Bills Digest No. 171 2003-04
Australian Energy Market Bill 2004
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
Australian
Energy Market Bill 2004
Date Introduced: 17 June 2004
House: House
of Representatives
Portfolio: Industry, Tourism and Resources
Commencement: The main provisions commence on Proclamation, or, if this does
not occur within 12 months of Royal Assent, on the first day after the
end of that period.
To apply the National Electricity Law (NEL), the National
Electricity Regulations and the National Electricity Code as Commonwealth
law in offshore areas as part of a uniform scheme of national electricity
regulation.
In June 2001, the Council of Australian Governments (CoAG) established
the Ministerial Council on Energy (MCE) to provide effective policy leadership
to meet the opportunities and challenges facing the energy sector and
to oversee the continued development of a national energy policy.
The Council comprises Ministers with responsibility for energy from the
Australian Government and all States and Territories. The Australian Government
Minister for Industry, Tourism and Resources chairs the Council and the
Department provides secretariat support.
The CoAG's Energy Market Review (the Parer Review) was presented to Government
in December 2002 in a report titled Towards
a Truly National and Efficient Energy Market.(1)
The MCE has agreed to introduce a cooperative national legislative framework
for the Australian energy market on a collaborative basis between Commonwealth,
State and Territory Governments and pursuant to a new inter-governmental
agreement, titled the Australian Energy Market Agreement, being
finalised by CoAG.(2) Under this agreement, the MCE is to
assume a national policy oversight role for the Australian energy market,
including for electricity and gas, superseding the National Electricity
Market Ministers Forum.
The Parer Review found that the current multiplicity of regulators creates
a barrier to competitive interstate trade and adds costs to the energy
sector. There are currently 13 regulators operating across every layer
of commercial activity. The Australian Government has worked with State
and Territory governments to achieve a reform package that will see a
significant reduction in the regulatory burden facing market participants
and investors in the energy sector.(3)
The MCE announced on 11 December 2003 that it had finalised policy decisions
for its major energy market reform program. Recommendations included the
establishment of two new statutory commissions to be established on 1
July 2004, funded by an industry levy: the Australian Energy Market Commission
(AMEC) with responsibility for rule-making and market development and
an Australian Energy Regulator (AER) responsible for market regulation.
To streamline and improve the quality of economic regulation, lower the
cost and complexity of regulation facing investors and enhance regulatory
certainty, all governments agreed to establish the AER as a single, national
energy regulator. The Trade Practices Amendment (Australian Energy Market)
Bill 2004 (see separate digest) seeks to implement this agreement.(4)
According to a Commonwealth Government information paper, transfer of
responsibilities to the AER and AEMC is to be in accordance with the following
timetable:
-
rule-making for, and regulation of, electricity wholesale and transmission
in the participating National Electricity Market (NEM) jurisdictions
– i.e. all States and territories except Western Australia and the
Northern Territory, which are not linked into a national grid because
of the distance from the national electricity market – from the second
half of 2004
-
rule-making for gas pipelines access, from July 2005
-
regulation of gas transmission for all other than Western Australia,
from July 2005
-
provision will be made for the Northern Territory and Western Australia
to join for electricity regulation, and Western Australia for gas
pipeline access regulation under the AER, by agreement, and
-
the AER will assume responsibility for national regulation of distribution
and retailing (other than retail pricing) by 2006, following development
of an agreed national framework. (5)
Each NEM jurisdiction, together with the Commonwealth, will enact amendments
to its electricity legislation using 'template' legislation agreed by
the MCE.(6)
The template legislation:
-
defines and recognises the AER, a Commonwealth body, in each NEM
jurisdiction
-
authorises the AER to perform functions conferred by the NEL, the
NEL Regulations and described in the Code in each of the participating
jurisdictions
-
defines and recognises the AEMC – to be established in South Australian
legislation as a separate statutory commission – in each jurisdiction,
and
-
authorises the AEMC to carry out functions that are conferred by
the NEL, the NEL Regulations and described in the Code, in each of
the participating jurisdictions of the NEL (in addition to being able
to do so in South Australia).(7)
Under the current Bill the Commonwealth will pass its own application
provisions for 'offshore' areas of the Commonwealth outside the jurisdiction
of the States to ensure uniform application of the new national electricity
laws.
Initially the AER will have responsibility for the economic regulation
of wholesale electricity and transmission networks and enforcement of
the National Electricity Code. It will undertake the regulatory and enforcement
functions previously exercised by the Australian Competition and Consumer
Commission (ACCC) and the National Electricity Code Administrator (NECA).(8)
Part 2 of the Bill contains the key provisions.
