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This Digest was prepared for debate. It reflects the legislation as
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CONTENTS
Snowy Hydro Corporatisation Bill 1997
Date Introduced: 26 June 1997
House: House of Representatives
Portfolio: Primary Industries and Energy
Commencement: Upon Royal Assent or on a day to be
fixed by Proclamation. In relation to section 59, the Proclamation
may not be made unless the Governments of New South Wales and
Victoria have agreed to that section commencing on the date in the
Proclamation.
To corporatise the Snowy Mountains Hydro-electric Scheme, remove
the dual management scheme and allow the Snowy Mountains
Hydro-electric Scheme to operate commercially in the national
electricity market.
In the aftermath of World War II, the Snowy Mountains
Hydro-Electric Scheme was 'born'.Launching the scheme on 17 October
1949, Governor-General William McKell stated that it was 'the
greatest development project that has ever been conceived in this
continent...the great conservation scheme for
Australia'.Undoubtedly it is an impressive engineering feat.
Situated within Kosciusko National Park and consisting of some 16
major dams, seven power stations, 145 kilometres of interconnecting
tunnels and 80 kilometres of aqueducts(1), it is by any measure a
remarkable system.So remarkable in fact that in August this year it
received official recognition from the American Society of Civil
Engineers as one of the Seven World Engineering Wonders.
In his second reading speech, the Minister representing the
Minister for Resources and Energy , the Hon. Bruce Scott MP, noted
that the Snowy Mountains Hydro-Electric Scheme ("the Snowy Scheme")
is now Australia's largest mainland supplier of renewable
energy.
However, apart from supplying electricity, the Snowy Scheme also
diverts water to the Murray and Murrumbidgee rivers systems for
irrigation.Therefore it impacts on a large portion of Australia,
for agricultural purposes, recreational purposes, power generation
purposes and aesthetic purposes.
The Constitutional Issues
Historical aspects
There is an argument that the Snowy scheme may well have been
implemented by the Commonwealth without there being the necessary
constitutional power to do so.The Constitution does not give to the
Commonwealth any express legislative head of power under which the
Snowy Mountains scheme could have been validly
authorised.Therefore, the Commonwealth was forced to rely on the
defence power [section 51(vi)] as the constitutional basis for the
Snowy Scheme.At the time, Sir Robert Menzies attacked the Chifley
government, according to Collis(2), for 'brushing aside the states
and for assuming a power which ...it did not possess: and for
enacting legislation therefore tainted with serious constitutional
illegalities'(3).
The use of the defence power is somewhat controversial as the
power has different applications depending upon whether Australia
is in a state of war or peace.The defence power expands in war time
to cover a large range of matters not ordinarily within the
Commonwealth's power, it recedes slightly during the time
immediately after a war (although remains more expansive than in
peace-time) and eventually reverts to its 'narrow' peace time
state. The High Court put this rather more eloquently in The
King v Foster [1949] 79 CLR 43 at pp 81-82:
When actual hostilities have ceased the scope of application of
the defence power necessarily diminishes, but the cessation of
hostilities leaves behind various matters which can legitimately be
made the subject of Commonwealth legislation as being incidental to
the execution of the defence power in the past. This Court has
already held that after hostilities have ceased laws may be
sustained under the defence power as valid because they deal with
conditions which have been brought about by the exercise of the
defence power itself (Dawson v. The Commonwealth (1946) 73 CLR
157)....Thus Federal regulation of matters which are brought within
Federal power only by reason of the defence power need not
necessarily cease with the actual fighting.
The argument that would have been put by the Commonwealth (had
the States ever challenged the Snowy Mountains Scheme on the basis
of the Constitution) was that 1949 was a time, immediately
following the cessation of hostilities, when the Commonwealth
required the legislative power to provide power (in the form of
electricity) to a large proportion of the population.Part of the
argument being that the Commonwealth had to provide electricity
from a source that was shielded and relatively secure from any
future enemy attack.It is certainly debatable whether the
Commonwealth had the constitutional power to commence the Snowy
Mountains scheme.The Snowy Mountains Scheme does seem to have
rather a tenuous link to the defence power.However, given that it
was never challenged (and in fact, Collis reports that the States
subsequently 'agreed to validate the scheme in their State
Parliaments'(4)) the constitutional issue of relevance today is to
what extent section 100 of the Constitution has application.
