Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
National Electricity Bill 2012

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

2010-2011-2012

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

THE HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

________________________________________________________________

 

 

NATIONAL ELECTRICITY BILL 2012

 

 

________________________________________________________________

 

 

 

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of Mr Robert Oakeshott MP)



NATIONAL ELECTRICITY BILL 2012

 

OUTLINE

 

The National Electricity Law cannot, at present, be amended by the Australian Parliament. 

 

The National Electricity Bill 2012 (the Bill) would adopt, in so far as practicable, the existing National Electricity Law, which is currently a uniform national law only by virtue of the National Electricity (South Australia) Act 1996 as adopted in relevant states and territories .

The Bill would incorporate in so far as practicable, and repeal, the existing Australian Energy Market Act 2004 (a Commonwealth Act), and adopt in so far as practicable the Australian Energy Market Commission Establishment Act 2004 , which is also a South Australian Act.

The Bill would effectively make the National Electricity Law an Act of the Commonwealth, without altering the substantive effect of the National Electricity Law , and would make the Australian Energy Market Commission a statutory body of the Commonwealth.

 

The National Electricity Law contains the ‘national electricity objective’, defined as follows:

 

The objective of this Law is to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to—

            (a)         price, quality, safety, reliability and security of supply of electricity; and

            (b)         the reliability, safety and security of the national electricity system.

 

Electricity network prices are determined by the Australian Energy Regulator (AER), under the National Electricity Rules, subject to review by the Australian Competition Tribunal under the National Electricity Law.

 

A Council of Australian Governments’ Communique of 25 July 2012 stated that:

 

COAG expressed concern over the recent substantial electricity price increases arising from factors including increases in transmission and distribution charges and requested energy ministers to focus current reviews of market regulation in the interconnected market on achieving efficient future investment which does not result in undue price pressures on consumers and business.

 

The Prime Minister in a speech on 7 August 2012 made the following statements:

 

People are paying a lot more - in some states, bills have gone up almost a thousand dollars in just a few years. …

 

Most compelling of all, the Australian Energy Regulator itself, in the State of the Energy Market Report 2011 released in December last year found the regulatory framework has led to some price increases that are difficult to justify (and that) consumers are paying more than necessary for a safe and reliable energy supply. …

 

Indeed, in many places around Australia, the State Governments both own lucrative electricity assets and regulate parts of the electricity market. …

 

Following the recent round of price increases, revenue for network enterprises wholly owned by State Governments is up fifty per cent over the previous five year period. …

 

I want real decisions this year to guide price determinations beginning next year.  My preference is to work co-operatively with the States through COAG to deliver a better outcome for consumers.  We won’t lightly use the big stick of regulation, of stronger powers for the Energy Regulator and the ACCC.  But it’s a stick we hold and which we’ll use if required.

 

The Leader of the Opposition on 8 August 2012 when asked, ‘Do you think there’s been gold plating of the wires and cables in some states,’ replied:

 

I think that all of these price rises, in fact, I know all of these prices rises have been approved by the Federal Government’s regulator.  Julia Gillard’s own regulator has approved every single price rise. So, if there’s a problem, it’s Julia Gillard’s fault.

 

The Productivity Commission’s Draft Report, Electricity Network Regulatory Frameworks , released on 18 October 2012 stated the following:     

 

Electricity prices have risen by more than 50 per cent in real terms over the past five years. Spiralling network costs are the main contributor to these increases, partly driven by inefficiencies in the industry and flaws in the regulatory environment .

 

Quite apart from the continued parochial mix of costly state-based regulations, the AER claims that the national regime is flawed too, and has led to inflated costs of capital and created incentives for inefficient investment, with flow-on price effects.

 

It is clear that the overall electricity network price regulatory scheme has been established by federal, state and territory governments on a mixed multilateral and unilateral basis. 

 

It is also clear that the scheme has led to significant regulatory failures. However the National Electricity Law cannot, at present, be amended by the Australian Parliament. 



