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Legislative Council - Fifty-Fifth Parliament, First Session (55-1)
2023-02-09 Daily Xml
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National Electricity (South Australia) (Ministerial Reliability Instrument) Amendment Bill

Second Reading

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (16:33): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation and explanation of clauses inserted in Hansard without my reading them.

Leave granted.

The Government is building upon an important national reform, the Retailer Reliability Obligation, which commenced in July 2019. The Retailer Reliability Obligation aims to give confidence to all stakeholders that sufficient dispatchable power will be available when required as the National Electricity Market transitions from ageing fossil fuel plants to new, clean energy resources.

This mechanism was designed to ensure the electricity system operates to reliably meet electricity demand at the lowest cost by incentivising retailers and other market customers in the National Electricity Market. It does this by encouraging earlier and longer term electricity contracting, thereby underwriting greater investment in dispatchable capacity.

Under the Retailer Reliability Obligation, if a forecast supply shortfall is identified, this triggers an obligation on electricity retailers to demonstrate their contracting can meet their share of peak demand one year in advance.

In 2019, the National Electricity (South Australia) (Retailer Reliability Obligation) Amendment Act 2019 provided for local provisions related to the triggering of the Retailer Reliability Obligation which applied only in South Australia. It provided for the South Australian Minister to make a reliability instrument if it appeared on reasonable grounds, that there would be a real risk that the supply of electricity to all or part of South Australia may be disrupted to a significant degree on one or more occasions during a period.

These South Australian provisions have proven to be valuable for us, with Reliability Instruments being made in early 2021 and early 2022 to reduce the risk of an energy shortfall in South Australia during the 2024 and 2025 summers respectively. The most recent Electricity Statement of Opportunities has indeed identified a reliability gap for the 2024 summer, further justifying the merits of theses supplementary provisions.

The other jurisdictions within the National Electricity Market have recognised the usefulness of these provisions and are now looking to adopt them.

In October 2021, National Cabinet endorsed the Energy Ministers' decision to implement a Ministerial reliability instrument for the Retailer Reliability Obligation for all regions in the NEM, as is currently in place in South Australia.

As such, the National Electricity (South Australia) (Ministerial Reliability Instrument) Amendment Bill 2022 seeks to expand these provisions that previously were only applied in South Australia to the other NEM jurisdictions.

The Bill gives an option to the Minister of the relevant participating jurisdiction to make a 'T-3' reliability instrument three years out for a specified period on or after 1 December 2025. A T-3 reliability instrument can only be made with 3 years' notice under the RRO framework.

The intention of this Bill is to better manage the risk that a reliability gap could emerge at any time across the 10 year forecast period that may not have been forecast by the Australian Energy Market Operator.

A Minister can only make such an instrument if at appears to the Minister, based on reasonable grounds, that there is a real risk that the supply of electricity will be disrupted to a significant degree on one or more occasions during a period specified in the instrument.

A transitional arrangement has been included in the draft Bill to manage the risk that amendments to the existing framework are not in place in time to provide 3 years' notice for the 2025/2026 period.

The notice period provided for in this draft Bill is no less than 24 months. A cut-off date applies to this transitional arrangement in that, after 1 December 2023, the trigger period reverts to 36 months which is consistent with the existing Retailer Reliability Obligation mechanism.

If an Energy Minister intends to make a reliability instrument, this Bill requires the Minister consult with the Australian Energy Market Operator and the Australian Energy Regulator in relation to the instrument the Minister proposes to make.

Broadening the existing Ministerial reliability instrument from South Australia to all NEM jurisdictions strengthens the ability for National Electricity Market jurisdictions to manage potential risks to system reliability.

The Bill also provides for the South Australian Minister to make the initial rules relating to the Ministerial reliability instrument.

The Ministerial reliability instrument reflected in this Bill is only one component of a broader resource adequacy reform package being developed by market bodies and jurisdictions. Nevertheless, strengthening the regulatory resilience of the National Electricity Market via this Bill is in the best interests of the South Australian community, particularly while there remain reliability concerns in response to risks and uncertainties associated with generation retirement.

I commend this Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of National Electricity (South Australia) Act 1996

4—Repeal of Part 7A

Part 7A provided for the South Australian Minister to make a T-3 reliability instrument. Its repeal is consequential on the amendments to the National Electricity Law effected by the measure.

Part 3—Amendment of National Electricity Law

5—Amendment of section 14C—Definitions

Certain definitions are inserted or amended for the purposes of the measure.

6—Amendment of section 14G—Meaning of forecast reliability gap, forecast reliability gap period, T-3 cut-off day and T-1 cut-off day

Section 14G of the National Electricity Law is an interpretative provision—the amendments are related to proposed section 14JA (which proposes to authorise a Minister of a participating jurisdiction to make a T-3 reliability instrument for a region).

7—Amendment of section 14H—Rules must provide timetable for reliability forecasts, requests and instruments

8—Amendment of section 14I—AEMO must request reliability instrument

These amendments are consequential.

9—Insertion of section 14JA

Section 14JA is proposed to be inserted into the National Electricity Law:

14JA—Minister may make T-3 reliability instrument

A Minister of a participating jurisdiction is authorised to make a T-3 reliability instrument for a region in certain circumstances.

The provision provides for the content of a T-3 reliability instrument for a region. Consultation and publication requirements are provided for. Certain limitations relating to making a T-3 reliability instrument are set out in the proposed section.

10—Amendment of section 14K—AER may make reliability instrument for a region

This amendment is consequential.

11—Insertion of section 90EC

Section 90EC is proposed to be inserted into the National Electricity Law:

90EC—South Australian Minister to make initial Rules relating to Ministerial reliability instrument

The South Australian Minister is authorised to make the initial Rules relating to the Ministerial reliability instrument amendments.

Schedule 1—Transitional provision

1—Transitional provision

A transitional provision relating to T-3 reliability instruments made by the Minister under section 19B of the National Electricity (South Australia) Act 1996 is inserted for the purposes of the measure.

Debate adjourned on motion of Hon. L.A. Henderson.

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