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ESSENTIAL SERVICES COMMISSION BILL\TOC\2\ESSENTIAL SERVICES COMMISSION BILL

\IND\Speech:nn:The Hon. P.F. CONLON The Hon. P.F. CONLON (Minister for Government Enterprises) obtained leave and introduced a bill for an act to establish the Essential Services Commission, to repeal the Independent Industry Regulator Act 1999, to amend the Local Government Act 1999 and the Maritime Services (Access) Act 2000; and for other purposes. Read a first time.

The Hon. P.F. CONLON: I move:

That this bill be now read a second time.

Today, the government is delivering on a key election commitment by introducing to parliament major new legislation that aims to serve the long-term interests of the community with respect to the price and delivery of essential services. The Essential Services Commission Bill establish­es the new Essential Services Commission as a powerful new industry regulator. Utility services, such as electricity, gas, water and sewerage, are essential to the daily lives of all South Australians. Reliable supply of those services at reasonable prices is essential to the community and to the ongoing competitiveness of South Australian businesses, small and large.

The government must play a central role overseeing the regulatory framework in which these essential services are provided. There has been even more focus on the govern­ment's regulatory role given the privatisation by the Liberal government of the state's electricity industry and national market reforms in the electricity and gas industries. Privatisa­tion has failed South Australians. For example, the impact of privatisation on electricity prices was clearly apparent from 1 July 2001 when nearly 3 000 commercial consumers faced power price increases averaging 35 per cent, with some increases as much as 100 per cent.

Over the past few years South Australia has experienced numerous instances of electricity blackouts that have caused severe disruption to the community. There have also been supply shortfalls of gas affecting some of South Australia's largest businesses. On top of these previous price increases and supply problems, all households and small businesses consuming less than 160MWh per annum will face a fundamental change in the way they take electricity from 1 January 2003. These small customers will be required to choose their electricity retailer, a process referred to as full retail competition.

#43 Some reports have estimated that electricity prices to households could increase by as much as 30 per cent from 1 January 2003. This Government inherited these price, supply and reliability problems. Our first response has been to call a halt to any further privatisation of government assets. Our second response is to consider how price, supply and reliability problems in essential services can be addressed. Our choices in this regard are effectively limited to ensuring that the regulatory regime is sufficiently directed and powerful.

The government believes that the current regulatory arrangements are inadequate and must be revised to provide greater clarity for the regulated businesses and the community they serve. The Independent Industry Regulator Act 1999 has been reviewed, as has the Victorian Essential Services Commission Act 2001. The Victorian act has been useful in providing insights to ways of improving the South Australian regulatory regime. The results of this review were incor­porated into a position paper entitled `Establishing the Essential Services Commission', which was publicly released in June 2002.

The new Essential Services Commission will subsume the existing regulatory responsibilities of the South Australian Independent Industry Regulator. The commission will continue to have regulatory independence and will not be subject to the direction and control of the minister with respect to its regulatory functions. The current regulator, Mr Lew Owens, will become the first chairman of the new commission.

Over the next few months the functions of the commission will be expanded from the electricity industry, third party access to the Tarcoola to Darwin railway and third party access to South Australian ports and maritime services to include regulation of the gas industry and water and sewerage services. However, the immediate focus of the commission will be on electricity, reflecting the immediate priority in preparing for electricity full retail competition.

Given the convergence of the gas and electricity indust­ries, there is a large degree of commonality between gas and electricity regulation and there are benefits from having one regulator address energy matters. The government is currently reviewing the legislative amendments to the Gas Act 1997 and other related acts to bring gas pricing and licensing regulatory functions within the ambit of the commission. These amendments will be tabled in parliament by the end of this year.

The commission will also oversight the quality and reliability of water services and require a standard customer contract to be developed with SA Water. The economic regulation of water and sewerage services is excluded from the initial functions of the commission. There is flexibility to declare other essential services to be subject to the jurisdic­tion of the Essential Services Commission.

A major element of the bill is the introduction of a new primary objective. The commission must protect the long-term interests of South Australian consumers with respect to the price, quality and reliability of essential services. The long-term interests of consumers are consistent with efficient and financially viable regulated industries that have incen­tives for long-term investment. Accordingly, the commission must also have regard to these matters in its regulatory decisions.