Does Section 100 Guarantee A Right of Access to the Water?
Section 100 of the Constitution states:
The Commonwealth shall not, by any law or regulation of trade
and commerce, abridge the right of a State or of the residents
therein to the reasonable use of the waters of rivers for
conservation or irrigation.
The Franklin Dam case, whilst not deciding the point,
raised the issue as to whether section 100 meant that the States
(and their residents) had a positive right to the reasonable use of
the water or whether the section merely prevented the Commonwealth
from legislating to restrict the reasonable use of the water:
The prohibitions in ss. 99 and 100 of the Constitution are
plainly directed to the Commonwealth, not to the States. It is
unnecessary to decide whether s. 100 guarantees to riparian States
and their residents access to the use of the waters for the
purposes mentioned or whether it merely imposes a restriction on
the power of the Commonwealth when legislating under ss. 51(i) and
98. It is, however, appropriate to point out that in the form in
which it is expressed s. 100 does impose a restriction on the
exercise of Commonwealth legislative power, one which prevents the
Commonwealth by a law or regulation of the kind described from
abridging the rights of a State and its residents.
The words 'of trade or commerce' relate back to 'law' as well as
'regulation'. This view is supported by similar expressions in the
neighbouring sections, ss. 98, 99, 101 and 102 which make it plain
that the group of sections is dealing with laws with respect to
trade and commerce. ...Section 98 is of special significance
because ... it ... suggests that the primary purpose of s. 100 was
to safeguard the rights of a State and its residents to the use of
waters in rivers used for interstate trade and commerce including
navigation and shipping, viz., the Murray River.
At first glance it may seem somewhat artificial to confine the
restriction on legislative power to laws made, or capable of being
made, in exercise of one power when a somewhat similar effect in
relation to the use of waters of rivers by a State and its
residents for conservation or irrigation might be achieved by the
Commonwealth in the exercise of other legislative powers. Why, one
might ask, would the framers of the Constitution confine the
pursuit of the objective - the protection of the State and its
residents in relation to the use of the waters - to some
Commonwealth laws but not others?
The answer to this question probably lies in the importance of
the Murray River to New South Wales, Victoria and South Australia
and the residents of those States and the apprehensions entertained
by them as to the impact of the Commonwealth's legislative powers
under ss. 51(i) and 98. Time does not permit an examination of this
aspect of our history. And in any event the legal answer to the
question is that we must give preponderant weight to the
significance of the expression "law or regulation of trade and
commerce" used in ss. 99 and 100 which, as we have seen, confines
the prohibition to laws made, or capable of being made, under ss.
51(i) and 98.(5)
In the absence of any recent judgments commenting on section
100, it is difficult to speculate on what the current High Court
might rule. It seems clear from the Franklin Dam case that
the supply of electricity for profit would be seen as a trading
activity (as in that case the building of a dam was held to be a
preparatory act of trade) and therefore, presumably, the law
enabling the Snowy Mountains scheme to proceed was a law with
respect to 'trade or commerce'. Expert constitutional lawyers Lumb
and Moens regard the 'better view' as being 'that s 100 does not
confer riparian rights on those States but merely obliges the
Commonwealth to recognise such rights when legislating under its
heads of power'(6).It is a possibility that the High Court, if
asked, might interpret section 100 as giving the States a right of
access to water for 'conservation and irrigation' but perhaps more
likely that they would find that the section merely impeded the
legislative power of the Commonwealth.
