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Legislative Council - Fifty-Second Parliament, First Session (52-1)
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NATIONAL ENERGY RETAIL LAW (SOUTH AUSTRALIA) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 22 February 2011.)

The Hon. R.I. LUCAS (15:29): I rise to support the second reading of the National Energy Retail Law (South Australia) Bill and, in doing so, indicate that I will also canvass Orders of the Day: Government Business No. 4, which is the statutes amendment bill which is related, and treat both bills as part of a cognate debate. This is the latest (I have lost count of the number) of the tranches of national energy-related law, originally national electricity law, and in recent times changes that the state parliaments have looked at in relation to national gas law, and of course we now have national energy retail law, which is applying to both energy and gas.

I do not intend to trace the long history of the changes that we have seen, but I do want to make two or three comments on the historical perspective of the whole debate that has ensued over almost 20 years. If we go back to 1993-94, the then federal Labor government and the then state Labor government first entered into the original agreements for the national electricity grid, which was to link the electricity systems of South Australia with the Eastern States. So we have seen almost 20 years now of movement and progress towards national energy law, originally started by a federal Labor government and a federal Liberal government.

To be fair, soon after 1993-94, there were significant changes in the political landscape and most governments around the nation, including the federal government, soon afterwards became federal Liberal governments and state Liberal governments, and the early stages in relation to progressing the national electricity framework—the national electricity grid—occurred at a time when there was a state Liberal government in South Australia, (from 1993 through to 2002), and for a good part of that time there was also a federal Liberal government as well.

By and large, the Liberal governments followed on with the original agreements established firstly by the Labor governments. Of course, in latter days, there has been convenient amnesia for some state and federal Labor politicians. The current Minister for Energy is one of those, on occasions when it suits him, to in essence say that all of these problems were problems engendered by the Liberals, as he terms it, conveniently forgetting that the original decisions were taken by federal and state Labor governments, certainly supported at the time by federal Liberal opposition when these debates were being conducted.

So by and large, this national energy framework, or electricity framework, has been supported by both Labor and Liberal parties nationally, contrary to some of the statements in recent times by some Labor representatives. The major change that people will recall here, of course, was the decision taken by the former Liberal government to long-term lease, or privatise, the electricity assets in South Australia. At that time, we were being told that the New South Wales electricity assets were worth about $25 billion to $30 billion.

As you well know, significant forces within the New South Wales Labor governments over the years have wanted to privatise their electricity assets. Without tracing the long history of the debacle of New South Wales politics and the privatisation of electricity assets, suffice it to say that, from those heady days when they talked of values of $25 billion $30 billion, it looks like the gross proceeds from the recent decisions taken on electricity by the current New South Wales Labor government might be of the order of $5 billion, or a bit more than that if they were able to sell one or two of the other assets, which is now not going to happen because of the election.

Evidently, there is considerable evidence that, in net terms, the proceeds are significantly less than that—possibly even less than half that—and a long way short of the days when the assets were being valued at $25 billion to $30 billion. These were decisions, to be fair, that former significant entities within the New South Wales Labor government understood. Former treasurers and former premiers of the New South Wales Labor government fought hard, but just as it is the SDA in South Australia that controls the Labor government, there are equivalent unions in New South Wales that control the Labor government there, and the government of the day was defeated on a number of occasions and was unable to proceed.

Ultimately, and inevitably, democracy has meant that $25 billion to $30 billion worth of assets have gone for less than, in net terms, probably $2 billion to $3 billion. To be fair, the assets that have been sold are not all the assets; they are not the distribution and transmission assets, as I understand it. It is essentially generation and retail, so it is not really an apple-to-apple comparison. Nevertheless, it is significantly less; whatever that component of the $25 billion to $30 billion valuation originally was that related to generation and retail, significantly less than that has been recouped through the recent decisions that have been taken.

I think that is the first issue: that, as many said back 10 or 12 years ago, this framework that we are talking about, the National Energy Framework, will inevitably lead to private sector operation of the major assets within the National Energy Framework. It was a former Labor government in South Australia that privatised or sold the South Australian Gas Company. It is interesting the difficulty that I have had in getting the cabinet documents that relate to that decision. For some reason, gas was seen to be okay for privatisation by the state Labor government, but for some reason electricity was not seen to be okay for privatisation by the state Labor Party here in South Australia.

We have seen a recognition, even in Queensland, by the Labor government there, as we have progressed now down almost 20 years of the National Energy Framework, that ultimately the capacity for governments and the public sector to manage and operate within this system is too great a risk for the taxpayers of the various states. Inevitably, as these debates continue over the coming years and decades, those members who are here long enough to participate in future debates I suspect will ultimately see private sector operation of virtually all of the significant operators within the national energy industry, and that will be irrespective of whether there are Labor or Liberal governments in the state jurisdictions.

