BILLS DIGEST NO. 16, 2011–12, 3 August 2011

Australian Energy Market Amendment (National Energy Retail Law) Bill 2011

Paula Pyburne
Law and Bills Digest Section

Date introduced:  6 July 2011

House:  House of Representatives

Portfolio:  Resources and Energy

Commencement:  Various dates as set out in the table contained in section 2 of the Bill.[1]

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The primary purpose of the Australian Energy Market Amendment (National Energy Retail Law) Bill 2011 (the Bill) is to amend the Australian Energy Market Act 2004 (AEM Act) to apply the National Energy Retail Law, including the National Energy Retail Regulations, in Australia’s offshore areas as laws of the Commonwealth.

Background

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 MCE is comprised of Ministers with responsibility for energy from the Australian Government and all states and territories.  One of its first tasks was to consider the recommendations of the 2002 Energy Market Review entitled: Towards a Truly National and Efficient Energy Market.[2]  That report proposed the establishment of a statutory National Energy Regulator under a legislative approach agreed by COAG to operate as the independent energy regulator in all jurisdictions, interconnected or otherwise, and to encompass the energy-related regulatory roles of the Australian Competition and Consumer Commission (ACCC), the National Electricity Code Administrator[3] and state and territory regulators.[4]

The following year, the MCE provided a formal report to COAG entitled: Reform of Energy Markets.[5]  That report contained detailed recommendations for a reform package which would encompass, amongst other things, governance of energy markets and economic regulation and rule making.[6]

In response to the Reform of Energy Markets report, the Commonwealth, states and territories entered into an inter-governmental agreement—the Australian Energy Market Agreement (IGA).[7]  The IGA acknowledges that ‘effective operation of an open and competitive national energy market will contribute to improved economic and environmental performance and deliver benefits to households, small business and industry, including in regional areas’ and provides the basis for the current co-operative legislative scheme which regulates the Australian energy market.[8]

Current regulatory scheme

The co-operative legislative regime which has evolved under the aegis of the IGA currently consists of the following:

•       Competition and Consumer Act 2010 (CCA) which establishes the Australian Energy Regulator (AER)

•       National Electricity (South Australia) Act 1996 which has been applied as a law in other states and territories through application Acts[9]

•       National Electricity Law and National Electricity Rules which are created as subordinate legislation by the South Australian parliament in its role as lead legislator, and also applied in the other participating states and territories

•       Australian Energy Market Act 2004 which is the Commonwealth application law applying to the offshore area of Australia and in the external Territories of Christmas Island and Cocos (Keeling) Islands.[10]

A similar legislative scheme, with South Australia as the lead legislator, exists in respect of gas.[11]

The latest change

The second reading speech at the introduction of the new lead legislation—National Energy Retail Law (South Australia) Act 2011—by Paul Holloway in the South Australian Legislative Council provides the rationale for this latest development:

In June 2006 the Council of Australian Governments amended the Australian Energy Market Agreement to provide for (among other things), the national framework for energy access; and the national framework for distribution and retail services.

Implementation of the national framework for distribution and retail services was split into two packages (economic regulation of distribution services and the retail market regulation) due to the scale and complexity of the regulation. The 'economic' package was completed with the commencement of amendments to the National Electricity Law and Rules on 1 January 2008 and the new National Gas Law and Rules on 1 July 2008.

As part of the ongoing national energy market reforms, the Ministerial Council on Energy has completed the final component of the national framework for distribution and retail regulation set out by the Council of Australian Governments in the Australian Energy Market Agreement. This reform, known as the National Energy Customer Framework (here referred to as the Customer Framework), will be implemented through a package of Laws, Rules and Regulations. The Customer Framework consists of this Bill, which includes as its Schedule the National Energy Retail Law, as well as Rules and Regulations to be made under that Law called the National Energy Retail Rules and the National Energy Retail Regulations.

... the Customer Framework also includes key amendments to the National Electricity Rules and the National Gas Rules on two matters. The first are national rules which enable retail customers and property developers to seek new (or significant modifications to existing) connections to electricity and gas distribution networks. The second are new rules to set out the rights and obligations between distributors and retailers which are necessary to support the retail supply of energy to customers and include a credit support regime...

