Wednesday, 16 August 2023

Energy Legislation Amendment Bill 2023

Second reading

Debate resumed on motion of Lily D’Ambrosio:

That this bill be now read a second time.

David HODGETT (Croydon) (12:35): It is a pleasure to rise and lead the debate from our side of the house on the Energy Legislation Amendment Bill 2023. I will state at the outset that it is a fairly straightforward piece of legislation, so we are not opposing this bill. But I want to outline our position here and raise a couple of matters. I thank the minister’s office for the bill briefing. By way of an overall summary, this bill is about ensuring the reliable supply of energy to Victorian consumers. As I have been talking to people about this bill, there is already a program for the Australian Energy Market Operator, the AEMO, to make and update a reliability forecast, which will inform the market of any gaps between energy supply and demand and signal potential investment opportunities.

This program provides for the AEMO to request the Australian Energy Regulator to make what is called a T-3 reliability instrument to trigger the RRO, the retailer reliability obligation. The National Electricity Law was recently amended to enable jurisdictional energy ministers to trigger that RRO. If the Victorian energy minister has the power to trigger the RRO, it is in our view – I think in everyone’s view – reasonable to place some decision-making criteria around this to ensure consultation occurs, to ensure appropriate safeguards are in place and to ensure there is a requirement for the minister to publish a statement of reasons as to why the RRO was triggered. That basically, in summary, sets out what this bill is about. There is already a program. The National Electricity Law enables jurisdictional ministers to trigger that RRO, so if they have got that power, it is fair and reasonable in our view to put some decision-making criteria around that and some rules in place to provide a bit of accountability around that. That is all very straightforward.

However, the opposition does note some legitimate concerns with national legislation and potential parliamentary practices and human rights issues that arise. If time permits in terms of my contribution up to the lunch break before question time, I will come back to making a few comments referencing the Scrutiny of Acts and Regulations Committee’s Alert Digest No. 9 of 2023, the one that was submitted yesterday. I will come back to referencing that SARC document and make a few points out of that just to raise those matters.

This bill is part of the government’s commitment to managing the transition of the energy sector to achieve net zero emissions by 2045 while ensuring the reliable supply of energy to Victorian consumers. This omnibus bill amends the National Electricity (Victoria) Act 2005 and the National Gas (Victoria) Act 2008 to deliver better outcomes to Victorian energy consumers. As outlined in the bill before the house:

The main purposes of this Act are –

to amend the National Electricity (Victoria) Act 2005 to incorporate decision making requirements that will apply to the Minister when deciding whether to make a T-3 reliability instrument under the National Electricity (Victoria) Law; and

(b) to amend the National Gas (Victoria) Act 2008 –

(i) to enable regulations to be made that prescribe a civil penalty for a breach of a declared system provision that is prescribed to be a civil penalty provision; and

(ii) to make further modifications to the National Gas (Victoria) Law as it applies as a law of Victoria to enable the Supreme Court to make an order that a person pay a civil penalty for a breach of a declared system provision that is prescribed to be a civil penalty provision; and

(iii) to update references to the ESC Gas Distribution System Code in Part 6 of that Act.

I did want to talk a little bit about, just to put it on record, a bit of detail about the retailer reliability obligation, and I did want to make reference to the parliamentary library and information service. Every time there is a new bill, a new piece of legislation, put into this place, the parliamentary library issues a new bill information link, which has a lot of background. It has the second-reading speech on the bill and the explanatory memorandum but also recent media or media over a period that is relevant to the bill and any acts that it affects. The one thing that caught my attention in particular was a flyer, which I draw members’ attention to – those who have got access to the new bills info links – because it is a very good document that outlines the retailer reliability obligation and gives an overview of exactly how the program works.

As I said at the bill briefing to the minister’s representative, reading the bill and trying to get your head around it for a layperson can be quite complex and difficult, even though it is a simple piece of legislation. But when the parliamentary library put out material like this, it makes it much easier for members of this place to get an understanding of what the retailer reliability obligation is, how it works and the time frame for that. So I do thank the parliamentary library information service for the new bills info links, because I certainly have a look at them every time there is a new bill put into this place and I found that particularly useful on this occasion.

Just to put a few comments around that, the retailer reliability obligation started on 1 July 2019. The retailer reliability obligation will support a reliable energy system by requiring energy retailers and some large energy users to hold contracts or invest directly in generation or demand responses to support reliability in the national electricity market. The national electricity market (NEM) is undergoing a fundamental transition, as we know, driven by rapid technological change as we move to a lower emissions electricity system. The large influx of intermittent renewables along with recent and upcoming closures of thermal generators mean we need to take extra measures to ensure the reliability of electricity supply.

The COAG energy council agreed to implement the retailer reliability obligation – the RRO – to help manage the risk of declining reliability. The RRO will ensure energy retailers are accountable for reliability in a way that they have not been before. If the RRO is triggered, it will require retailers to enter into sufficient contracts to meet their share of expected system peak demand. Retailers can choose to contract with any form of generation – for example, solar, hydro, gas, coal and batteries. However, the firmer the contracted generation source is, the greater its contribution will be to meeting their obligation. This will provide an incentive for market participants to invest in the right technologies in regions where it is needed to support reliability in the NEM. That information comes from that parliamentary library material. As I said before, it was a great way of understanding that and how it operates and what it is designed to do.