On another occasion perhaps I will go through some of the detailed arguments of the time and what has occurred since then, but I just wanted to briefly refer to one. The big issue was in relation to energy prices. Of course, much was made during the debates of 10 years or so ago of the potential impact of privatisation on energy prices in South Australia. I want to refer to a couple of recent reports from ESCOSA in South Australia. The first one was the 2007-08 annual performance report from the energy retail market. I quote from page 33 of that report from ESCOSA:

This data indicates that, since 2003-04, average real electricity prices (calculated as total annual revenue divided by total annual consumption) for residential customers have decreased by 10.1 per cent, with small business electricity prices decreasing by 11.4 per cent. Over the same period, large business has experienced an average price decrease of about 7 per cent.

So that was in the first four to five years after the privatisation. The independent regulator in South Australia was reporting—although the report does not say this—that there was an increase in the first year as the system settled down in terms of electricity prices but that average real electricity prices had decreased by 10.1 per cent for residential customers and by 11.4 per cent for small business prices in that five years in South Australia.

The more recent report 2009-10, the Annual Performance Report of the South Australian Energy Supply Industry uses a slightly different measurement, but nevertheless it gives an indication:

Regulated electricity standing contract prices for residential customers with an annual consumption of 5,000 kilowatt hours increased by 4.4 per cent during 2009-10 based on the continuous load, (i.e., no off-peak load tariff). Since 2003-04, the annual standing contract bill for this level of consumption has declined by 4.9 per cent in real terms.

There is a figure and a table underneath in that report which indicate that. Then further on at page 5, the report states:

Significant discounts against the standing contract price are available to residential electricity...customers albeit at levels that are lower than those applying in previous years. Discounts of up to 10 per cent are available for residential electricity customers...

That is the independent umpire indicating what has occurred in relation to electricity prices in South Australia in the period since the privatisation of our electricity assets.

Of course, some of the decisions that have been taken in the last few years by Labor governments, both state and federal, are having a very significant impact on increasing electricity prices, and I will refer to some of those quickly in my contribution today in relation to decisions that have been taken in relation to renewables and certainly the foreshadowing of a great big new tax by the federal Labor government on the electricity industry, which will see a massive increase in electricity prices for residential customers over the coming years as well.

I just wanted to contrast those sorts of energy prices that have been recorded with the other major utility that is provided in South Australia that is also essential for all consumers, and that is water. Water of course has remained under government control in terms of pricing. It is a decision that up until now has been taken by governments and politicians, both Liberal and Labor.

In almost a decade of the Labor government rather than seeing declines in electricity prices in the privatised electricity industry we have seen already almost a 100 per cent increase in the price of water under the government monopoly system that exists in South Australia and, because of decisions taken by the state Labor government in relation to doubling the size of what was required for a desal plant, we are likely to see another doubling again of water prices.

So, this lovely notion that some within the Labor Party and the Greens and elsewhere still cling to—that the public interest and benefit is protected by politicians and governments—I would love to see addressed by the Labor Party and the Greens and others and contrasted. As I said, we have seen a doubling of water prices, and there will be another doubling again with what we have seen up until recent times in relation to the operations of the electricity industry.

I am the first to acknowledge that there are significant issues in all of the industries, including the electricity industry, not all of the state and federal governments' making, but nevertheless decisions that they have taken and continue to take will impact on that industry, as they have impacted in relation to the water supply industry as well.

In the very many documents that are available to those who follow the national energy market, there is the annual statement of opportunities. Those members who are interested ought to have a look at that because it is flagging that we are going to run out of electricity supply and it indicates when it is forecast that we will run out. In New South Wales it is 2013-14, and in South Australia 2015-16. I will not go through all the details of that, but what it says is, 'Hey, someone actually needs to build more baseload plant in South Australia and elsewhere.'

We have a government in South Australia that proudly boasts that we have these new wind farms, but it cannot point to the last significant increment to baseload power here in South Australia. The last decision taken was by the former Liberal government in ensuring that Pelican Point was built (I might say, with the opposition of the state Labor Party). If it had not been for that there would not have been a new plant in South Australia in terms of baseload electricity supply.

Some government—it certainly will not be this one—has to start thinking long-term in terms of electricity supply. The Premier and minister run around patting themselves on the back saying, 'Hey, aren't we great, because we've got all this wind energy', but let us just quickly refer to that. We are told that a capacity of 1,173 megawatts of wind generation has been licensed in South Australia and that by the end of 2010 licensed capacity was likely to be as high as 1,300 megawatts. The problem is that when we need our power, on the peak days, wind power cannot help us.

I refer to some recent articles. One appeared in The Australian on 7 February this year, and indicated that, on the recent day we broke the peak demand record—in February at 4.30 in the afternoon—when our demand was 3,399 megawatts, only 49 megawatts of that could be met by wind. Less than 1 per cent of our electricity demand, because of air conditioners and other power requirements on that day, could be supplied by wind power. Supposedly we have 1,300 megawatts of wind power there—which the Premier proudly boasts about—but on the day it is actually needed it cannot supply it; it can supply only 49 megawatts.