The Environmental Issues
There are a number of concerns about the Bill and related
matters, that have been expressed by environmental groups.These are
essentially:
- the timing of the legislation (ie prior to the environmental
study);
- the handing over of control to a corporate entity for 75 years
(with a 50 year renewal option);
- the flow rate of the Snowy River;
- the likelihood that if any changes are made to increase the
water flow rate, compensation must be paid to the corporate
entity/private company; and
- the effect on the native fish population.
After corporatisation, the Snowy Hydro will be subject to the
New South Wales laws generally with respect to environmental law,
planning law and laws regarding water regulation.
Concern has also been expressed, in relation to the flow rate of
the Snowy, that a corporate entity will have to put profit above
the environment:
We are concerned that control of a large slab of south eastern
Australia's water will be placed in the hands of a company, whether
Australian or foreign, that will fight vigorously to maximise the
profits, resource availability, use at the expense of the
environment and community values.The people along the Snowy River
are fearful that corporatisation legislation will set up a priority
for profit on power generation ahead of other more valued
uses.These fears are exacerbated by the proposal in the New South
Wales legislation to grant an unprecedented 75 year water licence
to the corporatised body, with a 50 year option to renew.(7)
The fact that the Commonwealth legislation is being enacted so
as to take effect when the NSW and Victorian bills become law is
also seen as a concern from an environmental view point.This is
because it is argued that the Commonwealth will be merely
"rubber-stamping" the environmental assessment done by NSW.Mr Paul
Leete, Chairman of the Snowy River Alliance gave evidence to the
Senate Finance and Legislation Committee that:
we believe that these issues of water, electricity and
irrigation need to be up-front.We believe that the scheme is a
national asset.It is going to be one of the biggest natural
resource management decisions for the last 50 years and, under the
current terms of licence, it will go into the 22nd century.We
believe that the key to all of this is the natural resource
management.Even so, I know that the federal bill only relates to
electricity.(8)
Mr Leete also saw the potential for the arrangement to be costly
to the taxpayer in the future:
If there is going to be compensation involved, we believe that
there will be great reluctance by governments to alter those
arrangements.Given the length of term of the licence, it would be
quite foreseeable to see a situation, in 10 or even 20 years time,
where there needs to be significant changes in those
arrangements.That could mean we could be paying the Snowy Hydro,
which could be a privatised company by then, compensation for over
100 years.(9)
The Reasons Given for the Bills
The second reading speech identifies a number of reasons as to
why the Snowy Mountains Hydro-electric Authority should be
corporatised.These include:
- the fact that there has been consistent support 'for
corporatisation of the Snowy Scheme by successive Commonwealth and
State governments';
- to 'ensure that the benefits of competition reform in
Australia's electricity industry can be accessed by the Snowy
Scheme';
- to allow the Snowy Scheme to operate commercially in the
national market;
- to allow the Snowy to 'change from cost based to profit based
operations';
- to remove the 'outdated and inefficient' dual management
scheme;
- to allow for the accelerated repayment of the debt owed to the
Commonwealth (current value around $740 million);
Clause 3 notes that the Bill is to operate concurrently with the
New South Wales and Victorian Snowy Hydro Corporatisation
Acts.However, these Acts have yet to be passed.The Victorian
Snowy Hydro Corporatisation Bill had its second reading
moved 18 September 1997 and debate was 'to be resumed' as of 11
October 1997.This was criticised by Mr Leete, Chairman of the Snowy
River Alliance.Mr Leete was of the opinion that: 'if the parliament
passes this legislation before a decision is made between the
states, then the parliament has rubber stamped any decision that
the states might make'
Clause 7 provides that the Commonwealth may
hold (or sell) shares in the Snowy Hydro Company.According to the
"Corporatisation Principles" it has been agreed that the equity in
Snowy Hydro will be as follows:
Commonwealth 13%
Victoria 29%
New South Wales 58%
Clauses 8 and 9 provide that the Snowy
Hydro-group company will not be affiliated with the Crown but will
be an independent company and therefore the Commonwealth will not
be responsible for any debts incurred by the company.
