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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2009-05-13 Daily Xml
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ELECTRICITY (COMPENSATION FOR BLACKOUTS) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 4 March 2009. Page 1504.)

The Hon. D.W. RIDGWAY (Leader of the Opposition) (20:00): I rise on behalf of the opposition to speak on the Hon. John Darley's Electricity (Compensation for Blackouts) Amendment Bill. I should also apologise to the Hon. John Darley because, a fortnight ago, he asked us to speak on this bill and we were not ready as we had not consulted our party room. Now, I should apologise again because we are in transition between shadow ministers although we are prepared to vote on the second reading tonight. First, however, I will make a few comments in relation to the bill.

This bill is in response to the 2006 power outages and also recent outages during the summer period. I note that the bill was originally introduced by the Hon. Nick Xenophon but has altered somewhat since then and was in response to an ESCOSA report on the 2006 outages. ESCOSA has released a similar report following the 2009 experience and, in light of this, it was appropriate for me to consult further with ESCOSA and ETSA on these proposed changes. ETSA and ESCOSA have made a number of points that I will put on the record during this small contribution.

In his explanation, the Hon. John Darley refers to the Electricity Distribution Code as a regulator of behaviour of electricity suppliers. I note that the first part of the bill seeks to make it compulsory for that code to contain a provision requiring that the electricity entity pay compensation in particular circumstances. The current electricity code already has that provision. Clause 5.3(d) of that document sets out the threshold and payment amounts for the various frequencies of interruptions and their durations.

The contract states that the provider will 'do its best' to minimise the frequency and duration of interruptions and will make payments where applicable. I make the point that payments made under this clause are contractual obligations and, as such, the use of the word 'compensation' in the bill is probably not really appropriate. Nevertheless, the bill sets out a new schedule to replace the current one in clause 5.3.

By September 2006, payments arising from the summer heatwave of 2006 totalled about $535,360 to over 4,000 South Australian consumers, so it is apparent that there is already a mechanism in place to provide compensation to consumers. ETSA Utilities expects to make a further $600,000 in payments to customers who suffered loss during extended power outages. Those figures can be found in the final report of ESCOSA on the 2006 heatwave.

I know that those payments were to people who had lost power for over 12 hours. If we consider the Hon. Mr Darley's proposal of having a $150 payment for a three hour outage, it is apparent that ETSA's payments would have to be considerably more significant. From the opposition's point of view, we are concerned that the bill does not define a 'failure to supply electricity' and, to use the example of load shedding, which is unrelated to the performance of ETSA, such issues as this, along with any other non ETSA-related outages, are not provided for in the bill.

Often long delays are caused by storms where the wind has blown over Stobie poles or trees or debris have landed on the wires which need to be removed and replaced with either new poles or new wires; bushfires that destroy the asset and it takes time before crews are allowed to get back into those areas; floods where ETSA cannot gain access; situations where cars and trucks or other vehicles have crashed into a pole requiring that it be replaced and access is restricted while investigations are undertaken by police, particularly in the case of fatalities or major crashes; or where a transformer has failed and the operation to replace it is time-consuming because of the complex and difficult nature of the work.

This proposal seems to assume that it is a deliberate act by the distributor to delay restoration where it is a difficult, complex and dangerous task which inevitably takes time. To suggest that such a penalty should commence after three hours is not at all sympathetic to the supplier or its capacity to rectify the situation in a more timely manner. ETSA's prices are regulated by a framework which is quickly moving to a national level. The scheme is to continue under new regulatory arrangements with the Australian Energy Regulator, but the payment amounts are to increase by about 10 per cent.

When new regulatory obligations such as this arise, ETSA is entitled to ask what the cost will be. We must consider that, if this legislation is to be passed, ETSA would immediately seek a pass-through of the projected costs, and prices would rise in order to cover the cost of this scheme.

The 2006 report stated that it may be technically possible to design a network that continues to operate without failures no matter what the level of demand for electricity might be from time to time. Building, operating and maintaining such a network would, however, be extremely costly and would require customers to pay much higher prices than they pay now if such a standard of network was required.

The GSL scheme currently in place in South Australia is the toughest in Australia in terms of eligible events and their relative payments. The penalties proposed in this bill seem to bear little relationship to the costs involved, and transfer the responsibility to the distributor rather than retaining some individual responsibility to manage one's own situation.

In my experience of running a small business in the South-East where we often had power outages because of bushfire and for other reasons, it was frustrating and concerning. Certainly from an irrigation point of view, we have crops and produce at risk from irrigation, cool rooms and refrigeration. It is certainly an issue and, fortunately, most of us manage to get around that by having some auxiliary generation capacity.

The opposition has a little sympathy with what the Hon. John Darley is proposing but, bearing in mind the comments I have made and the consultation that we have undertaken so far, it is unlikely that we will support the bill at the third reading. However, we are happy to support it at the second reading stage.