In particular, the National Electricity Law specifically establishes the framework for ‘merits reviews’ (appeals) of AER decisions.

 

In its submission to the Senate Inquiry on Electricity Prices, the NSW Independent Pricing and Regulatory Tribunal stated:

 

The review process provided by the National Electricity Law (NEL) allows the network businesses to seek review of specific aspects of the AER’s determination to achieve more favourable outcomes. To date, the businesses have sought review of elements of every decision the AER has made on their regulated returns. In NSW, the distribution network businesses sought review of the averaging period for the risk free rate of return in their WACC calculation, which resulted in an additional $1.9 billion in allowed revenue over 5 years (out of a total of $18 billion). …

 

The appeal process should ensure that the Australia Competition Tribunal makes a substitute decision only when its decision better meets the National Electricity Objective, compared to the AER’s decision. …

 

We encourage the SCER (Standing Council on Energy and Resources) to make changes to the NEL to provide a more balanced appeal process.

 

In October the Chairman of the Australian Competition and Consumer Commission supported these views, stating:

 

Merits review has not focused on whether the regulator’s overall decision provides network businesses with sufficient revenues to efficiently supply energy services.

 

Rather, merits review has allowed businesses to ‘cherry pick’ one or two issues from what inevitably is a balanced decision weighing hundreds of complex issues, some of which would have favoured the network businesses. The decisions of the review body, the Australian Competition Tribunal, have increased the money recovered from customers by approximately $3 billion.

 

The Productivity Commission has also said:     

 

Overall, the objective of the National Electricity Law — the long-term interests of consumers — appears to have been lost in what has become an elaborate legalistically framed process.

There would be benefits in clarifying:

•       the importance of the National Electricity Objective as a guiding principle for decisions in any merits review process

•       the interdependence between some critical aspects of business costs.

 

An independent panel investigating the limited merits review regime has recently reported its findings and recommendations to the Standing Council on Energy and Resources.

 

The Standing Council on Energy and Resources, made up of the relevant federal, state and territory ministers, is yet to announce a response to the final report of the independent panel investigating the limited merits review regime.    

 

It should be noted that while the independent panel investigating the limited merits review regime has recommended significant changes to the regime, it has not proposed specific legislative amendments required to give affect to all of its recommendations. 

 

Accordingly, significant doubt remains about if and how these recommendations will translate into legislative amendments, and hence the effect on price determinations for consumers.  Under current legislative arrangements, this will depend on decisions to be made by the Standing Council on Energy and Resources, which must ultimately be ratified by multiple state and territory governments.    

 

The Bill if passed will allow a response to be implemented, subject only to passage through the Australian Parliament, before new electricity network price determinations commence. 

 

The Bill if passed will remove the potential conflict of interest that arises from states and territories owning and receiving revenue from electricity network operators, while retaining a determinative role over the legislation governing reviews of network price determinations.

 

FINANCIAL IMPACT STATEMENT

The Bill is not expected to have any direct financial impact.



 

NOTES ON CLAUSES

 

The Bill adopts insofar as practicable the existing National Electricity Law, which is currently a uniform national law by virtue of the National Electricity (South Australia) Act 1996 as adopted in relevant states and territories.

The Bill incorporates insofar as practicable, and repeals, the existing Australian Energy Market Act 2004.

The Bill adopts in so far as practicable the Australian Energy Market Commission Establishment Act 2004 of South Australia.

The Bill omits much of Schedule 2 and all of Schedule 3 of the National Electricity (South Australia) Act 1996 , as these provisions are covered by existing Commonwealth Acts with similar affect. 

The following notes on clauses explain other substantive variations in the Bill from the existing National Electricity Law , Australian Energy Market Act 2004 , and the Australian Energy Market Commission Establishment Act 2004 of South Australia, necessary to translate the National Electricity Law to an Act of the Commonwealth. 

