Bills Digest no. 54 2005–06
Energy Efficiency Opportunities Bill
2005
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Energy Efficiency Opportunities Bill
2005
Date Introduced: 14 September 2005
House: House of
Representatives
Portfolio: Industry, Tourism and Resources
Commencement: On Royal Assent.
The Bill establishes an Energy
Efficiency Opportunities program under which corporations that are
large energy users are required to assess the potential to improve
their energy efficiency and report publicly on the assessment. They
are not bound to actually implement any measures in their
assessment report. This measure was foreshadowed in the Government
s June 2004 energy white paper Securing Australia
s energy future.
A National Greenhouse Response Strategy (NGRS) was adopted by
the Council of Australian Governments in 1992 and, as a
contribution to the NGRS, in 1995 the Commonwealth Government
established a Greenhouse Challenge Office which was charged with
the task of liaising with industry enterprises. In June 1996, the
initial group of industry bodies signed up their commitment to the
Greenhouse Challenge. With the voluntary agreements in place, by
1999 there were commitments to reduce greenhouse gas emissions
relating to over 250 important sites across
Australia.(1)
Separately, the Industrial Energy
Efficiency Project undertaken by the Warren Centre for Advanced
Engineering at the University of Sydney had a primary aim to
demonstrate to Australian industry the financial benefits of energy
efficiency. It was to show how significant savings can be achieved
through the application of inexpensive, cost-justified techniques.
The project, which ran from 1997 through to 1999, was built on five
case studies that would each highlight techniques to increase
energy efficiency and which can be applied widely throughout
Australian industry.
Around 60 specific opportunities for
energy savings were identified across the five case studies. Nearly
a third of the opportunities related to better measurement and
control, and a further quarter called for improvements to
operational procedures. These twin themes of better measurement and
better operation emerged time and again throughout the project. In
over 50 per cent of the cases, realising the benefits required
improvements in measurement, control and reporting of energy use.
And some required simple changes to operating and maintenance
procedures, and needed no capital expenditure.
In 2003, change to administration of
the Greenhouse Challenge scheme was followed by the loss of 77
corporations from the program. According to the Government, most of
the companies that withdrew from the scheme were small businesses
that had found they were unable to afford the additional costs
incurred of monitoring and reducing greenhouse emissions. However,
the Greenhouse Challenge program has recovered since to reach
agreements with some 780 companies.
On 15 June 2004, the Prime Minister
released a national energy white paper, 'Securing
Australia's Energy Future'(2). Regarding energy
efficiency, the paper stated:
the government will require large energy users to
undertake a rigorous assessment of energy efficiency opportunities
every five years starting in 2006. These assessments will be
undertaken consistent with an improved Australian standard and will
be designed to identify energy efficiency investments with a
payback of four years or less. Firms will be required to report
publicly on the outcomes of the assessment, and will be free to
make decisions on investments identified via their normal business
processes. The government will act to ensure the assessments are
rigorous and comprehensive, and to disseminate the lessons learned
to the wider business community. Public reporting will be designed
to provide the markets with useful information while protecting
firms reasonable commercial interests. Details of the regime will
be developed in consultation with relevant stakeholders.
The issue of energy efficiency
improvement in the private sector was also an issue included in the
National Framework for Energy Efficiency, specific
implementation of which was agreed by Australian state and federal
energy ministers in August 2004.
The launch of Greenhouse
Challenge-Plus, in March 2005 integrated two other industry
focused measures (the Generator Efficiency Standards and Greenhouse
Friendly initiative). Greenhouse Challenge Plus was designed to
reduce greenhouse gas emissions; accelerate the uptake of energy
efficiency; integrate greenhouse issues into business
decision-making; and provide more consistent reporting of
greenhouse gas emissions levels.