On 31 December another article—I think it was in the Sunday Mail—stated, 'Wind power should not be relied on to guarantee electricity supply during hot days,' but I guess that is when you want your electricity supply, on a hot day. The article went on:

Wind turbines operate at less than three per cent of their total generation in hot weather because limits to prevent overheating and a lack of wind can stifle their output when temperatures soar past 35C. The State Government and the Australian Energy Market Operator yesterday revealed there would be enough electricity in SA…to meet demand [for that particular day]—

It went on:

'The reduction in wind generation during peak periods, or at the hottest times of the day, is partially attributed to limits placed on some turbines at high temperatures to prevent overheating,' an AEMO spokeswoman said. 'During the top 10 per cent of summer peak demand periods, approximately three per cent of total wind generation-installed capacity contributed to demand.'

Energy Users Association of Australia executive director Roman Domanski said wind power was intermittent and difficult to rely on and other power sources must be built to provide householders and businesses with guaranteed summer supplies. 'Wind does not work on hot days and there's been incidents,' he said. 'That obviously means we're going to have to build more generation.'

I think that is a salutary warning to those who are prepared to look beyond the spin of the current Premier and current Minister for Energy. The proud boast of having 1,300 megawatts of wind capacity available does not help us when we actually need it, on the hot days. There is a lot more in relation to that, but perhaps another occasion will allow us to explore some of those issues in greater detail.

The tranche of legislation that we have before us today was signed off by the Ministerial Council on Energy at the now infamous ministerial council meeting in Melbourne on 11 June 2010. Why is that infamous? Well, it is infamous because in The Australian, under the heading 'Minister has energy to dine but skips meeting', Michael Owen reported:

Senior Rann government minister Pat Conlon is under fire for travelling interstate for an energy ministers' conference where he dined with Martin Ferguson but skipped the actual meeting the following day. Every other...minister who travelled to Melbourne for the meeting attended the meeting.

This was the meeting where we signed off on this tranche of legislation that we are about to discuss over the coming weeks. The quite detailed discussions in the National Energy Customer Framework, attachment A, were part of the communiqué that came out of the meeting minister Conlon went across to attend but for some reason, which we will now explore, was unable to attend. The article by Mr Owen states, 'It is understood Mr Conlon was out late after the dinner with other guests. A spokesman', this is a spokesman for Mr Conlon, 'yesterday would only say that he was "struggling to see what relevance there is whether the minister did or didn't go out for a drink after dinner"'.

The Hon. P. HOLLOWAY: Mr President, point of order: I am struggling to understand the relevance of what might have happened at this thing to this legislation. It obviously has nothing to do with it.

The Hon. R.I. LUCAS: If you listen you will learn about it.

The PRESIDENT: Order! The Hon. Mr Lucas should stick to—

The Hon. R.I. LUCAS: Indeed, I am.

The PRESIDENT: —the energy.

The Hon. R.I. LUCAS: Indeed. This was actually the meeting where this legislation was being approved. Mr Owen then says 'although there was no suggestion by The Australian that Mr Conlon had been drinking'. For some reason, Mr Owen was asking questions of Mr Conlon's office and the answer came back saying that they did not know what the relevance was as to whether or not minister Conlon had been drinking.

The PRESIDENT: I am not too sure of the relevance of you raising it either.

The Hon. R.I. LUCAS: The relevance is that minister Conlon, at taxpayers' expense, went across to discuss this communiqué and he drank too much and ate too much so that he could not go to the meeting the next day.

The PRESIDENT: Order!

The Hon. R.I. LUCAS: As one observer said, 'He was as drunk as a skunk.'

The PRESIDENT: Order!

The Hon. R.I. LUCAS: Another one has said—

The PRESIDENT: Hearsay.

The Hon. R.I. LUCAS: —in relation to that, 'He was tired and emotional.'

The PRESIDENT: Order!

The Hon. P. HOLLOWAY: Point of order: under standing orders, if allegations are made against any member of the other house, they have to be done as a definitive motion, and I would suggest those allegations are completely out of order.

The PRESIDENT: It is totally hearsay. The Hon. Mr Lucas is being mischievous. He should stick to the bill.

The Hon. R.I. LUCAS: What we need to know, and the question I put to the minister—

The PRESIDENT: I am sure the Hon. Mr Lucas would not like it if somebody else stood up here and accused him of being rolling drunk somewhere—

The Hon. R.I. LUCAS: I have been, Mr President.

The PRESIDENT: —in some discussions—

The Hon. R.I. LUCAS: Some of your Labor friends say that I have psychiatric problems and—

The PRESIDENT: —when he sold South Australia's power.

The Hon. R.I. LUCAS: —that I have left my wife. All sorts of things have been said about me, Mr President. The question I am putting to the minister handling the bill in relation to this house is: what input did we have at this meeting, where these decisions were being taken, when a minister who was meant to be there representing our interests was too hung over to actually attend the meeting? So, the communiqué came out on this national customer framework, which is what this whole legislation is about, and we did not have a minister attend the meeting. He went to the dinner beforehand; taxpayers paid for him to go to Melbourne.