Clause 10 provides that all the assets and
liabilities (other than those relating to the transmission
undertaking which is described in clause 12 below) of the Snowy
Mountains Hydro-electric Authority will be transferred to the new
Snowy Hydro Company just before the date of corporatisation (which
is the date upon which the Snowy Mountains Hydro-electric Power
Act 1949 is repealed).Water is expressly excluded from the
list of assets.
Clause 12 provides that the Minister may direct
those assets or liabilities connected with the transmission of
electricity generated by the Snowy Scheme to be transferred to
TransGrid at a price to be 'determined by agreement between the
Commonwealth, New South Wales and Victoria'.The 'Corporatisation
Principles' state at paragraph 4.3 that this will be at 'an agreed
fair market value' but they do not set out how this might be
calculated.
Clauses 13, 14 and 15 deal with loans owed by
the Snowy Mountains Hydro-electric Authority to the
Commonwealth.The Commonwealth Minister for Finance is to set out in
a written instrument the full amount owed to the Commonwealth by
the Authority and then must lend this same amount to the
Authority.The terms and conditions of the loan must also be in the
written instrument of the Finance Minister.
Clauses 17 and 18 allow certain other loans
currently held by the Authority to be taken over by the
Commonwealth and provide that the Treasurer may authorise the
payment of money to discharge those loans.The rights and
obligations of those loans then become the Commonwealth's.
Clause 19 applies sections 5A, 5B, 5C and parts
of 5D of the Loans Securities Act 1919 to the loans taken
over by the Commonwealth under clauses 17 and 18.Those provisions
of the Loans Securities Act 1919 essentially authorise the
Treasurer, or delegate,to do all acts necessary to borrow money
from overseas, including submitting to the jurisdiction of foreign
courts.
Clause 20gives the Minister for Finance broad
power to determine the amount payable to the Commonwealth under the
borrowing transactions.The terms and conditions of the loan,
however, are to be as agreed between the Commonwealth, New South
Wales and Victoria.
Part 4 - Transfer and rights of employees
As the Bill will be timed to coincide with the abolition of the
Authority, provision is made in this part of the Bill for the
current employees of the Authority.Essentially they will move to
the Snowy Hydro Company as at the date of corporatisation, and will
retain their employment benefits together with the terms and
conditions of their current employment (proposed section
23).Although, Clause 24 provides that
those terms and conditions of employment can be varied after
corporatisation.Significantly, this could mean that conditions are
omitted or substituted.
Long Service Leave
Clauses 26-32 deal with the transfer of
long-service leave credits from the Authority to the Snowy Hydro
Company.There is a guarantee that credits will be transferred as at
the date of corporatisation and for those employees with less than
10 years service in the Authority at that date there are provisions
for their service to be 'combined service' between the Authority
and the Snowy Hydro Company.
Employees who already have 10 years service prior to the
corporatisation date, will be protected under proposed
section 32.
Occupational Health and Safety
The Safety, Rehabilitation and Compensation Act 1988
will continue to apply to the Snowy Hydro Company after
corporatisation and employees will have the same protection and
benefits, as they currently enjoy, after that date.
Maternity Leave
The existing maternity leave conditions of Authority employees
will be preserved for the first 12 months of their employment with
the Snowy Hydro Company.This means that women who were on maternity
leave, about to go on to maternity leave or would have been
eligible for maternity leave within the first twelve months after
the date of corporatisation will still be covered by the
Maternity Leave (Commonwealth Employees) Act 1973.
Division 5 - Other transitional and saving provisions
Clauses 40-46 provide for the continued
application of some Acts and the phasing out of others to cover the
transition period from the Authority ceasing to exist and the Snowy
Hydro Company commencing.
For example persons who were eligible for benefits under the
Defence Force Retirement and Death Benefits Act 1973 are
deemed to still be in public employment for the purposes of
retaining those benefits.