The Productivity Commission, in its April 2005 draft
report on energy use, indicated strong reservations about the
proposed Energy Efficiency Opportunities program. Whilst noting
that the lack of full information about the program made it
difficult to make a conclusive assessment , the draft report
suggested a number of potential problems can be identified . These
include:(3)
-
The criterion of amount of energy was arguably
counter-intuitive and counter-evidentiary
-
The possible administrative costs, procedural difficulties and
verification of energy efficiency assessments.
It also stated:(4)
However, the most significant weakness of the
Energy Efficiency Opportunities assessment (EEOA) framework is the
context in which it is to be applied. While the EEOA policy does
not specify what barriers to energy efficiency it seeks to address,
judging from the consultation report and the DITR presentation to
stakeholders, it appears that the main issue is the perceived lack
of managerial attention to energy efficiency matters.
The Commission reiterates its strongly held view
that organisational barriers alone cannot justify regulatory
intervention. To the extent that firms feel compelled by the EEOA
process to invest in projects they would otherwise reject, the EEOA
would distort investment decisions and reduce overall cost
effectiveness. Competitive pressures on firms give them strong
incentives to maximise their efficiency. This is particularly true
for industrial firms competing in export markets, which make up a
large proportion of the organisations targeted by the EEOA.
However, the Government argues that if it did not
proceed with a mandatory energy efficiency opportunities assessment
program for large energy users, then an inefficient status quo
would prevail. A final report was submitted by Productivity
Commission to the Treasurer in late August, but has yet to be
publicly released.
According to the Warren Centre study,
total energy consumption for Australia is 3000 petajoules per annum
and is estimated to cost A$40 billion annually. Industrial energy
consumption is 40 per cent, giving an energy bill of A$16 billion
per year. Although many firms now achieve impressive economic
returns by using energy more efficiently, numerous studies continue
to uncover significant potential. Experience in Australia and
overseas has demonstrated that it is possible to save 10 to 15 per
cent of this over a five year program. This would result in reduced
costs of up to A$2 billion annually, strengthening Australian
industry and making it more competitive in world markets.
It is likely that energy is about 5
per cent of a company s total manufacturing costs, but it is not a
fixed overhead, but rather a controllable cost, and for many
manufacturers it is equivalent to half the annual profit. Saving 10
per cent of that energy will provide a 5 per cent increase in
profits and, in most cases, will give more production capacity.
Improving operations should be the core of any significant energy
management activity. These suggestions of possible efficiency
improvement rates seem to accord with the estimates contained in
the circulated Explanatory Memorandum, which also notes the
organisational barriers to energy efficiency improvements facing
businesses today.
The Explanatory Memorandum states
that the 250 largest energy user companies were identified in an
Australian Bureau of Statistics (ABS) study. The ABS 2001-02 Energy
Survey conducted in 2003 provides a breakdown of the surveyed
entities. The top 250 businesses accounted for 62.2 per cent (or
1219.4 petajoules) with most from the mining and manufacturing
industries. Of the largest 250, 47.2 per cent are in the
manufacturing industry, 20.6 per cent are in the mining industry
and 10.4 per cent are from the transport industry. However, as the
Explanatory Memorandum notes, some large commercial sector
businesses such as retail chains and banks are affected. The
Explanatory Memorandum provides extensive information on business
compliance cost estimates as well as expected benefits suggesting a
decade s financial benefit around $760 million.
By way of comparison, the Victorian
Environment Protection Agency (EPA) has conducted a program for
Greenhouse Gas Emissions and Energy Efficiency in Industry. In
part, this requires certain operations that operate under EPA
statutory approvals to examine and implement measures to improve
energy efficiency and reduce greenhouse gas emissions. The
legislative requirement to implement measures that meet certain
benchmarks (mainly relating to the payback period) distinguishes
the Victorian program from the proposed Commonwealth Energy
Efficiency Opportunities assessment program. Following the three
year implementation period (2004 to 2006), it is anticipated that
Victorian companies will achieve greenhouse gas emission reductions
of approximately 1.15 million tonnes of carbon dioxide annually. In
this program, existing EPA license holders are required to report
annual energy usage and associated GHG emissions and to undertake
an energy audit, if usage and emissions are above threshold
values.(5)
In the context of an energy
efficiency scheme, it is notable that, in addition to certain power
and water utilities, the operations subject to the EPA statutory
approvals generally only include industrial type operations. A
large white-collar office building operated by one company which
has a large energy use due to electronic equipment, air
conditioning etc would apparently not be subject to the
scheme. It is understood that this limitation being reviewed with a
view to considering and expansion of the program s scope.