I was a minister for eight or nine years and I cannot ever recall, at any of those ministerial council meetings that I attended, that a state minister who went there and went to the dinner the night before, and who was meant to go to the meeting the next day, then stayed in his hotel room unable to attend the meeting. There have been ministers who have been able to get to a dinner and had to fly out the first thing the next morning, and one can understand that sort of thing, but that was not the case with minister Conlon. While these critical negotiations were going on, he was in his room sleeping it off.

The PRESIDENT: That is totally hearsay. If the honourable minister was in his room, he could have had food poisoning.

The Hon. R.I. LUCAS: That is just unacceptable to the taxpayers of South Australia.

The PRESIDENT: He could have had food poisoning; he could have been sick.

The Hon. R.I. LUCAS: We are sending him across there to represent our interests. We expect him to at least attend the ministerial council meeting. If the taxpayers are paying for you to go to a ministerial council meeting you do not get to just go to the dinner, drink the good stuff, eat the good stuff and then sleep it off the next morning in your hotel room while everyone else is working at the ministerial council meeting. You send off the poor old public servants to the meeting to have to represent the state, and the poor public servants are sitting there saying, 'Well, where's the minister? What are we meant to be doing here?'

The PRESIDENT: The Hon. Mr Lucas should get out of the gutter and get back to the bill.

The Hon. R.I. LUCAS: It is outrageous. It is unacceptable, for something as critical as the legislation before us, that the minister was not even there to negotiate on our behalf the critical issues that relate to the national customer framework. Mr President, I am sure, if you took off your partisan hat privately afterwards, even you would be appalled at that sort of behaviour by a minister of the crown, Liberal or Labor.

What we are seeing here is this package of legislation, which is of a template nature, and it will obviously require some detailed discussion during the committee stage of the bill. The minister (or his hard-working public servants) has indicated in the second reading explanation that we are to see another piece of legislation which will be state specific. There are a whole range of questions of a general nature that I want to ask the minister during the committee stage, and they include: what are the state-specific issues that are going to be included in the following pieces of legislation that this parliament has to consider?

For example, we have some amendments from the Hon. Mr Parnell in relation to some submissions from SACOSS. Once we hear from the minister as to what is in the state-specific legislation, it may well be that it is more appropriate for this chamber to consider amendments like the Hon. Mr Parnell's in the state-specific legislation. That is, we have the debate as to whether or not there should be further restrictions or further guidelines in relation to late payment of energy bills or cutting off electricity supply during a heatwave. It may well be that that sort of debate can be removed from the template bill, which is meant to be the template for all the other states, and when the state-specific stuff comes along we can discuss it.

I am guessing that the state-specific stuff will be—for example, the state minister, contrary to the national guidelines, has been saying, 'Well, look, even though we have had a review which says there is plenty of competition in South Australia, we are still going to have retail price controls.' As a result of that, I am assuming that is going to continue and that that is not what is going to be resolved in this bill; it will be ultimately resolved in the follow-on state-specific legislation.

We are also going to insist, as I understand it, on our definition of what a small business customer is, that is, 160 megawatt hours as opposed to 100 megawatt hours. That, I suspect, may be another one of the issues that is in the state-specific legislation that is to follow. I think the second reading does refer to one example, the Residential Energy Efficiency Scheme, which is a state-specific issue which is to be further considered.

I am assuming there are a range of other things that the government's advisers would know already will be in the proposed legislation. We would not have the draft of it, I guess, but at least we would know the issues that are going to be included in that state-specific legislation. So, if we could get the answer to that from the minister, it might assist us in the Liberal Party as we address the issues that the Hon. Mr Parnell has raised, which we would obviously need to discuss with energy retailers.

There is a problem there. I had a quick discussion yesterday with someone who represents the distributor, ETSA in South Australia, and there are obviously issues in relation to the proposed amendments for them as well, so there will need to be some consultation. So, it might make more sense to discuss those sorts of amendments and, indeed, anything that we might want to move in the state-specific legislation.

What we can see from this is that there is a national template, but the state-specific stuff indicates that we in South Australia are going to have provisions which relate to our market. In some of the previous legislation there has been this debate that, 'Hey, we're the lead legislator. Here's the national template. It's been agreed with all the other jurisdictions; therefore, we can't change it.' We have been sympathetic to that, both when we were in government and we argued the case, and in opposition when we have argued it, but on this occasion the minister seems to be saying to us, 'Well, here's the template, but we're going to hive off significant issues and powers and restrictions in state-based legislation.'