A real strengthening of regulatory powers is achieved by a combination of increased enforcement powers and penalties in this bill and, as appropriate, by increased enforcement powers and penalties in the related industry act. In this bill, the maximum penalty for breach of a pricing determination by the commission is $1 million. Enforcement powers include warning notices and injunctions. Where it appears to the commission that a contravention has occurred, for example, of a pricing determination, it may issue a warning notice and receive an assurance that a breach has been, or will be, redressed. In addition, the minister, the commission or any other person may seek an injunction in the courts to require that an entity undertake actions to remedy a breach.

As an example of increased enforcement powers and penalties in related industry acts, the Electricity Act 1996 will also provide for penalties of up to $1 million for a breach of a licence condition, including breaches of industry codes or rules. Similar provisions with respect to warning notices and injunctions will also be included in the Electricity Act. Amendments to the Electricity Act will be tabled as soon as possible. Overall, these enforcement provisions will be a substantial incentive to industry participants to comply with the commission's determinations.

The approach of linking the Essential Services Commis­sion legislation with the relevant industry act and stronger enforcement powers will be followed with the gas industry and other industries as appropriate. There are substantially improved governance arrangements for the Essential Services Commission, as compared with those applicable to the South Australian Independent Industry Regulator.

In particular, there will be a commission chairperson and the capacity to appoint part-time commissioners. Appoint­ments will be by the Governor. With the broadening of the regulatory responsibilities of the commission from those of the current regulator, it is important that further knowledge, skills and experience in these new fields can be brought to the commission to complement the skills and experience of the commission chairperson, as required. Joint decision making on important determina­tions, particu­larly in these new areas, can help ensure good regulatory outcomes. Additionally, the commission would be able to delegate specific functions and projects to the chairperson and to the part-time commission­ers as considered appropriate.

#44 A number of good practice administrative and operat­ing procedures are specified. These procedures will en­sure appropriate transparency and accountability and will not impact on the commission's regulatory independence. Consumers and industry will need to know the commis­sion's general consultation and regulatory prac­tices and principles. Accordingly, the Essential Services Commission is required to prepare and publish a Charter of Consultation and Regula­tory Practice, outlining the commission's ap­proach to, and processes of, consultation and regulatory principles. As it is an important document, the commission is required to consult with the minister in the preparation of this document.

In terms of improved communications, harmonisation and coordination of regulatory activities, the Essential Services Commission is required to enter into, and publish, memo­randa of understanding (MOUs) with other regula­tors, such as the Office of the Technical Regulator. The commission is also required to consult with various enti­ties, including con­sumer bodies. These entities will be declared by regula­tion.

The commission must submit to the minister an annual performance plan and budget, which must comply with the minister's requirements. It is expected that the Essential Services Commission will continue to be primarily indus­try funded through licence fees on regulated industries, as is the case with the South Australian Independent Industry Regula­tor.

The establishment of an Essential Services Ombuds­man is another key government commitment that has been announced previously. The requirement for the electricity, gas, water and sewer­age industries to participate in an ombudsman scheme will be legislat­ed in the relevant industry act. For example, the amendments to the Electricity Act that are soon to be tabled will require such participation. Respon­sibility for resolution of consumer com­plaints with respect to gas and water and sewerage services will be added over time.

The new ombudsman scheme must be approved by the Essen­tial Services Commission. It is expected that the scheme would build upon the existing Electricity Industry Ombuds­man. As in the case of electricity industry participants, gas and water industry participants will be required to continue to fund the activities of the new ombudsman. I commend the bill to members and seek leave to insert the remainder of the second reading explanation in Hansard without my reading it.

Leave granted.

Explanation of clauses

PART 1

PRELIMINARY

Clause 1: Short title

Clause 2 Commencement

Clauses 1 and 2 are formal.

Clause 3: Interpretation

This Clause sets out definitions for terms used in the measure. It defines "essential services" as being:

(a)electricity services;

(b)gas services;

(c)water and sewerage services;

(d)maritime services;

(e)rail services;

(f)any other services prescribed for the purpose of the defini­tion.

PART 2

ESSENTIAL SERVICES COMMISSION

Clause 4: Essential Services Commission

Clause 4 establishes the Essential Services Commission.

Clause 5: Functions

Clause 5 states the Commission's functions. These in­clude the regulation of prices.

Clause 6: Objectives

Clause 6 states the objectives the Commission must have in performing its functions. It provides that its primary objective must be the protection of the long term interests of South Australian consumers with respect to the price, quality and relia­bility of essential services.