 

Clause 1A - Commencement

 

1. Clause 1A specifies arrangements for commencement of the Act.

 

 

Clauses 1B-1H - Application

 

2. Clauses 1B-1H are standard application clauses of Commonwealth Acts.

 

 

Clause 2 - Definitions

 

3. Clause 2, “ civil penalties ” adopts the convention of Commonwealth Acts to prescribe penalties through penalty units.   Civil penalties under the existing National Electricity Law are rounded to the nearest whole penalty unit.

 

 

Clause 6A(6) - Agreement of State Minister to distributor nomination

 

4. Clause 6A(6) requires the Minister to be satisfied that the relevant State or Territory Energy Minister agrees to the nomination of an entity as a nominated distributor for the purposes of the Act and the specified provisions of the National Electricity Rules.

 

 

Clause 9 - National Electricity Rules

 

5. Clause 9 prescribes the National Electricity Rules as a legislative instrument, but that the National Electricity Rules are not disallowable, because the process for establishing and amending the National Electricity Rules will remain governed by the National Electricity Act in accordance with current Australian Energy Market Commission processes.

 

 

Clause 10A - Modification of the Corporations Act

 

6. Clause 10A provides that relevant provisions of National Electricity Rules may modify the operation of Chapter 5 of the Corporations Act 2001 to allow the orderly management of a ‘Retailer of Last Resort’ event, as currently defined and provided for by the National Electricity Rules .

 

 

Part 3A - Establishment of the Australian Energy Market Commission

 

7. Clauses 28ZJH-ZJI provide that members of the Australian Energy Market Commission are to be appointed by the Governor-General.

 

8. Clause 28ZJT(9) applies the confidentiality provisions of the Commonwealth Freedom of Information Ac 1982 to documents classified as confidential by the Australian Energy Market Commission.

 

9. Clause 28ZJV brings the Australian Energy Market Commission under the Commonwealth Authorities and Companies Act 1997 for financial reporting purposes.

 

 

Clauses 29AI-AK - Commonwealth consent to conferral of functions etc. on AEMC

 

10. Clauses 29AI-AL replicate for the Australian Energy Market Commission provisions pertaining generally to Commonwealth statutory bodies, and address Constitutional matters.

 

 

Part 5C - Establishment of the Consumer Advocacy Panel

 

11. Clauses 57CBAI-CBAK replicate for the Consumer Advocacy Panel provisions pertaining generally to Commonwealth statutory bodies, and address Constitutional matters.

 

 

Clauses 70 - Applications for judicial review

 

12. Clause 70 retains provisions for judicial review of decisions of the Australian Energy Market Operator, but deletes the Australian Energy Market Commission, as the Australian Energy Market Commission will be subject to the Commonwealth Administrative Decisions (Judicial Review) Act 1977.

 

 

Clause 80 (Deleted) - Repayments of penalties

 

13. Clause 80 has been deleted as it potentially involves an appropriation, which is not customarily contained in a Private Members Bill, but could be reinstated by a Government amendment. 

 

 

Clause 110 - Agreement of State Minister to system security coordinator nomination

 

14. Clause 110 requires the Minister to be satisfied that the relevant State or Territory Energy Minister agrees to the nomination of a person as a system security coordinator for the purposes of the Act and the specified provisions of the National Electricity Rules.

 

Clause 159 - Regulations

 

15. Clause 159 provides for regulations to be made by the Governor-General .

 

 



 

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

 

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act

2011

 

 

National Electricity Bill 2012

 

This Bill is compatible with the human rights and freedoms recognised or declared in the

international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)

Act 2011 .

 

 

Human rights implications

 

The Bill does not engage any of the applicable rights or freedoms beyond those currently engaged by the existing National Electricity Law, which has previously been adopted by the Commonwealth through the Australian Energy Market Act 2004 .

 

 

Conclusion

 

“This Bill is compatible with human rights because it does not raise any human rights issues beyond those engaged by the existing National Electricity Law, which has already been adopted by the Commonwealth through the Australian Energy Market Act 2004 .”

 

 

 

 

Robert Oakeshott MP