If that is the case then the argument that nothing can be changed in South Australia because it has all been agreed does not have as much persuasion. The minister might want to say, 'Yes, but we got agreement from the other jurisdictions that we are going to change this or hold onto that', or something along those lines. I can understand that argument, but that is not quite as persuasive as, 'Hey, this is the national legislation. No-one else is changing it and if you change it it's going to mean major problems for everyone else', particularly as we know that we are going to have state-specific legislation and the minister has already indicated that there are certain things which are going to be in that. One of the other areas that I suspect that we and some of the other jurisdictions, but not all, will have are the provisions relating to the state-based ombudsman scheme, which will need to be there.

I advised my colleagues that I would only speak for 32 minutes and 11 seconds today and I always keep my promises to my colleagues. There will be considerable debate during the committee stage in two weeks' time. If we can get some answers back from the minister, in particular on the state-based legislation and what is to be covered, then that, I am sure, will assist, at least in part, a smoother passage through the committee stage of the council.

The Hon. G.E. GAGO (Minister for Regional Development, Minister for Public Sector Management, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises) (16:02): There being no further second reading contributions, I would like to make some concluding remarks and provide some answers to questions made during the second reading stage.

I thank honourable members for their contributions in response to the second reading explanation of the national energy customer framework bills currently before us. These bills establish national consumer protections for electricity and gas supply that harmonise existing state arrangements. South Australia will not experience a decline in current customer protection under the national framework, in fact, it enhances protections for South Australian customers with the introduction of a formalised customer hardship regime which retailers must develop. The regime will assist customers who cannot pay their bills due to hardship.

The hardship regime includes protections for vulnerable customers, including a prohibition on the charging of late payment fees, a ban on requiring a security deposit and a requirement on retailers to allow payment by using Centrepay. Importantly, the bill explicitly requires that retailers not disconnect a hardship customer due to an inability to pay, except as a last resort.

In their second reading contributions, honourable members have raised questions about the extent to which this is truly a national framework. This national framework is the culmination of extensive consultation between participating governments, industry and consumer stakeholders. The national framework reflects agreement on a comprehensive consumer protection package, while recognising the need to accommodate a limited number of local arrangements in agreed areas.

It is important to note that due to the distances involved, Western Australia and the Northern Territory are not physically connected to the national electricity market (NEM) or to the eastern interconnected gas network. They have elected not to implement the national framework at this time. South Australia will not be transitioning immediately to the national framework upon the passage of these bills. In fact, all participating jurisdictions, including Victoria, have agreed to a common target date of 1 July 2012 to commence the framework.

South Australia will introduce its implementing legislation to parliament later this year to apply the national framework and stakeholders will be consulted again during that process on local implementation issues. The national framework is not the appropriate vehicle to deal with state specific amendments.

I would like to address some specific matters raised by the Hon. Mr Parnell. In relation to disconnection during heatwave events, the national framework contains relevant obligations in the National Energy Retail Rules, which are binding on retailers and distributors. The rules have the full force of law and can be enforced by the Australian Energy Regulator (AER).

The national framework recognises that the impact of extreme weather events on consumer requirements cannot be uniformly regulated across all jurisdictions. The national framework therefore allows each jurisdiction to nominate weather events relevant to local conditions when disconnections for non-payment cannot be carried out. South Australia already has a regime to prevent disconnection during a heatwave where a person has not paid their bill. An equivalent obligation will be retained when South Australia adopts the national framework.

In relation to wrongful disconnection payments, the inclusion of a wrongful disconnection regime was not agreed at a national level for a number of reasons. These include the introduction of a customer hardship policy to identify customers experiencing hardship and the availability of a payment plan for all small customers prior to disconnection. It was considered that the national framework adequately addresses the issue of disconnection of customers who lack the capacity to pay their bills, which is the core objective of a wrongful disconnection regime. A wrongful disconnection regime would increase costs to all customers, including hardship customers.

In relation to a general ban on late payment fees, the government does not support this approach as late payment fees are an important tool for retailers to manage the commercial costs of supplying those customers who fail to pay on time. Any increased cost to the retailer should late payment fees be banned would be recovered over time from all customers, including hardship customers.

There is nothing in the national framework that prevents retailers charging a late payment fee, but retailers are prohibited from applying late payment fees to hardship customers. This recognises that late payment fees are not appropriate for vulnerable customers. I note that late payment fees have been in place in South Australia for many years and were formalised, along with the ability for interest to be charged on late payments, in the South Australian Energy Retail Code when it was first issued in October 1999 as part of the privatisation process.

In relation to the removal of price regulation as raised by the Hon. Mr Hood, the government's current intention is to maintain price regulation because it is in the interest of all consumers. Only recently, the Essential Services Commission reviewed its retail pricing methodology and made improvements to improve its operation. It is necessary to allow some time for this new approach to settle down before any further changes are made.

As noted by members, energy price levels have been rising due to increases in both network and wholesale costs. An important outcome of the national framework is the reduction of unnecessary red tape caused by retailers having to maintain multiple customer frameworks across jurisdictions, which impose real costs on all customers.