Clauses 6 to 8 apply the South Australian electricity law, regulations
and rules – which are the model to be adopted by each participating State
and Territory – as Commonwealth law 'in the adjacent area of each State
and Territory'. By virtue of subclause 3(1), 'adjacent area' has
the meaning given in section 5A of the Petroleum (Submerged Lands)
Act 1967, i.e. the area between 3 nautical miles from the coastline
and the outer limits of the Australian continental shelf.
The explanatory memorandum notes that the national electricity law is
only applied as a Commonwealth law in the offshore adjacent areas to ensure
that 'jurisdiction of the Commonwealth does not unnecessarily overlap
with State or Territory jurisdictions'.(9)
Clause 6 defines the 'National Electricity (Commonwealth) Law'
to be applied in such areas as that set out in the National Electricity
(South Australia) Act 1996 'as in force from time to
time'. Clause 7 states that regulations 'as in force from time
to time' made under the South Australian Act apply as Commonwealth regulations.
Clause 8 states that rules (including the National Electricity
Code) 'as in force from time to time' made under the National Electricity
Law set out in the South Australian Act apply as Commonwealth rules.
The explanatory memorandum notes that the Commonwealth, States and Territories
have 'agreed generally' to apply the electricity provisions uniformly.
Therefore changes to National Electricity Law, Regulations and Rules will
not be subject to parliamentary disallowance in any jurisdiction.(10)
It also notes that under the Australian Energy Market Agreement
'the National Electricity Law and Regulations may only be amended with
the agreement of the Ministerial Council on Energy', and that under subclause
14(3) of the Bill, the Commonwealth will be able to make regulations to
modify the Law, Regulations and Rules as they apply as Commonwealth law.
(11)
Clauses 9 and 10 confer Commonwealth jurisdiction in relation
to the offshore adjacent areas on the AEMC and the AER respectively.
Clause 13 provides for review under the Administrative Decisions
(Judicial Review) Act 1977 of decisions of the AER in relation to
offshore adjacent areas.
The effect of the Bill on its face is to give the South Australian
Parliament the ability to modify Commonwealth law, regulations and rules.
However much this may make sense in practice, and notwithstanding the
agreement of governments from all relevant jurisdictions, there may be
an issue – should some person or body wish to challenge the scheme of
national energy regulation – as to whether allowing the people of South
Australia through their elected representatives to make laws applicable
to the Commonwealth generally is allowable under the Australian Constitution.
It may be that for the purposes of this particular Bill this is not a
significant issue, since any invalidity would only apply to offshore areas
which are not central to electricity production (regulation of other areas
would be authorised through matching State/Territory legislation). However
the Government has said that the AER and AEMC will have authority over
other forms of energy, including gas supply, where offshore areas are
much more critical.
Parliament should note the warning of prominent constitutional lawyer
Professor George Williams that 'the Constitution, as interpreted by the
High Court, no longer provides an adequate framework for federal-State
cooperation on national legislative schemes'.(12) Professor
Williams notes that the High Court under Chief Justice Mason (1987-1995)
showed a 'willingness to recognise…policy choices'.(13) With
particular reference to the troubles of the former national Corporations
Law scheme he says, however, that the current High Court has approached
Commonwealth/State legal cooperation 'in a formalistic manner divorced
from overarching concepts or matters of policy'.(14) In Re
Wakim (1999), a decision which almost entirely prevented the Federal
Court hearing Corporations Law matters, the High Court:
rejected as normative guidance the previously accepted
notion that cooperative federalism ought, as a general rule, to be fostered
and encouraged. Instead, the majority reached a decision that served
no countervailing policy choice.(15)
In this context, Parliament needs to consider carefully potential difficulties
with the constitutionality of the national legislative framework for the
Australian energy market.
Section 1 of the Australian Constitution states that 'the legislative
power of the Commonwealth shall be vested in a Federal Parliament…'. Instead,
on its face, this Bill vests Commonwealth legislative power in the South
Australian Parliament. There is no doubt that the legislative power of
the Commonwealth Parliament carries with it an ability to delegate that
power, provided the ability to revoke the delegation is always retained.
But it is at least arguable that this power of delegation may not extend,
under the system of government described in the Australian Constitution,
to conferring the right to make Commonwealth laws on another parliament.
From a legal/constitutional perspective, the idea that the people of one
State could, through their parliament, make laws applicable to the people
of the Commonwealth as a whole (albeit in this Bill, restricted to particular
offshore areas) appears contrary to the constitutional federalism inherent
in the Australian Constitution.
Academic commentary recognises two situations where an invalid 'abdication'
of legislative power could be alleged. The first is where Parliament
delegates this power to the executive or other agency subordinate to it.
