the introduction of this feed-in scheme to make a massive windfall profit, and stopped paying for the electricity that they were receiving. Those companies were hoping that the solar panel owners, the small generators, would be happy enough receiving the 44¢ and would not notice, or would not mind, that they were no longer being paid for the electricity that they actually produced. As I have said, I estimate that, with the number of panels on the roofs of homes and small businesses in South Australia, the windfall profit to these companies is in the order of $350,000. So, we are not talking about small change; it is a considerable amount of money.

In a ministerial statement on 19 June this year, the Premier stated that by the end of 2007 more than 2 million kilowatt hours of electricity was being returned to the grid every year from these solar panels. By February 2008 I think that figure was probably closer to 2.2 million kilowatt hours. The amount is increasing rapidly and will be much higher in three to five years. If we do the sums and take that figure of 2.2 million kilowatt hours and value the electricity at 16¢ per kilowatt hour (which is at the lower end of the scale, and lower than TRUenergy is paying), we arrive at the figure of $352,000. That is money that should be going into the pockets of householders who have done the right thing by installing solar panels on their roof; it should not be going into the coffers of the big electricity retailers.

Since raising this issue a number of months ago I have been inundated with complaints from angry customers of both AGL and Origin who quite rightly feel that they are being ripped off. They feel that they have done the right thing by society, by the climate and by the planet in putting these relatively expensive solar panels on their roof, yet their retailers are refusing to pay them for that power. So, I commenced an online petition on this issue and I have already collected 200 signatures. Given that the number of people who have solar panels on their roof is a relatively small proportion of the population, to get 200 signatures of people who are upset about being ripped off I think is a considerable number.

I should also tell the council that I have raised this matter with the Essential Services Commission (ESCOSA) which, as members would know, is the body which is responsible for looking at the price of essential services including energy. The Essential Services Commission, I think quite rightly, points out that retailers had no regulatory obligation to pay for the electricity that they take from these solar panels prior to 1 July, yet all of the companies chose to do the right thing and to pay for that electricity. However, there was no legal obligation on them to do that.

ESCOSA also points out that it has no role to be able to force electricity retailers to make these payments. It acknowledges that there is a financial benefit to the retailer in taking the electricity but not paying for it, but it was not able to specify exactly how much that benefit was. ESCOSA also pointed out to me that it understood that retailers were reviewing their decision to stop paying for this electricity. However, in the several months that I have been talking about this in the community, we have not yet seen much movement from the big retailers. So, in the absence of their reviewing their decision and doing the right thing, I think it is beholden on us as legislators to make them do the right thing. Clearly, the law is flawed and that is the loophole that I am seeking to plug.

The mechanics of the bill that I have introduced set out that the price that has to be paid to small generators—that is, these people with solar panels—should be made up of two components. The first component is that the retailer should purchase the electricity, and the second component is for the 44¢ legislated premium. The first payment (the payment for the electricity) that the householder or small business owner exports to the grid should be paid for by the electricity retailer. The 44¢ (the second component) is paid for by all electricity consumers.

The question that then arises is: what is a fair and reasonable price to require the retailers to pay to householders for the electricity that is produced? This question has been considered elsewhere. It was considered in Victoria by the Essential Services Commission of Victoria, which is that state's equivalent of our ESCOSA, and it has worked out what a fair and reasonable price is. In August last year the Victorian parliament included a provision in its equivalent of our Electricity Act that retailers had to pay a fair and reasonable price for the electricity that was fed into the grid from small producers. That provision started on 1 January this year.

When there was a dispute about what a fair and reasonable price was, the Essential Services Commission of Victoria was asked to determine what a fair and reasonable price was. It made the following determination, which was guided also by their relevant department of primary industries, which also provided guidance on the subject in March this year:

An offer must specify that the retailer will pay or credit the customer for electricity supplied by the customer under a feed-in contract at a rate not less than the rate the customer pays to buy electricity from the retailer.

In other words, it specified a one-for-one arrangement: you pay them and they pay you the same price for the electricity. That is exactly the arrangement that existed before 1 July with both AGL and Origin. They were happy to pay that amount.

The Victorian government has recently released details of its new premium feed-in scheme, extending what is already in place in that state. Under that scheme, householders will be paid 60¢ a kilowatt hour under a net metering regime. Net metering is the system we use here in South Australia as well. Members will note that 60¢ is virtually identical to the proposal that I am putting forward now, which is 44¢ plus a payment for the electricity of approximately 16¢. This would bring us into line with what the Victorians have legislated to pay their small producers.

The Australian Capital Territory recently passed legislation implementing a 50¢ per kilowatt hour rate; however, they have used a gross metering method rather than net metering. That means that the financial return for households in the ACT will be much greater and, therefore, the payback period for their solar panels will be much shorter.

What my bill is doing is reflecting what is happening in other jurisdictions. I think it was great that South Australia was the first state to institute a feed-in scheme, but since then other states have moved on and overtaken us. We need to acknowledge that we did not get it quite right, that there is a loophole and that that loophole is being exploited.

At the time we debated the feed-in bill, I was critical of the fact that it was a net metering scheme rather than a gross metering scheme. That is still my position, but we will work with the scheme that we have. I would make the point that it is a less generous scheme and, therefore, we need to provide every fair and reasonable incentive to the owners of these panels to help them pay back the capital cost.

Currently, AGL and Origin are getting a free ride. They are expecting ordinary South Australian taxpayers to pay a feed-in premium, without paying any money themselves for the electricity that they then on-sell to other customers. I do not think that is fair. I think they should be obliged to pay at least something for the electricity they are receiving. If it is good enough for them to pay for the electricity they receive from a large coal-fired power station—Starfish Hill or from some other large generator—then it should be good enough for them to pay for the electricity they receive from households and small business electricity generators.

The only question is: how much? I have gone for a very conservative model, and that is the one-for-one model. I should say that I have excluded from that model any of the fixed charges, so it does not take into account the supply charge to the house: it is purely the unit cost of electricity.

I think the electricity retailers know what they should be doing. I think they have misjudged the mood of their customers. They have misjudged the anger that is out there in the community. They felt that people would be happy enough with 44¢ and that they (the retailers) could get that electricity for free. I congratulate TRUenergy for doing the right thing, and through this bill will be requiring other retailers to do the right thing as well.

I think we do have a responsibility to fix up this law and to get it right. We need to provide proper incentives to our small businesses, community groups, churches and households that we said, in this place at the start of this year, should be able to benefit from the scheme. They should get all the money (not just two-thirds of it) to which they are entitled for having invested in these panels.

I certainly did not vote for a feed-in scheme that would allow energy retailers to pocket hundreds of thousands of dollars a year, at the same time that they were expecting the mums and dads and taxpayers to pay more on their electricity bills to subsidise the panels in the community. I did not vote for a scheme that required taxpayers to pay extra to help drive the uptake of solar technology, while some companies take the opportunity to make a windfall profit by no longer paying a cent for the electricity they receive from these small generators.

I think that most members here would be somewhat surprised to see how events have turned out. I do not think anyone here would have expected that we were voting for windfall profits for large companies when we supported the solar feed-in laws at the start of this year.

What I did vote for, and what I think many of us here voted for at the start of the year, was that we wanted all South Australians to help pay for greenhouse benefits and for reducing our state's greenhouse footprint. That includes requiring our energy companies to pay their fair share as well. I say that the free ride for these companies must come to an end, and I would urge all honourable members to support this bill.

Debate adjourned on motion of Hon. J. Gazzola.

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