The Hon. CARMEL ZOLLO (20:06): As with Mr Xenophon's similar bill in 2006, the government opposes the bill for the following reasons. The government established the Essential Services Commission of South Australia (ESCOSA) as a strong regulator with a primary objective to protect the long-term interests of South Australian consumers with respect to price, quality and reliability of essential services.

ESCOSA undertook a comprehensive analysis to determine ETSA's current service standards framework, which includes the following components: average network reliability standards to be applied to different geographical regions of the network; a service incentive scheme which provides ETSA with a financial incentive to improve reliability and customer service aspects over time; and a guaranteed service level (GSL) scheme, which requires ETSA to compensate customers who have received service that is worse than a predetermined guaranteed level.

Following the heatwave interruptions of 2006, ESCOSA amended the GSL scheme to provide a payment of $320 for customers who experience a supply interruption with a duration in excess of 24 hours. ESCOSA concluded that this additional level of payment provides an appropriate level of compensation for customers experiencing the most serious of supply interruptions and strengthens the current service standard framework.

From 2010, the Australian Energy Regulator (AER) will be responsible for the economic regulation of ETSA, including the national service standards framework. This will involve a service target performance incentive scheme which includes reliability, quality of supply and customer service elements. The national service standards framework will recognise ESCOSA's GSL scheme. ESCOSA has recently determined that the GSL levels to apply from 2010 will be retained while the payment will be indexed for CPI.

The government considers the costs resulting from the bill to be excessive, as the maximum compensation payment level is approximately equal to the average annual electricity cost for a household. The much higher compensation costs envisaged by the bill would be likely to be passed on to all customers—to their detriment—through the regulated network charges in accordance with the pass-through provisions to be included in the Australian Energy Regulator 2010-15 Electricity Distribution Price Determination. The Hon. David Ridgway has already mentioned that particular aspect of this bill.

Due to the distances and radial nature of much of the network, particularly in rural and remote areas, outages longer than three hours' duration are unavoidable. The average service standards under the Electricity Distribution Code vary with regional locations, but in some areas performance within the average standards would incur a penalty under the bill.

Further, it is expected that some outages acceptable under the service target performance incentive scheme could also incur penalties under the bill. The government considers that the current GSL scheme provides an adequate allowance for customers who receive very poor service, while maintaining a manageable cost framework for customers more generally.

It was reported recently in the media, and honourable members may be aware, that in a new report, entitled 'Performance of ETSA Utilities during the heatwave of January 2009', an information paper dated April 2009, the state's energy regulator, the Essential Services Commission of South Australia, found that ETSA had improved its performance since January 2006 in managing the impact of extreme heatwaves.

ETSA chief executive, Lew Owens, is reported to have said that this year's heatwave lasted longer and was more intense than the heatwave three years ago—and I think we would all agree with that. He went on to say that, whilst ETSA was pleased with the results of the review, it would continue to look for ways to improve its performance during such events. It was also reported that ETSA paid out more than $110,000 (about 800 payments) to people living in the Riverland following an intense thunderstorm which hit the area in mid-November.

In this latest ESCOSA performance report, the commission comes to several conclusions, and I think it is worth while placing them on the record. The first is:

The commission concludes that ETSA Utilities' distribution network and call centre performed satisfactorily during the January 2009 heatwave. While extreme electricity demands during prolonged high temperatures led to a significant number of both HV and LV outages and consequent demand on the call centre, timeliness by ETSA Utilities in responding to customer queries and restoring supply after LV interruptions was better than during the January 2006 heatwave, which is considered to have been a less severe weather event.

The other conclusion I would like to place on the record is:

The commission concludes that, based on restoration times following LV network interruptions as well as call centre responsiveness, ETSA Utilities has improved its performance in managing the impacts of extreme heatwaves since January 2006. This is attributed to improved pre-summer planning and preparation, and to better resourcing and overall management of the response following the onset of the heatwave.

However, it is essential that heatwave preparatory measures and response procedures be kept up-to-date, and that they incorporate experiences of past heatwaves. This is particularly important given the possibility of an increased frequency of severe heatwaves such as that experienced in January 2009.

In short, while it is always important to be prepared and learn from past experiences, the report is generally positive on ETSA's performance, and it is one with which the government would agree. As would be expected, the report is on ESCOSA's website, and further information can be obtained from there on the incident response times and comparisons.

In conclusion, it is worth noting that, pursuant to Part B, Section 6.2 of the Electricity Distribution Code issued by ESCOSA, ETSA Utilities, in the event that it is negligent, is liable for any losses incurred, including physical loss, consequential loss and loss of profits due to problems in the quality of supply electricity (such as power surges and drops) and interruptions to or failures of supply of electricity to the supply address. For the reasons I have outlined, the government will not support this legislation.

The Hon. J.A. DARLEY (20:15): I thank honourable members for their contribution. I reiterate that this bill is about providing just compensation to people for the inconvenience of power blackouts, and to at least provide enough compensation for them to replace food and other items that may have gone bad, as well as to compensate them for the inconvenience. I commend the bill to the council.

Bill read a second time.

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