In terms of the main provisions of this bill, most of it was outlined in the minister’s second-reading speech – short but fairly simple and fairly straightforward. The bill will amend the National Electricity (Victoria) Act 2005 to strengthen the retailer reliability obligation – RRO – framework established under the National Electricity Law, which was recently amended to enable jurisdictional energy ministers to trigger the RRO, as I said in my summary at the outset.

The bill will introduce Victorian-specific decision-making criteria and consultation safeguards to be used in the event the Victorian minister needs to trigger the RRO in response to an emerging risk of significant electricity disruption. The decision to trigger the RRO will be made in consultation with the Australian Energy Regulator and the Australian Energy Market Operator as well as the Treasurer and the Premier. It will ensure the decision is informed by the most up-to-date information regarding the energy sector and the broader economy. The RRO puts responsibilities on retailers and large customers to secure contracts with electricity providers during periods of forecast lack of supply. This in turn encourages forward contracting, which, importantly, helps underwrite much-needed new investment in electricity generation and avoid supply shortfalls.

The bill will improve the functioning of Victoria’s wholesale gas market by enabling regulations to be made to increase the maximum civil penalties payable for parties that breach the rules. The change will provide additional flexibility to the Australian Energy Regulator and the courts in determining an appropriate response to instances of non-compliance and help ensure any civil penalties issued reflect the severity of the conduct and act as a deterrent. This will ensure the compliance and enforcement regime is fit for purpose so that the Victorian gas market delivers better outcomes for consumers and will align the level of civil penalties with those in place in other east coast wholesale gas markets. Finally, the bill updates several outdated references to the ESC gas distribution system code in the National Gas (Victoria) Act 2008. This will help improve the accurate interpretation of the act.

I will go back to where I started. That is the formal part of the bill, but again, in trying to put it in layman’s terms, it is about ensuring the reliability of supply of energy to Victorian consumers. As I said, there is already a program, which I have outlined from that information from the library, for the AEMO to make and update a reliability forecast. Again, the National Electricity Law was amended to enable jurisdictional energy ministers to trigger that. Back to my point: the minister already has the power to do that, this bill just puts some decision-making criteria around that and ensures that consultation occurs with the major players, including the Treasurer and the Premier. There is a requirement for the minister to publish a statement of reasons as to why the RRO was triggered. Given that, it is reasonable for us to be in favour of that and to support that.

As always, I consulted widely with my database of stakeholders in the industry and the sector. Feedback was invited from a range of those stakeholders, and no areas of concern were raised or identified with the bill. I again take the opportunity to thank the minister’s office, in particular Nick Parry, who very promptly reaches out and organises a bill briefing and opens it up to our side of the house, and the two department representatives, Matt Garbutt and Arthi. For Hansard’s benefit – I know you are smiling over there, Nick – I will spell Arthi’s surname: P-I-L-L-A-P-A-K-K-A-M. Both Matt and Arthi from the department were very helpful during the bill briefing, and I did want to put on record my appreciation for the time they gave and for the answers to the questions that we raised to seek clarification on the bill. Thanks again to Matt, Arthi and Nick.

In the time remaining I want to make a few comments and reference the SARC Alert Digest that was handed down on Tuesday. This is not a reason to oppose the bill, because we are certainly not opposing the bill, but it was drawn to my attention and the opposition does note that there are some legitimate concerns with the national legislation and potential parliamentary practices and human rights issues that arise. I just want to make reference to and perhaps even quote a couple of sections here from the SARC report in the time remaining and hopefully time that beautifully with the 1 o’clock pause in business, and then others can make contributions after question time. On page 3 of that SARC Alert Digest, under the section ‘Comments under the PCA’, it states:

Practice Note A … Additional explanatory material – Delegation of legislative power

Clause [6] substitutes section 16A which provide the Governor in Council may make regulations with respect to a provision of the declared systems to be a civil penalty, a conduct provision and a civil penalty for a breach of a declared system provision that is prescribed to be a penalty provision … It inserts new Division 3 of Part 7 into the National Gas (Victoria) Law to insert sections 70 and 71 which apply the National Gas Law as set out in the Schedule to the South Australian Act as in force for the time being. It appears the penalties that may be prescribed by regulations made by the Governor in Council are referable to section 3A of the South Australian Act. The Committee notes the Supreme Court of Victoria may hear an application by the AER in the case of non-compliance and the penalties to be imposed.

It then goes on to state and make a number of comments, which I will not quote verbatim, around Henry VIII clauses. The SARC report goes on to say:

By way of historical background in relation to national schemes of legislation the Committee has previously observed: –

Henry VIII clauses

And in particular I noted these couple of sections:

Professor Pearce described a ‘Henry VIII’ clause as: – ‘the inclusion in an Act of power to amend either that Act or other Acts by regulation.’

