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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2012-07-18 Daily Xml
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ESSENTIAL SERVICES COMMISSION (ELECTRICITY, GAS, WATER AND SEWERAGE PRICES) AMENDMENT BILL

Introduction and First Reading

The Hon. D.G.E. HOOD (16:04): Obtained leave and introduced a bill for an act to amend the Essential Services Commission Act 2002. Read a first time.

Second Reading

The Hon. D.G.E. HOOD (16:05): I move:

That this bill be now read a second time.

I rise to speak on the Essential Services Commission (Electricity, Gas, Water and Sewerage Prices) Amendment Bill 2012. We are all aware of the complaints from the public concerning rises in prices of electricity, gas and water, particularly the rises that have occurred over the last two or three years. Much has been said as to who is at fault and what, if anything, can be done.

Whilst some may say that nothing can be done I, for one, have become very concerned at the things I have been told by a number of constituents, as I am sure other members have in this place. I heard a complaint from one pensioner, for example, who has decided to shower only every second day to save the cost of hot water. I have heard from others who say that they have to live in an unheated house because the cost of heating is now too much for them. These are not isolated complaints; I have had many similar complaints, as I am sure other members have in this chamber.

I have looked at the cost of electricity, gas and water to see whether or not the price rises have really been of such magnitude to justify these consequences. Using figures available from government sources where possible, I calculated that the increases in prices in recent years are as follows: over the last three years, namely taking account of increases in the financial years commencing July 2010, July 2011 and July 2012, the cumulative increase in the cost of electricity for an ordinary consumer has been 62.8 per cent. The corresponding cumulative CPI for the preceding respective periods was just 7.4 per cent. Over the same period, the price of gas for an ordinary household has increased by 38.1 per cent against the same CPI increase of 7.4 per cent. Finally, over the same period, the price of water, excluding sewerage charges, for an ordinary consumer using 190 kilolitres of water per year has increased 94.5 per cent, and that is 12.8 times the rate of CPI over the same period.

We need to look back to the events beginning in early 2002. I see that as the beginning of the present situation because in that year the Essential Services Commission Act was passed—a worthwhile measure in its time I believe. One purpose was for the commission to set prices for the sale of essential services. Section 6 of the act provided that the commission must:

...have as its primary objective protection of the long term interests of South Australian consumers with respect to the price, quality and reliability of essential services...

Essential services were defined as including, amongst other things, electricity services, gas services and water services, although the required declaration for water services was not made until very recently and the government itself has continued to set water prices over those years.

In the lead-up to the 2002 election, on 4 February 2002 an Advertiser report on election promises by the then opposition leader, Mike Rann, stated:

A new plan to cap electricity prices and reduce blackouts through better maintenance has been used by Labor to kickstart the vital final week of its election campaign. In announcing the details yesterday, Labor leader Mike Rann said an Essential Services Commission would be created to monitor power generation companies as well as the operation of other services such as water and gas.

'Electricity companies must be able to make fair and reasonable returns and profits that encourage reinvestment and provide for contracts to be honoured,' he said at the party's campaign launch at Adelaide Oval, which included former prime ministers Gough Whitlam and Bob Hawke. 'But we will not tolerate South Australian families and businesses being unscrupulously exploited by anyone,' went on to say Mr Rann.

The Advertiser report then continued:

After Mr Rann's speech, Labor Treasury spokesman [then opposition Treasury spokesman, of course] Kevin Foley described the plan as 'a big stick' to the privatised electricity companies. 'We want to tilt the playing field back towards the consumers,' he said. Mr Foley said he hoped the powers would never have to be used and if the generators and retailers in South Australia aimed for a fair and reasonable profit they had nothing to fear from Labor. 'But we cannot—and will not—sit back and watch families get hurt, businesses get hurt and lose jobs because the privatised electricity companies are running rampant throughout our state,' he said.