The Hon. Ms Vincent raised the matter of energy concessions for people with multiple sclerosis. It is important to note that nothing in the national framework changes an individual jurisdiction's ability to implement a concessions framework. The government has received a detailed report on the issues associated with medical heating and cooling. Any changes in concession arrangements for medical heating and cooling will be considered in the context of the many other spending priorities of the state budget.

The Hon. Mr Parnell has indicated that he proposes to move amendments to these bills to implement some of the matters I have spoken of, specifically extreme weather events, wrongful disconnection payments and late payment fees. Any amendments to these bills would require the agreement of all participating governments. Agreement is considered unlikely as it would override what has been a difficult negotiation and would effectively ignore many years of consultation and agreed outcomes. It will be members' responsibility if this major national energy reform package is delayed.

I now turn to a series of questions asked by the Hon. Mr Ridgway. The Hon. Mr Ridgway asks that other legislation is put before the South Australian parliament in relation to the national framework as agreed in the Council of Australian Governments' Australian Energy Market Agreement (AEMA). The National Energy Retail Law (South Australia) Bill 2010 (NERL) is the last major national legislative package arising from the AEMA.

South Australia intends to introduce legislation later this year to amend this application act to the National Energy Retail Law and to introduce a statutes amendment bill to make consequential amendments to the current South Australian energy legislative instruments, in particular the Electricity Act 1996 and the Gas Act 1997, as well as other relevant state acts, in order to apply the national framework in South Australia. Where necessary, these instruments will include South Australian specific obligations on energy retailers and distributors.

Mr Ridgway asked what red tape is being reduced and how the efficiencies will be achieved. The national framework reduces red tape by decreasing the regulatory burden faced by energy businesses, particularly retailers operating nationally. Currently, each jurisdiction has a separate regulatory regime for the sale and supply of energy to retail customers. Energy retailers that operate across jurisdictions must comply with all of the differences in each of these regimes, despite their covering similar obligations.

The national framework improves efficiencies through harmonisation of existing regimes, by removing regulatory overlap and costs that arise from duplication. For example, the national retailer authorisation under the national framework eliminates the need for current jurisdictional retail licensing regimes. Further, the framework benefits retailers by creating easier access to a wider range of customers nationally, greater competition and greater regulatory certainty, which ultimately benefits all customers.

Mr Ridgway asked whether prices would be the same across the NEM under the national framework. The national framework permits an authorised retailer to operate across the participating jurisdictions under a single national authorisation. Under a standard retail contract, the price will be fixed by either the retailer or the relevant regulator, with the standing contract price to be set in South Australia by the Essential Services Commission of South Australia. Given the differences in each jurisdiction, including generation and network costs, retail prices are different, and this will continue once the bill applies in a jurisdiction.

Mr Ridgway asked about the impact on the energy Ombudsman. The Energy Industry Ombudsman schemes will continue to be established under local jurisdictional legislation or, as in South Australia, as a not-for-profit public company established by the market participants with oversight by ESCOSA. The national framework seeks to ensure that, while the energy Ombudsman schemes themselves operate according to their own jurisdictional laws or constitutional arrangements, the Ombudsman is able to receive, investigate and resolve small customer complaints and disputes that may arise under the national framework.

The national framework is expected to have a minimal impact on the day-to-day operations of the Ombudsman. The Energy Industry Ombudsman of South Australia will continue to provide services exclusively to South Australian energy consumers.

Mr Ridgway noticed media coverage that included comments concerning electricity prices in Marree. The government does not intend to apply the national framework to communities that are not connected to the national grid. Such communities would include those receiving electricity under the Remote Area Energy Supplies scheme, such as Marree. The current consumer protections provided to such customers will continue under the Electricity Act 1996, with regulatory oversight by ESCOSA and the technical regulator.

Mr Ridgway asked for information about hardship programs, indicators and reporting by the regulator. Each retailer is required to develop and maintain a customer hardship policy. These policies identify residential customers experiencing payment difficulties and assist these customers to better manage their energy bills on an ongoing basis. Retailers will also be required to offer flexible payment options, including payment plans and the Centrepay payment option, and have in place processes to identify appropriate government concessions.

The national framework requires the AER to determine the hardship program indicators. The National Energy Retail Rules prescribe the hardship program indicators, including entry into and participation in hardship programs, and the assistance available and provided to customers under customer hardship policies.

The national framework requires the AER to publish a retail market performance report each year as soon as practicable after 30 June but no later than 30 November. As part of its annual retail market performance report, the AER must include:

a retail market overview;

a retail market activities report;

a report on the performance of retailers by reference to the hardship program indicators;

a report on the performance of distributors by reference to distributor service standards and associated guaranteed service level schemes;

a report on the performance of distributors in relation to the small compensation claims regime; and

a report on any additional matters that the regulator considers appropriate for inclusion.

The AER must publish each retail market performance report on its website. The AER is not required to provide a copy of the report directly to energy consumers.

The Hon. Mr Ridgway asks how explicit informed consent will be obtained from a small customer and what form the consent will take. A retailer is required by the national framework to obtain the explicit informed consent of a small customer for certain transactions including customer transfer to another retailer, entry into a market contract and entry into a prepayment meter market retail contract.