A bit further down it states:

A Henry VIII clause has also been defined as ‘a clause of an Act of Parliament which enables the Act to be expressly or impliedly amended by subordinate legislation or Executive action.’Or alternately, ‘A Henry VIII clause is a provision of an Act that enables the Act (or another Act) to be amended by subordinate legislation.’

And finally, towards the end of the commentary there by the SARC on the Henry VIII clauses it says:

Henry VIII clauses may be regarded as having insufficient regard for the separation of powers doctrine. The power of the Executive by means of subordinate legislation to override the intention of Parliament as expressed in an Act may be a matter for Parliament’s consideration. A provision in a Bill or an Act that permits subordinate legislation to amend an Act may constitute an inappropriate delegation of power.

And that last line is the one that grabbed my attention in terms of reading this SARC Alert Digest:

A provision in a Bill or an Act that permits subordinate legislation to amend an Act may constitute an inappropriate delegation of power.

That gave rise to just a bit of discussion amongst my colleagues and stakeholders and our party room on how the opposition notes that legitimate concern with national legislation and potential parliamentary practices and human rights issues that arise. In my view, in our view, it was not a means to be opposing the bill for the reasons I outlined before, but I did just want to put that on record because I do respect the work that the Scrutiny of Acts and Regulations Committee do, and I usually have a cursory glance at their reports when they are tabled in this place at the beginning of the sitting week. And given the Energy Legislation Amendment Bill 2023 was coming up for debate, I had a close look at that, and my attention was drawn to those Henry VIII clauses, so I just put that on record as perhaps an issue or a concern for the house to be aware of. There may be other members on either side that wish to make comments in relation to that and how it affects their perception or views, but that line, ‘it might constitute an inappropriate delegation of powers’ – if something needs to be considered by this house, it should be considered by this house.

Who is your speaker, Ben? I might go a bit short, mate.

The DEPUTY SPEAKER: Through the Chair, correct titles.

David HODGETT: Sorry, Chair. I did not want to quote more from –

A member interjected.

David HODGETT: No, no. Just in summary again, if I could go back over a couple of points of the Energy Legislation Amendment Bill, it is straightforward. It is really back to that basic issue that was outlined by the representatives at the bill briefing. There is already a program for the Australian Energy Market Operator to make and update a reliability forecast which will inform the market of any gaps between energy supply and demand and signal potential investment opportunities. We know this program provides for the AEMO to request the Australian Energy Regulator make a T-3 reliability instrument to trigger the RRO – the retailer reliability obligation. We know that exists. As has been clearly pointed out to us, the National Electricity Law was amended to enable jurisdictional energy ministers to trigger that RRO. In our discussions we thought that it is good practice, it makes sense and it is very reasonable to place some decision-making criteria around that to ensure that that consultation occurs, that appropriate safeguards are in place and that the minister publishes a statement of reasons why the RRO was triggered.

There is quite a bit material in relation to this bill. But as I said in briefing our party room, you can get tied up on all this stuff around the retailer reliability obligation – about how the program works, about making a reliability forecast and about updating that reliability forecast, triggering the RRO and the T-3 reliability instrument. You can complicate the whole bill trying to wrap your head around that, making comments or asking questions about that. But with all due respect to that, it is does not matter because this is really about the minister having the power and about putting some accountability around that and how that will operate. It is for those reasons we are not opposing the bill.

I might come back and ask this separately – a couple of people on our side were very interested in the time frame. The member for South-West Coast, who attended the bill briefing, had a discussion with me. There are some quite long time frames. The fact sheet states:

The Australian Energy Market Operator (AEMO) will identify any potential reliability gaps in each NEM region in the coming five years using its Electricity Statement of Opportunities (ESOO).

Again, without getting out of the scope of the bill, we were trying to wrap our heads around these time frames. Five years – how does that work? Is that the forecast of supply and reliability? Equally, when updating the reliability forecast and/or triggering the RRO, there was some commentary. It states:

Triggering the RRO (‘T-3’ Reliability Instrument)

If a reliability gap exists three years and three months from the identified gap, AEMO must request the Australian Energy Regulator (AER) make a ‘T-3’ Reliability Instrument to trigger the RRO. The AER must determine whether to make the instrument at least three years and one month prior to the start of the identified gap.

Again, we are probably guilty of getting a bit bogged down in some of those time frames. What do the five years mean? What do the three years and one month mean? It is outside the scope of this debate, but it would be interesting to get a few details and a bit of a briefing about those time frames so that we can have a better understanding of how some of these things work in practice in the sector and how they will assist. But having spoken at length about all that and made a contribution –

Ben Carroll: Very well.

David HODGETT: Thank you, Minister. We are not opposing the bill. We think it is very straightforward piece of legislation. I do put on record those comments from the SARC report to flag that as a potential issue. We always get a bit concerned when things are done under regulation, but we respect that governments of every persuasion do things under regulation, so it is not something that the current government has a monopoly on. Those practices do occur, but we note that sometimes things should be considered by all of this house and voted on by this house as opposed to just getting done under regulation.

That is my contribution. I look forward to the contributions from other members of the house. I am very pleased to contribute to the debate on another bill in the minister’s space of energy.

Sitting suspended 1:00 pm until 2:01 pm.

Business interrupted under sessional orders.