The Customer Framework will be applied in all jurisdictions which are part of the National Electricity Market, namely, South Australia, Victoria, New South Wales, the Australian Capital Territory, Tasmania, Queensland and the Commonwealth by application Acts which apply the framework for the purposes of those jurisdictions.[12] [emphasis added]

This Bill is not concerned with the actual provisions of the National Energy Retail Rules, the National Energy Retail Regulations or the National Energy Customer Framework which are contained in South Australian legislation which has been the subject of extensive public consultation.  Rather, this Bill reflects the Commonwealth’s commitment to apply the National Energy Retail Law (which contains the Customer Framework) and the National Energy Retail Regulations by way of an application law to Australia’s offshore area.

Creation of the National Energy Customer Framework

The National Energy Retail Law (South Australia) Act 2011 (the National Energy Retail Law) was assented to on 17 March 2011.[13]  The National Energy Customer Framework establishes a largely uniform set of regulatory obligations governing the sale and supply of energy to retail customers, particularly small customers. Under the National Energy Customer Framework, roles of and relationships between the distributor, the retailer and the customer will be consistent across participating jurisdictions. According to the Minister for Resources and Energy, Martin Ferguson MP:

This new framework will strengthen protections for customers who experience financial hardship in paying their electricity bills. It imposes mandatory obligations on retailers to develop customer hardship policies that will assist residential customers experiencing longer-term payment difficulties.[14]

At its meeting of 10 December 2010, the MCE agreed to ‘work towards a target commencement date of 1 July 2012, while not precluding the earlier adoption by jurisdictions of some of the National Energy Customer Framework functions’.[15]

Committee consideration

On 7 July 2011, the Senate Selection of Bills Committee deferred consideration of the Bill until next meeting.[16]

Financial implications

According to the Explanatory Memorandum, the Bill will have no financial impact.[17]  However it has been reported that ‘the Australian Energy Regulator will receive another $18.6 million over four years to fund its new functions under the National Energy Customer Framework which co-ordinates state regulations for energy distributors and retailers.[18]

Key provisions

Schedule 1—Australian Energy Market Act

Items 1–7 of Schedule 1 to the Bill amend section 3 of the AEM Act to insert new definitions which refer to the National Energy Retail Law which was recently passed by the South Australian Parliament as the lead legislator in the national co-operative scheme.

Item 10 of Schedule 1 to the Bill inserts proposed Division 2A—Energy retail laws which contains proposed sections 11T–11Z.

Proposed section 11T applies the National Energy Retail Law (and any rules or instruments made under it) to the offshore area of each state and territory and to any other places, circumstances or persons that are prescribed by regulations.  The application law is to be referred to as the National Energy Retail Law (Commonwealth).  Similarly, proposed section 11U applies any regulations made under the National Energy Retail Law as National Energy Retail Regulations (Commonwealth).

Proposed sections 11V–11X provide that the Australian Energy Market Commission, the Australian Energy Regulator (AER), the Australian Competition Tribunal and the Commonwealth Minister respectively have functions and powers which are conferred under the National Energy Retail Law (Commonwealth) and the National Energy Retail Regulations (Commonwealth).

Item 11 of Schedule 1 to the Bill amends section 13 of the AEM Act to ensure that decisions taken under the National Energy Retail Law (Commonwealth) and the National Energy Retail Regulations (Commonwealth) are subject to the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act).  This is consistent with the amendment in item 1 of Schedule 2 to the Bill which is outlined below.

Item 14 inserts proposed subsection 13F(3) to make it clear that neither the National Energy Retail Law (Commonwealth) nor the National Energy Retail Regulations (Commonwealth) are legislative instruments—and so are not disallowable by the Parliament.  The Explanatory Memorandum provides the rationale for this provision on the grounds that:

This reflects the legal status of these instruments because they are applied by and not made under a Commonwealth law.  Additionally, if those instruments were to be made legislative instruments under the Legislative Instruments Act 2003 (Cth), an instrument made under the various state regimes would be disallowable in Commonwealth Parliament, which would undermine the cooperative nature of the scheme.[19]

Items 15–16 of Schedule 1 to the Bill amend section 13G of the AEM Act to invest the Federal Court with jurisdiction for civil or criminal matters arising under the National Energy Retail Law (Commonwealth) and the National Energy Retail Regulations (Commonwealth).