New section 3 sets out the object of the Bill
to improve the identification and evaluation of energy efficiency
opportunities by large energy using businesses and, as a result, to
encourage implementation of cost effective energy efficiency
opportunities .
New section 5 gives effect to the various
provisions in Schedule 1. Schedule
1 sets out the enforcement provisions where a
contravention of a civil (as opposed to criminal) penalty provision
occurs. Presumably these provisions are contained in a Schedule,
rather than the main part of the Bill, for drafting simplicity.
New sections 6-8 contain definitions of holding
company controlling corporation and group . One of the reasons
these definitions are important is because a controlling
corporation s obligations under the Bill - see for example the
commentary on new section 9 below - depend on the
amount of energy used by it and its subsidiaries(6)
(collectively the group ), rather than just the controlling
corporation alone.
Starting from the 2006 financial year, a controlling corporation
whose group has a collective annual energy use(7) over a
threshold of 0.5 petajoules must apply to be placed on the Register
of Corporations for the Energy Efficiency Opportunities Scheme (the
Register): new subsection 9(1). Application for
registration can be done up to nine months after the end of the
year ( trigger year ) in which the threshold was exceeded. If for
some reason the corporation did not know that the 0.5 petajoule
threshold was exceeded in the trigger year, and could not have
ascertained this through reasonable diligence, there is no
obligation to register: new subsection 9(2). It is
up to the corporation to prove that it could not have ascertained
that it exceed the threshold: new subsection 9(3).
A failure to apply to be registered is a contravention of civil
penalty provision see clause 1 of Schedule
1.
Even where a group has exceeded the energy use threshold for a
trigger year, registration is not required where an exemption is
granted by the Secretary of the Department of Industry, Tourism and
Resources (the DITR Secretary) under new section
11. As long as certain procedural conditions have been
met, the DITR Secretary must grant the exemption
application if he or she is satisfied that the corporation s energy
use will not exceed the threshold in the year immediately following
the trigger year: new subsection 11(5).
Part 4 (new sections 12-14) contain various
administrative matters relating to the Register. The contents of
the Register must be made available to the public by electronic or
other means : new subsection 12(3). Besides the
names of the relevant corporations, the information on the Register
is to be determined by regulation: new paragraph
12(4)(b).
Part 5 (new sections 15-19) deal with energy
efficiency assessment plans. Essentially, such plans must set out
the particular actions by which the corporation intends to assess
opportunities for improving its energy efficiency: new
subsections 18(1) and (4). Only corporations registered
under Part 4 need to submit an assessment plan.
The life of the plan is 5 years: new subsection
18(2). The various actions contained within them must have
deadlines attached to them: subsection 18(6). More
detail regarding general assessment plan requirements may be set
out in regulations, including the types of actions for the
assessment of energy efficiency opportunities and deadlines for
them: new subsection 18(8).
Assessment plans are to be given to the DITR Secretary within 18
months of the end of the trigger year and thereafter every 5 years:
new subsections 15(1)-(3). Regarding the plan, the
Explanatory Memorandum comments:(8)
The information provided to the Department under
this clause will be treated as commercial in confidence. Reference
is made to section 70 of the Crimes Act 1914 to make clear
that the appropriate treatment of confidential information by
Commonwealth Officers is covered by that provision.