In this situation the test for an invalid abdication 'is simply whether
the Parliament has always retained the capacity to revoke the delegation
and recall the power to itself'. As constitutional lawyer Professor Gerard
Carney from Bond University notes, this:
simply requires one to determine whether the provision
can be repealed. This depends on whether the provision is singly or
doubly entrenched. Only if it is doubly entrenched, is the provision
incapable of repeal…(16)
The second situation, however, is where 'Parliament delegates its powers
to a body which is not authorised by the constitutional framework'.(17)
In this case the applicable principle is that a legislature cannot 'create
and endow with its own capacity a new legislative power not created by
the Act to which it owes its existence'.(18) Carney notes
that:
a…provision which confers on such a body the power of
future enactment will be invalid for infringing this principle. And
this would seem to be the case whether the…provision is singly or doubly
entrenched.(19)
Conferral in this Bill by the Commonwealth legislature of a power on
the South Australian parliament – a body not directly answerable or subordinate
to the Commonwealth parliament – to amend Commonwealth law, regulations
and rules amounts to conferring a 'power of future enactment' and may
infringe this principle.
It may be that if there were a challenge in the High Court, the court
would take into account both the policy aim of building a unified national
scheme of energy regulation and specific controls in the (yet to be finalised)
Australian Energy Market Agreement on the South Australian Parliament's
ability to unilaterally amend national electricity laws. But Professor
William's comments suggest such factors may also be ignored by the High
Court.
Under the Corporations Law scheme in effect from 1990 to 2001, the Corporations
Act 1989 applied as law for the Australian Capital Territory and for
the other States and Territories under uniform application Acts. The
Commonwealth could amend the ACT legislation (and consequently the applicable
law in the other States) using its full plenary power under section 122
of the Constitution.(20)
In comparison, however, the Commonwealth Parliament has no direct power
to amend the national electricity laws. It is only through the mechanism
of the MCE that the South Australian Parliament agrees to amend these
laws.(21) The Commonwealth has no direct control over South
Australian laws in the way it can have over ACT laws – although the Commonwealth
can, of course, pass legislation overriding South Australian laws in areas
within its power.
1. http://www.industry.gov.au/assets/documents/itrinternet/FinalReport
20December200220040213110039.pdf?CFID=242389&CFTOKEN=11377123
2. 'Explanatory memorandum:
Australian Energy Market Bill 2004, p. 1
3. Second Reading Speech,
Australian Energy Market Bill 2004
4. ibid.
5. Ministerial Council on
Energy Standing Committee of Officials, Intergovernmental Agreement and
Legislative
Framework, Information Paper May 2004, at
http://www.industry.gov.au/assets/documents/itrinternet/IGALegislativeframeworkfinal20040525161258.pdf?CFID=1658449&CFTOKEN=87460888.
6. The following Acts
are to be amended:
• the National Electricity (New South Wales) Act 1997
• the National Electricity (Victoria) Act 1997
• the Electricity – National Scheme (Queensland) Act 1997
• the National Electricity (South Australia) Act 1996
• the Electricity (National Scheme) Act 1997 (ACT), and
• the Electricity – National Scheme (Tasmania) Act 1999.
7. Intergovernmental
Agreement and Legislative Framework, Information Paper, op. cit.
8. ibid.
9. Explanatory memorandum,
p. 5. The offshore area out to 3 nautical miles is within State/Territory
jurisdiction.
10. ibid.
11. ibid.
12. George Williams, 'Cooperative Federalism
and the Revival of the Corporations Law: Wakim and Beyond', 20 Companies
and
Securities Law Journal
160, May 2002 at 160.
13. ibid, p. 162.
14. ibid.
15. ibid, p. 163.
16. Gerard Carney, 'An overview of manner and
form in Australia', Qld University of Technology Law Journal, vol
5, p.69 at 83.
17. ibid, p. 84.
18. ibid, p. 83, citing the Privy Council in
In re The Initiative and Referendum Act, [1919] AC 935.
19. ibid, p. 84.
20. See Tomasic and Bottomley, Corporations
Law in Australia, Federation Press 1995, p. 76.
21. From a theoretical perspective, it could
be argued that the South Australian Parliament would have to give priority
to the views of its elected
representatives, in
the case of any conflict with the views of the MCE.
Peter Prince
22 June 2004
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to Senators and
Members of the Australian Parliament. While great care is taken to ensure
that the paper is accurate and balanced, the paper is written using information
publicly available at the time of production. The views expressed are
those of the author and should not be attributed to the Information and
Research Services (IRS). Advice on legislation or legal policy issues
contained in this paper is provided for use in parliamentary debate and
for related parliamentary purposes. This paper is not professional legal
opinion. Readers are reminded that the paper is not an official parliamentary
or Australian government document.
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 2004
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, 2004.
|