Item 17 inserts proposed sections 13K–13N into the AEM Act.  Proposed sections 13K and 13L relate to energy retail laws.  The sections give effect to, and validate, instruments and decisions made by the AER before the National Energy Retail Law and the National Energy Retail Regulations actually start to apply—subject to certain conditions.  Those conditions are:

•       the instrument or decision has to be made within the timeframe set out in proposed paragraph 13K(1)(a)

•       the instrument or decision would have been authorised by the National Energy Retail Law (Commonwealth) and the National Energy Retail Regulations (Commonwealth): proposed paragraph 13K(1)(b)

•       any instrument or decision made by the AER has been made in accordance with any conditions or other requirements set out in the South Australian Energy Retail Legislation as if it had already started to apply: proposed paragraph 13K(1)(c).

Where the AER is required to take a preparatory step before making an instrument or a decision, the AER is deemed to have complied with that requirement provided that it was taken in the period set out in proposed paragraph 13L(1)(b).

Proposed sections 13M and 13N are in similar terms but instead relate to electricity and gas laws.

Schedule 2—Other Amendments

Item 1 of Schedule 2 to the Bill amends the ADJR Act by inserting proposed paragraphs 2(db) and 2(dc) into Schedule 3 of that Act.  Schedule 3 of the ADJR Act describes Acts of the states, the Australia Capital Territory and the Northern Territory—and parts of such Acts—that are ‘enactments’ for the purposes of the ADJR Act.  The effect of the amendment is that the National Energy Retail Law will be subject to judicial review.

This means that a person who is aggrieved by a decision of a Commonwealth officer or authority under the National Energy Retail Law can apply to the Federal Court or the Federal Magistrates Court for an administrative review.  The administrative review may be undertaken on a number of grounds which are set out in paragraphs 5(1)(a)—(j) of the ADJR Act including, but not limited to, that a breach of the rules of natural justice occurred in connection with the making of the decision, or that procedures that were required by law to be observed in connection with the making of the decision were not observed.

Items 2–25 of Schedule 2 to the Bill amend the Competition and Consumer Act 2010 (CCA).  Items
2–5 insert new definitions into subsection 4(1) of the CCA, including the definition of ‘local energy instrument’ which refers to a regulation, rule, order, declaration or other instrument if the instrument is made, or has effect, under a law of a state or territory, and the law of the state or territory applies a uniform energy law as a law of its own jurisdiction.

Part IIIAA of the CCA establishes the Australian Energy Regulator (AER).  The AER’s key responsibilities include:

•       regulating the revenues of transmission network service providers by establishing revenue caps

•       regulating the revenues of distribution network service providers

•       monitoring the electricity wholesale market

•       monitoring compliance with the national electricity law, national electricity rules and national electricity regulations

•       investigating breaches or possible breaches of provisions of the national electricity law, rules and regulations

•       instituting and conducting enforcement proceedings against relevant market participants

•       establishing service standards for electricity transmission network service providers

•       establishing ring-fencing guidelines for business operations with respect to regulated transmission services, and

•       exempting network service providers from registration.[20]

Items 6–13 amend section 44AI of the CCA which is contained in Part IIIAA.  The effect of the amendments is to permit a ‘local energy instrument’ to impose functions, powers or duties on the AER consistent with the Australian Energy Market Agreement or any other relevant agreement between the Commonwealth and the state or territory concerned.  Items 14–20 of Schedule 2 to the Bill similarly amend section 44AJ of the CCA which explains how the duties on the AER are imposed.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2434.

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ISSN 1328-8091

[1].               The Ministerial Council on Energy has set a target commencement date for participating jurisdictions to uniformly commence the National Energy Retail law on 1 July 2012.

[2].               W Parer (Chair, Energy Market Review), Towards a Truly National and Efficient Energy Market, Commonwealth of Australia, December 2002, viewed 21 July 2011, http://www.ret.gov.au/Documents/mce/_documents/FinalReport20December200220050602124631.pdf

[3].               The National Electricity Code Administrator has now been replaced by the Australian Energy Market Commission and the Australian Electricity Regulator.

