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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-06-29 Daily Xml
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STATUTES AMENDMENT (ELECTRICITY AND GAS—PRICE DETERMINATION PERIODS) BILL

Second Reading

Second reading.

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management) (18:08): 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 Australian Energy Market Commission (AEMC) in its review of the South Australian energy market has indicated concern with the level of flexibility in existing energy price control frameworks.

The South Australian Government has no intention to remove energy price control mechanisms at this time, but has been prepared to examine ways of making the existing framework better.

The Essential Services Commission of South Australia (ESCOSA) has advised that while there is a degree of flexibility within the current regime, greater flexibility would be achieved if provisions in both the Electricity and Gas Acts allowed for a variation of an existing price determination in cases where special circumstances exist, without the need for a new three year determination to be made.

ESCOSA considers that special circumstances are generally events of a magnitude to disturb the fundamental basis of an existing Price Determination so much as to require a new determination to be made. So, if an unexpected event occurs which can be shown to have a material impact on the credibility of the existing price path determination, a review would be initiated pursuant to the 'special circumstances' provisions of the Acts to confirm or deny the existence of special circumstances. If the event was unable to be predicted, planned or reasonably insured against, then 'special circumstances' exist.

The current provisions allow a new price determination be made before the expiry of the preceding determination in cases where ESCOSA has determined that special circumstances exist. Under the current arrangements, any flexibility, however is lost due to the requirement that the new determination itself will need to be made for at least three years.

While this current provision is suitable if the existing price determination was nearing its completion, it would be more cost efficient and timely to make an adjustment to an existing price determination within its own life without the need to make a new determination of at least three years.

The Bill provides ESCOSA with the ability to determine whether making a new three year price determination or making an intra-period variation to the existing determination was the more efficient approach following the confirmation of the existence of special circumstances. This may depend on the timing of the pass-through proposal in relation to the age of the existing price determination. The Bill amendments provide the opportunity to deal with special circumstances in a more timely and less costly manner.

The practical effect of this amendment would be that if a significant change in input costs arose following the commencement of a three-year price path, then that existing price determination could be varied by a subsequent variation to the price determination.

Alternatively, if a significant change in input costs (i.e. special circumstances) arose towards the end of a three year path, ESCOSA could use its discretion and decide that making a new price determination at this time would be less onerous than revising the existing price determination and making a new one in the near future. This is already allowed under section 36AA(4a)(d)(i) of the Electricity Act 1996 and section 34A(4a)(d)(i) of the Gas Act 1997.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Amendment provisions

These clauses are formal.

Part 2—Amendment of Electricity Act 1996

3—Amendment of section 36AA—Provision for standing contract with small customers

This clause relates to the Electricity Act 1996 and will allow the Essential Services Commission, in special circumstances, to make a determination that has the effect of varying an existing standing contract price determination for the balance of the term of the existing determination.

Part 3—Amendment of Gas Act 1997

4—Amendment of section 34A—Standing contracts

This clause relates to the Gas Act 1997 and has a comparable effect to the amendment set out in clause 3.

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

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