A failure to submit a plan is a contravention of a civil penalty
provision see clause 1 of Schedule
1.
Assessment plans are subject to approval of the DITR Secretary.
The DITR Secretary must approve a plan if they are
satisfied that it substantially meets the requirements of
new section 18. If they are not satisfied that it
substantially meets the requirements of new section
18, they must refuse to approve it, and prepare a revised
plan that does so: new subsections 17(1)-(3). The
DITR Secretary must invite the relevant corporation to comment on
the revised plan within a specified period : new paragraph
17(3)b). After considering any comments, the DITR
Secretary can either approve the plan as is, or revise it again and
seek further comments: new subsections 17(4)-(5).
A revised plan, whether it be revised once or several times, can
only be approved if the DITR Secretary is satisfied that it
substantially meets the requirements of new section
18.
A theoretical consequence of the DITR Secretary s powers under
new section 17 is that a corporation may have an
approved plan that it does not agree with. However, new
section 19 allows a corporation that has an approved plan
in place to request a variation to that plan. The DITR Secretary
may either approve or refuse to approve it. The DITR Secretary
must approve the variation if they are satisfied that the
amended plan substantially meets the requirements of new
section 18. However, if it is refused, the DITR Secretary
takes no further action. It would be up to the corporation to
submit another request for variation that takes into account any
reasons given by the Secretary for refusal.
Part 6 (new section 20) provides that a
corporation must carry out the proposed actions contained in the
assessment plan. Regulations may set out further requirements for
this. The Explanatory Memorandum comments that the regulations
might require:(9)
Firstly, [corporations] will have to assess the
business objectives for energy use and reduction (if any).
Secondly, they will have to measure and analyse energy efficiency
data. Finally, they will undertake a process to a minimum standard
that identifies and evaluates energy efficiency opportunities.
A failure to carry out apply the proposed actions is a
contravention of a civil penalty provision see clause
1 of Schedule 1.
Part 7 (new sections 21-22) require periodic
reporting both to the public and the DITR Secretary. The frequency
of such reporting is to be set by regulation. The assessment plan
itself is not required to be made public. Under new
subsection 22(3), both the public and DITR Secretary
reports must contain:
-
a description of the way in which the corporation has carried
out, during the period, the proposal in its approved assessment
plan for assessing the opportunities for improving the energy
efficiency of its group;
-
the results of carrying out that proposal;
-
the response of the corporation to those results; and
-
any other information required by the regulations.
Regulations may set out additional required contents for the
report to the DITR Secretary. Virtually all other aspects of
reporting, including the form of the report, and the timing and
manner of release to the public are to be governed by regulations.
The report to the public must be signed off by the corporations
Chairperson (or equivalent): new subsection 22(4).
For whatever reason, there is no explicit requirement for this in
the report to the DITR Secretary.
A failure to comply with the Part 7 reporting requirements is a
contravention of a civil penalty provision see clause
1 of Schedule 1.
Part 8 (new sections 24-38) deal with powers of
inspection. They are a fairly standard set of powers, encompassing
powers such as entry of officials onto premises, search and
securing of evidential material, issue and use of warrants, and the
conditional ability to compel the answering of questions /
production of documents.
The persons that exercise the Part 8 powers are
called authorised officers . These are appointed by the DITR
Secretary and must be either an officer or employee of the DITR or
a suitably qualified person : new section 25. No
guidance is given on what would constitute suitable qualifications.
Perhaps this could be dealt with in regulations. As is usual, such
officers are subject to the direction of the Secretary in
exercising their powers or performing their functions.
New section 26 is a standard provision on
identity cards. Importantly, a related provision is that an
authorised officer cannot exercise their powers with respect to
premises if they fail to produce their identity card if so required
by the occupier of the relevant premises: new subsection
30.