It is now clear that we are watching families get hurt by those increases—the very increases predicted, if you like, by the then opposition leader, Mike Rann, and the opposition Treasury spokesman, Kevin Foley. They simply cannot continue at the same rate. I have no doubt the government introduced these measures with the right intention, but they simply have not served their purpose in the way they were intended. A later report in The Advertiser on 21 November 2003 said:

The state government has warned it will change the law if necessary to prevent further electricity prices next year. 'There is no way power prices will be allowed to rise again next year—it's not going to happen' Energy Minister Patrick Conlon said yesterday. Premier Mike Rann also weighed into the debate, labelling electricity companies seeking further increases as 'greedy bloodsuckers' and telling them to 'get stuffed'. The Government delivered the strongest message yet it would not tolerate further increases and would amend legislation if that was needed to stop a price rise.

From government statements made back in 2002 and 2003, one gains the clear impression the government was determined to keep the price for essential services within reasonable bounds. Although various explanations for the increases in prices have been given, I do not think anyone would regard the prices I have quoted a few moments ago as reasonable for ordinary people, or indeed for anyone, in this state. It is the government's responsibility to put in place a better system.

The government has made an announcement that it will limit water price increases to the CPI or thereabouts for the next three years. We support this; I have no doubt the chamber supports it. This only applies to water and not to electricity and gas. We need a means of keeping a real check on the future increases for essential services in this state. Of course I am well aware that money paid by consumers for gas and electricity generally goes to private companies rather than to the state government, and this makes price regulation more difficult.

It was the job of the Essential Services Commission to protect consumers in exactly this situation. It seems the me that this has not occurred. Whilst the capital expenditure of the desalination plant has served to increase water prices, I do not accept that there has been any corresponding reason for the massive increases that we have seen in the prices of gas and electricity. The carbon tax adds to the price, but that alone does not explain the majority of price increases. The information I have seen indicates that wholesale prices do not explain the increases we have seen. Indeed, wholesale prices have risen by approximately 50 per cent over the period, and retail prices by substantially more.

It is because of the huge price increases for electricity, gas and water, which seem to be completely out of proportion to the general increase in the prices, that I have introduced this bill. It provides that, if the Essential Services Commission decides to fix a price rise that is more than double the consumer price increase for the period immediately preceding the decision, each house of parliament has the option of disallowing the rise. The matter would then go back to the commission to make a further decision. The debate in the relevant house of parliament would indicate the general mood of members, and this would enable the commission to understand the relevant parameters within which it can take a final decision or another decision.

I acknowledge this is a drastic option, and one that some people will criticise. I would find it much easier to accept that the rises we have just seen must be justified because the commissioner must have taken all matters into account, but the size of the rises indicates to me that something has gone horribly wrong with this process. I say that something has gone wrong because I hear from constituents, particularly pensioners as I mentioned, that they are at their wits' end worrying about electricity, gas and water bills. One elderly lady has decided that she will take a hot shower only every second day because of the cost of hot water. A number of pensioners in particular have told me they no longer heat their homes in winter because of the cost. They watch TV in the evenings with a blanket wrapped around them and nothing else, still shivering in some cases. We all know what a danger summer time heat can be for the elderly if they cannot afford the cost of cooling their homes during a heatwave. We must ensure that essential services are affordable for everybody.

The working provisions of this bill are quite simple and do not require any further explanation beyond that given above. The definitions, however, can be rather complex because of the need to compare the periodic price rise with the CPI rise in the preceding relevant period. The bill takes into account the provisions of section 17 of the Water Industry Act 2012, most of which was proclaimed to come into effect on 1 July this year. That section provides that the water industry is declared to constitute a regulated industry for the purposes of the Essential Services Commission Act. That ties in with section 25 of the Essential Services Commission Act, which provides that the commission may make determinations regulating prices for services in a regulated industry. The consequence is that in future the commission is entitled to make price determinations as to the price of water.

In summary, let me say the following. I accept that it is not ideal to have the houses of parliament given the power to disallow prices determined by the Essential Services Commission. I would have preferred that it did not come to this, but some action is necessary. We have people who cannot afford to shower, cannot turn on their heaters and cannot turn on their air conditioners. The price rises over the last few years have been clearly over the top. It would be irresponsible to stand back and allow this to continue. Parliamentary supervision of the process is the only realistic, independent solution to this very serious problem that we simply must face up to.

Debate adjourned on motion of Hon. T.J. Stephens.

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