The retailer is required to clearly, fully and adequately disclose all matters relevant to the consent of the small customer and to advise as to each specific purpose or use of the consent in accordance with the law and the rules. The form of consent can be either in writing and signed by the small customer or verbal as long as the verbal consent is evidenced in such a way that it can be verified and made subject of a record.

Consent may also be obtained by an electronic communication generated by the small customer. A retailer is required on request to provide a small customer with access to a copy of the record of consent at no charge to the small customer and maintain that record for at least two years. A transaction between a retailer and a small customer is void if it is established that explicit informed consent was not obtained by the retailer, and the retailer cannot recover any moneys for energy supplied as a result of this void transaction.

The Hon. Mr Ridgway requested information on the price comparator service. The price comparator service assists small customers to compare the standing offer price and market offer prices available to customers in the area where the customer's premises are located. It allows customers to find the most suitable offer available. The AER is responsible for developing and updating the price comparator and making it available on a website available to the public.

To ensure that energy retailers provide consistent pricing information to customers and to the AER, the AER may develop a retail pricing information guideline. In accordance with this guideline, retailers are required to submit information and data to the AER relating to the presentation of standard offer prices and market offer prices that are generally available to classes of small customers in a jurisdiction, including any variation to those prices. The AER can then use this data to update the price comparator, including any variations to the retailer's standing offer or market offer prices.

The Hon. Mr Ridgway requests further information in relation to electricity consumption benchmarking, in particular, the criteria to be used for those benchmarks. Under the proposed national energy retail rules, the energy consumption benchmarks only relate to electricity consumption by residential customers. The electricity consumption benchmarks will be based on the following three criteria: (a) electricity consumption information received by the AER from distributors; (b) localised zones as determined by the relevant jurisdictional minister; and (c) household size. The AER must administer the electricity consumption benchmarks and update them every three years from the date when the initial benchmarks are prescribed in the national regulations.

The retailer is required to provide certain particulars in a bill for the residential customer as follows: (a) a comparison of the customer's electricity consumption against the benchmarks; (b) a statement indicating the purpose of the information provided with respect to those benchmarks; and (c) a reference to the energy efficiency website that is prescribed by the national regulations and notified by the AER on its website.

The retailer is required to present the above information in either a graphical or tabular form in a location on the customer's bill that is convenient for the retailer. The information must be presented in a manner that is easy for the customer to understand. In addition, the distributor is required to provide information to the AER for the purpose of the electricity consumption benchmarks in a manner and form as requested by the AER.

The Hon. Mr Ridgway asks how one would develop a distributor-customer relationship and the terms and conditions of that relationship. A relationship is established between a distributor and a customer by way of a contract between the parties. This contractual model is similar to existing contractual arrangements that operate in electricity in most jurisdictions, but it does represent a change for many gas distributors.

The law obliges a distributor to offer to provide customer services including new connections, connection alterations and ongoing supply services under a direct contractual relationship. This obligation on distributors mirrors the obligation on retailers to have a standing office to sell energy to small customers. The law provides for three customer connection contracts: deemed standard connection contracts, for all customers; AER approved deemed contracts, for large customers; and negotiated connection contracts, for both small and large customers.

The Hon. Mr Ridgway asked if connection costs and augmentation fees will be regulated and scrutinised under the framework. As the member will recall, the economic regulation of distribution services has already been transferred to the AER. Under this national framework, to ensure connection changes for retail customers and property developers are broadly consistent across networks and aligned with distributed determinations, distributers must submit a connection policy as part of each regulatory proposal for approval by the AER. The connection policy must be consistent with connection charge principles under the rules and connection charge guidelines to be developed by the AER.

The connection charge guidelines will establish principles for fixing a threshold below which retail customers will be exempt from any requirement to pay connection charges for any upstream augmentation necessary to make the connection. In this way, smaller or more typical retail customers will not be paying directly for upstream augmentation in respect of their connection. In developing the electricity connection charging guidelines, the AER must have regard to the inter-jurisdictional differences related to regulatory control mechanisms, classification of services and other relevant matters, such as historical and geographical differences between networks.

The Hon. Mr Ridgway asked for further information on the Small Compensation Claims Regime, which is designed to provide small customers with a small claim a low cost and effective ways to obtain compensation for damage to their property without needing to prove negligence. There are no defined classes of property damage in the national framework, but an acceptable claim will be determined by each jurisdiction applying the regime. This bill does not impact on the existing Guaranteed Service Levels (GSL) requirements on distributers relating to the frequency and duration of supply interruptions. Where these standards are not met, customers will continue to receive payments in accordance with the South Australian Electricity Distribution Code.

The Hon. Mr Ridgway asked about time frames for resolving complaints. A retailer or distributor will be required to handle customer complaints in accordance with its published procedures, which must be consistent with the applicable Australian standard. The retailer or distributor must advise their customer in a timely way of the outcome of their complaint, including any reasons for its decision. If the customer is not satisfied with how their retailer or distributor has handled their complaint, they can refer the matter to the energy Ombudsman in their state or territory.