Entry into premises by authorised officers must be under a
warrant or by the consent of the occupier. If seeking the consent
of the occupier to enter premises, the authorised officer must
inform them that they may refuse consent: subsection
31(1). However, there is no obligation to tell the
occupier that they may withdraw consent after entry this contrasts
with other legislation for example subsection 49(2) of the
Water Efficiency Labelling and Standards Act 2005. Consent
must be voluntary for entry without a warrant to be lawful:
new subsection 31(2).
Under new section 32, when entry is done
pursuant to warrant, the authorised officer must announce that they
are authorised to enter the premises and to provide any person at
the premises with the opportunity to let them in. If the occupier
of the premises (or someone who apparently represents the occupier)
is present during the execution of the warrant, the authorised
officer must identify themselves to the occupier and make available
a copy of the warrant: new subsection 33(1).
Once entry is gained through consent or by warrant, authorised
officers may exercise various powers listed in new section
28 essentially they are to search the premises and
anything on them, inspect records and documents and take extracts
or copies of them. Evidential material can only be seized by a
warrant, although can be secured until a warrant is obtained:
new paragraph 28(1)(h). There is no express
limitation of how long evidential material may be secured if there
is a delay in obtaining a warrant to seize it.
If entry is by warrant, an authorised officer can require the
occupier of the premises (or someone who apparently represents the
occupier) to answer questions and produce documentation:
new subsection 29(2).(10) Failure to
comply with such a request is an offence carrying a maximum penalty
of six months imprisonment.(11) There is no requirement
on the part of the authorised officer to warn a person about the
penalty for non-compliance. Note that new subsection
29(4) provides that a person is not obliged to comply with
the demand if this would tend to incriminate them or expose them to
a penalty. Again, there no requirement on the part of the officer
to inform a person that they are excused from complying under the
self-incrimination provision.
New section
37 is a standard provision regarding the obligation of the
occupier (or someone who apparently represents the occupier) to
provide all reasonable facilities and assistance for the effective
execution of the authorised officer s powers where entry is via
warrant. However, there is no exp
licit exemption from this obligation even where compliance might
tend to incriminate the person or expose them to a penalty. Failure
to comply with new section 37 is an offence
carrying a maximum penalty of 30 penalty units ($3 300). Again
there is no requirement on the part of the authorised officer to
warn a person about the penalty for non-compliance.
New section 38 deals with the issuing of
warrants (termed monitoring warrants ) and is a fairly standard
format. The issuing magistrate must be satisfied, by information on
oath or affirmation, that access to the premises is necessary for
the purpose of (i) substantiating information provided under the
Act or (ii) determining whether the Act has been complied with.
There is no ability to apply for warrants by fax, telephone etc. A
warrant authorises the authorised officer to enter the named
premises using such force use as is necessary and reasonable .
Part 9 (new sections 39-41) deals with
miscellaneous matters.
New section 38 allows the DITR Secretary to
delegate his or her powers under this Act to a DITR SES
employee.
New section 39 provides for Administrative
Appeals Tribunal (AAT) review for various decisions made by the
DITR Secretary. Notably these include a decision not to grant an
exemption for registration under new section 11
and decisions regarding approvals of assessment plans under
new section 17.
New section 41 is a standard regulation-making
power.
Under clause 1, there are five provisions of
the Act for which a contravention constitutes a civil penalty
provision . These are
-
corporation must apply to be registered (new subsection
9(1))
-
provision of an assessment plan by a registered corporation with
a relevant specified period specified (new subsection
15(5))
-
carrying out of assessments as per the approved assessment plan
and any regulatory requirements (new subsection
20(4))
-
public reporting (new subsection 22(1))
-
reporting to the DITR Secretary (new subsection
23(1))
A decision on whether a contravention has occurred is made by
the Federal Court on application of the Minister(12):
clauses 1 and 4. The rules of evidence and
procedure for civil matters(13) apply to a hearing in
determine the matter: clause 6. If the Court finds
a contravention, and deems it serious , it may order a penalty
payable to the Commonwealth of up to 1000 penalty units ($110 000):
clause 3. Clause 11 provides that
in certain instances where a civil penalty contravention appears to
have occurred, but that the corporation acted honestly and that,
having regard to relevant circumstances, it ought to be excused for
the contravention, the Court may relieve it wholly or partly from
any civil liability.