The provisions relating to corruption offences under the
Crimes (Superannuation Benefits) Act 1989 remain in place
for those employees who were employed by the Authority and have
transferred across to the Snowy Hydro Company.Thus people who
committed offences under that act may have their superannuation
benefits held or confiscated (by way of a restraining order against
their property).
Offences may still be prosecuted and civil remedies may still be
taken after the corporatisation date in relation to acts, omissions
or proceedings in connection with the Authority.Clause
43 preserves the application of the Director of Public
Prosecutions Act 1993 for this purpose.
Section 55E of the Judiciary Act 1903 allows the
Australian Government Solicitor to act for the Crown and certain
specified office holders in relation to legal proceedings.The
Authority qualified for such representation and therefore
Clause 44 preserves the Authority's entitlements
in this regard in relation to cases already commenced or
proceedings commenced in respect of things that happened whilst the
Authority was still in existence.
Clause 45 provides a formula for calculating a
refund payable to the Snowy Hydro Company in respect of payments
made by the Authority under the Occupational Health and Safety
(Commonwealth Employment) Act 1991. The refund will relate to
payments for the period after incorporation.
Staff of the Authority will lose their rights of mobility that
they had pursuant to the Public Service Act 1922 as at the
day of corporatisation.
Part 5 - Miscellaneous
The Corporatisation Principles make it clear that the aim of the
bills is to create a financially viable corporatised entity (Snowy
Hydro) to operate on a competitively neutral basis and which is
able to effectively participate in the emerging national
electricity market.
Clause 49 limits the costs involved in
transforming the Authority into the Snowy Hydro by providing that
the initial steps involved in corporatisation are not subject to
taxation.For example, the issue or transfer of shares (to the
Commonwealth, Victoria or New South Wales) in the Snowy Hydro
Company will be exempt from tax.
Clause 53 provides that assets will vest in the
Snowy Hydro Company or in TransGrid as the case may be and the
transfer in ownership should be noted in the usual way (eg in the
case of land, on the certificate of title).This provision links in
with clause 47 whereby the Commonwealth can enter
into an agreement with NSW to share the cost of any land tax
payable as a result of either the Snowy Hydro Company or TransGrid
acquiring land by virtue of the Bill.
Clause 56 relates to personal information and
other assets or records currently held by the Commonwealth in
respect of the Authority and its employees.Proposed subsection
56(5) specifically authorises the disclosure by the Snowy Hydro
Company of personal information about its employees who were
previously employed by the Commonwealth.Without this exemption the
Privacy Act 1988 would prevent the release of that
personal information.
Clause 59 repeals the Snowy Mountains
Hydro-Electric power Act 1949. The date that this act is
repealed is defined as the date of corporatisation of the Snowy
Hydro Company.Clause 2 provides that a
Proclamation may not be made fixing a day for the commencement of
proposed section 59 unless the Minister is satisfied that there is
agreement between the Commonwealth, Victorian and New South Wales
Governments.
- Second Reading Speech p2.
- Collis, B Snowy: The Making of Modern Australia
(1990), Hodder & Stoughton (Aust) Pty Ltd at p38.
- Ibid, Collis's words not a direct quote of Menzies.
- Ibid p38.
- The Commonwealth Of Australia v. Tasmania. The
Tasmanian Dam Case (1983) 158 CLR 1 at 498-99.
- Lumb, R.D & Moens, G.A. The Constitution of the
Commonwealth Of Australia Annotated (5th Ed) 1995,
Butterworths, at p490.
- Submission of the Snowy River Alliance to the Senate
Finance and Public Administration Legislation Committee report on
the provisions of the Snowy Hydro Corporatisation Bill
1997 and the Snowy Hydro Corporatisation (Consequential
Amendments) Bill 1997 ,October 1997, p20.
- Senate Committee Proof Hansard, 26 September 1997, p
33.
- Senate Committee Proof Hansard, 26 September 1997, p
35.
Susan Downing
29 October 1997
Bills Digest Service
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ISSN 1328-8091
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