The Hon. Mr Ridgway asked for an outline on what is an exempt seller. An exempt seller is a person who sells energy but who is exempt from the requirement to hold a retailer authorisation. The national framework provides for three types of exemptions; the first is individual exemptions granted on a case-by-case basis, taking into account the particular circumstances of an individual seller. This would cover situations such as an energy generator supplying energy to a neighbouring business, but not to the wider community.

The second is registrable exemptions, where the AER can identify a class of exempt seller types where the conditions can be applied generally across the class. These sellers must register in order to be exempt. This would cover situations such as landlords supplying unmetered energy to small customers residing in caravan parks, residential parks and retirement villages.

The third type of exemption is deemed exemptions, designed for those categories of sellers where conditions can be applied generally across the category but identifying each seller is impractical. This would cover situations such as landlords passing on common area costs to residents or companies on-selling energy to a related company. The AER is currently developing and consulting publicly on its exempt selling guidelines in preparation for its role in the enforcement of the exempt seller regime.

The honourable member asks how a retailer gives a credit support guarantee to a distributor, why it is necessary to have the credit support rules and how it relates to late payment fees. Distributors earn regulated returns and are unable to vary their tariffs outside the regulatory control mechanisms if a retailer defaults on paying network charges. The new credit support rules seek to spread the risk more equitably so that end-use customers do not bear the full cost of non-payment and default by one retailer.

Distributors will be required to obtain in advance from a retailer an unconditional financial guarantee to draw upon in the event of the retailer's default, with the amount of credit support required by distributors from retailers proportionate to both the probability and size of the default risk posed by a particular retailer. If there are still outstanding unpaid charges from a retailer's default after the credit support has been paid, only then can the distributor seek to recoup these remaining amounts from its end-user customer base via a regulatory pass-through mechanism.

Credit support arrangements and late payment fees are not directly related, although they are both seeking to manage the risk associated with non-payment for energy services. Credit support requires retailers to make an upfront financial guarantee to distributors based on a specific risk assessment and protects distributors from non-payment for network charges. Late payment fees recover the costs of retailers in managing outstanding debt, and are only incurred by those customers who fail to pay on time, noting that hardship customers are explicitly excluded.

The Hon. Mr Ridgway queried whether the South Australian government has paid any late payment fees in relation to its energy supply. As a large energy consumer the government's energy contracts are negotiated through a public tender process, with the negotiated contract not providing for late payment fees. The Hon. Mr Ridgway requested information in relation to the power of the AER to require written enforceable undertakings from a person. This new power for the AER to require an enforceable undertaking is similar to a power held by the Australian Competition and Consumer Commission under the Competition and Consumer Act 2010.

An enforceable undertaking is an administrative remedy that requires a person who is not complying with the regulatory requirements to agree to take corrective action, for example, to implement a compliance program to address certain noncompliant actions. The intention of this remedy is to afford a regulator an alternative tool to achieve compliance with a regulatory regime without having to proceed immediately to court, thus potentially saving time and legal costs.

The Hon. Mr Ridgway asked about the information-gathering powers of the AER. Under the law, the AER has power to obtain information and documents if it has reason to believe that a person is capable of providing that information or document and it requires it for the performance or exercise of its functions and powers under the law or rules. Protections apply to the use of confidential information provided to the AER. This power is necessary to enable the AER to have the best and most accurate information available to it in order that it may make informed decisions.

Significant care has been taken to ensure that duplication of information provision does not occur, insofar as information provided by an industry participant under the National Electricity Law, National Gas Law or this national framework can be used for the purposes of any of these regimes. In addition, the AER may require information from retailers under the Retailer of Last Resort provisions to ensure that it is fully informed in relation to a Retailer of Last Resort event and able to ensure the effective transfer of customers, if necessary.

The Hon. Mr Ridgway asked for information in relation to wrongful disconnections, particularly their prevalence and the reasons for wrongful disconnections. As there is no wrongful disconnection scheme in South Australia, the following information is based on Victorian statistics on wrongful disconnection. The Victorian Essential Services Commission indicates that there are approximately 2.2 million electricity consumers in Victoria and 1.4 million Victorian gas consumers.

According to the Victorian Essential Services Commission 2008-09 Compliance Report for Victorian Retail Energy Businesses, there were only 155 wrongful disconnection claims. This equals 0.004 per cent of the 3.6 million energy connections. A wrongful disconnection occurs where the retailer breaches the requirements set out in the Victorian Energy Retail Code regarding the process for disconnection.

Having placed the answers to some of the questions posed during the second reading on the record and there being some outstanding responses still to be provided, I am happy to provide those in the committee stage. On that note, I wish to thank all those who contributed to the second reading stage and who have expressed support for this bill. I look forward to the committee stage.

Bill read a second time.

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