Clauses 7-9 deal with double jeopardy matters.
The Federal Court cannot make a declaration of contravention or
order a pecuniary penalty where the relevant corporation has
already been convicted of a criminal offence constituted by conduct
that is substantially the same : clause 7. If
criminal proceedings have started, the civil proceedings are
stayed, but can be resumed if the corporation is not convicted of
the criminal offence: clause 8. A criminal
prosecution can proceed for substantially the same conduct even
after a declaration or contravention or pecuniary penalty order has
been made: clause 9.
Subclause 10(1) enables the Minister to require
a person to provide all reasonable assistance in relation to civil
or criminal proceedings under the Act. There are various
limitations to this power in subclauses 10(2)-(3) and
(5), mainly relating to whether the person was themselves
possibly involved in the contravention or offence (a
self-incrimination issue) or are, or have acted as, lawyers for
relevant persons or corporations. The Minister may seek a Federal
Court order to direct a person to comply with the subclause
10(1) requirement in specific way : subclause
10(7). A failure to comply with the requirement carries a
5 penalty unit penalty presumably there would also be a question of
contempt of court if any Federal Court order was not complied
with.
Concluding Comments
As is not unusual for Commonwealth industry regulatory
legislation, much of the actual implementation of the Energy
Efficiency Opportunities program will be spelt out in regulations.
Examples include:
-
meaning of the term energy used
-
information to be contained on the Register of Corporations for
the Energy Efficiency Opportunities Scheme
-
additional energy efficiency opportunities assessment plan
requirements
-
the frequency of reporting on a corporation s energy efficiency
opportunities assessment, and
-
the timing of the release of the public report on a corporation
s energy efficiency assessment
When these regulations are released, it
will important that adequate Parliamentary scrutiny is given to
them to ensure the effective and open operation of the
program.
Substantial powers are given to authorised officers under the
powers of inspection in Part 8. A failure by
occupiers of premises (and certain other persons in some cases) to
comply with these powers can result in substantial fines or even
imprisonment. Whilst Part 8 generally includes
sufficient safeguards covering the exercise of these powers, the
main provisions section of this Digest notes a few instances where
the Bill seems, at least on the face of it, to be silent on the
issue.
-
Minister for Industry, Science and Resources, Greenhouse
Challenge delivers results , Media Release 99/346, 24
October 1999.
-
Securing Australia's Energy Future,
p. 113.
-
Draft report, pp. 188 189.
-
ibid., p. 189.
-
John A Marsigio, Greenhouse gas emissions and energy efficiency
in industry EPA Victoria s role in the Victorian Greenhouse
Strategy , Unpublished Conference paper, April 2005.
-
And possibly joint ventures or partnerships in which the
corporation is involved: see new subsection
10(2).
-
New subsection 10(3) provides that the termed
energy used is to be defined be regulations.
-
Explanatory Memorandum, p. 101.
-
Explanatory Memorandum, p. 103.
-
If entry is by consent, the authorised officer may only request
answers and documentation.
-
The standard Criminal Code offence provisions of giving
false or misleading evidence would also apply.
-
The responsible Minister is the Minister for Industry, Tourism
and Resources.
-
For example, the decision is presumably made on the balance of
probabilities.
Angus Martyn and Matthew James
11 October 2005
Bills Digest Service
Information and Research Services
This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
professional legal opinion.
IRS staff are available to discuss the paper's
contents with Senators and Members and their staff but not with
members of the public.
ISSN 1328-8091
© Commonwealth of Australia 2005
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by members
of the Australian Parliament in the course of their official
duties.
Published by the Parliamentary Library, 2005.
Back to top