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
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ISSN 1328-8091
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