[4].               W Parer (Chair, Energy Market Review), Towards a Truly National and Efficient Energy Market, op. cit., p. 47.

[5].               Ministerial Council on Energy, ‘Reform of Energy Markets’, Report to the Council of Australian Governments, 11 December 2003, viewed 21 July 2011, http://www.efa.com.au/Library/MinCouncilonEnergyRpttoCOAG.pdf

[6].               Ibid., p. 5.

[7].               Australian Energy Market Agreement, 30 June 2004, viewed 21 July 2011, http://www.ret.gov.au/Documents/mce/_documents/IGA_FINAL_(30JUNE2004)2004071310032320041112162849.pdf

[8].               An explanation of the operation of the Australian electricity market is contained in Australian Energy Market Operator, An introduction to Australia’s national electricity market, Melbourne, July 2010, viewed 21 July 2011, http://www.aemo.com.au/corporate/0000-0262.pdf

[9].               For example the Electricity—National Scheme (Queensland) Act 1997, viewed 21 July 2011, http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/E/ElectricyNSQA97.pdf the National Electricity (New South Wales) Act 1997, viewed 21 July 2011, http://www.legislation.nsw.gov.au/maintop/view/inforce/act+20+1997+cd+0+N and the Electricity (National Scheme) Act 1997 which was enacted in the Australian Capital Territory, viewed 21 July 2011, http://www.legislation.act.gov.au/a/1997-79/default.asp

[10].               Section 3 of the Australian Energy Market Act 2004 provides that the term ‘offshore area’ has the same meaning as in the Offshore Petroleum and Greenhouse Gas Storage Act 2006.  Section 3 of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 generally provides that an offshore area starts three nautical miles from the baseline from which the breadth of the territorial sea is measured, and extends seaward to the outer limits of the continental shelf.  Section 8 of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 contains specific details of each of the offshore areas.

[11].               See National Gas (South Australia) Act 2008.  Examples of application Acts are the National Gas (Queensland) Act 2008 and National Gas (New South Wales) Act 2008.

[12].               P Holloway (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Industrial Relations, Minister Assisting the Premier in Public Sector Management), ‘Second reading speech: National Energy Retail Law (South Australia) Bill 2010’, Legislative Council, Debates, 10 November 2010, p. 1462, viewed 21 July 2011, http://hansard.parliament.sa.gov.au/docloader/Legislative%20Council/2010_11_10/Daily/Legislative%20Council_C_Daily_DIST_2010_11_10_v9.pdf#xml=http://hansardsearch.parliament.sa.gov.au/isysquery/fa8a3479-c242-481d-81c5-e9c5e6ef74b2/2/hilite/

[13].               The text of the National Energy Retail Law (South Australia) Act 2011 can be viewed at: http://www.legislation.sa.gov.au/LZ/C/A/NATIONAL%20ENERGY%20RETAIL%20LAW%20(SOUTH%20AUSTRALIA)%20ACT%202011.aspx

[14].               M Ferguson (Minister for Resources and Energy), Roll out of national energy customer protections, media release, 28 October 2010, viewed 22 July 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F417053%22

[15].               Ministerial Council on Energy, Communiqué, Brisbane, 10 December 2010, viewed 22 July 2011, http://www.ret.gov.au/Documents/mce/_documents/2010%20bulletins/24th_Meeting_Communique_10Dec2010.pdf

[16].               Selection of Bills Committee, Report no. 9 of 2011, Senate, Canberra, 7 July 2011, viewed 22 July 2011, http://www.aph.gov.au/Senate/committee/selectionbills_ctte/reports/2011/rep0911.pdf

[17].               Explanatory Memorandum, p. 8.

[18].               M Drummond, ‘ASIC gets more to police changed market’, Australian Financial Review, 11 May 2011, p. 23, viewed 22 July 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F755658%22 and Australian Government, ‘Part 2: Expense measures’, Budget measures: budget paper no. 2: 2011-12, p. 317, viewed 22 July 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fbudget%2F2011_17%22

[19].               Explanatory Memorandum, p. 6.

[20].               AER website: http://www.aer.gov.au/content/index.phtml/itemId/659171