Clause 7: Independence

Except as provided under this measure or any other Act, the Commission is not to be subject to Ministerial direction in the performance of its functions.

Clause 8: Commission may publish statements, reports and guidelines

The Commission is empowered to publish statements, reports and guidelines relating to the performance of its functions.

Clause 9: Commission must publish Charter

Under this clause, the Commission must publish a Charter of Consultation and Regulatory Practice including guide­lines relating to processes for making price determinations or codes or rules and conducting inquiries.

Clause 10: Consultation

Clause 10 provides that the Commission must consult with a relevant prescribed agency in the making of a price determination or a code or rules, in the conduct of an inquiry, after first consult­ing with the Minister and in preparing and reviewing the Charter of Consultation and Regulatory Practice.

It also provides that, if requested to do so by the Commission, a prescribed agency must consult with the Commission.

A prescribed agency means a person, body or agency that has functions or powers under relevant health, safety, environmental or social legislation applying to a regulated industry and is pre­scribed by regulation for the purposes of this Part.

Clause 11: Memoranda of Understanding

Under this clause, the Commission and a prescribed body must enter into a Memorandum of Understanding to in­clude such matters as are prescribed and any other matters that the parties consider appropri­ate.

Clause 12: Membership of Commission

Clause 12 states that the Commission is to be constituted of a Commissioner, appointed by the Governor as the Chairperson, and such number of additional Commission­ers as are appointed by the Governor.

Clause 13: Commissioners

A person may be appointed as a Commissioner who is qualified for appointment because of the person's know­ledge of, or experi­ence in, one or more of the fields of industry, commerce, econom­ics, law or public administra­tion.

Clause 14: Acting Chairperson

Clause 14 provides that the Governor may appoint an Acting Chairperson to act in the office of the Chairperson and a person so appointed has, while so acting, all the functions and powers of the Chairperson.

Clause 15: Staff

The staff of the Commission may comprise persons em­ployed in the Public Service and assigned to assist the Commission or persons appointed by the Commission.

Clause 16: Consultants

The Commission may engage consultants.

Clause 17: Advisory committees

The Commission may establish advisory committees to provide advice on specified aspects of the Commission's functions.

Clause 18: Delegation

This clause allows the Commission to delegate functions or powers to a Commissioner or any person or body of persons that is, in the Commission's opinion, competent to perform or exercise the relevant functions or powers.

Clause 19: Conflict of interest

Clause 19 provides that the Chairperson, an Acting Chair­person, a Commissioner or a delegate of the Commission must inform the Minister in writing of any interest that the person has or acquires that conflicts or may conflict with the person's functions. Unless that conflict is resolved to the Minister's satisfaction, the person is disqualified from acting in relation to the matter.

Clause 20: Meetings of Commission

The Chairperson may convene as many meetings of the Commission as he or she considers necessary for the efficient conduct of its affair. A quorum of the Commission consists of a majority of the Commis­sioners in office for the time being.

Clause 21: Common seal and execution of documents

Clause 21 provides that the common seal of the Commission must not be affixed to a document except in pursuance of a decision of the Commission and the affix­ing of the seal must be attested by the signatures of 1 or more Commissioners. It also provides that a document is duly executed by the Commission if the common seal of the Commission is affixed to the document in accordance with the proposed section or the document is signed on behalf of the Commission by a person or persons in ac­cordance with an authori­ty conferred under the proposed section.

Clause 22: Application of money received by Commission

Except as otherwise directed by the Treasurer, fees or other amounts received by the Commission will be paid into the Con­solidated Account.

Clause 23: Annual performance plan and budget

This clause requires the Commission to prepare and sub­mit to the Minister a performance plan and budget for the next financial year or for some other period determined by the Minister.

Clause 24: Accounts and audit

This clause requires the Commission to ensure that proper ac­counting records are kept of the Commission's receipts and ex­penditures. The Auditor-General may at any time, and must at least once in each year, audit the accounts of the Commission.

PART 3

PRICE REGULATION

Clause 25: Price regulation

Clause 25 provides hat the Commission may make price determi­nations if authorised to do so by a relevant industry regulation Act or by regulation under this measure.

Clause 26: Making and effect of price determinations

This clause sets out the process for making price determi­nations and deals with their commencement and subse­quent variation or revocation.

Clause 27: Offence to contravene price determination

It is to be an offence with a maximum penalty of $1 000 000 if a regulated entity contravenes a price determination or part of a price determination that applies to the entity.

PART 4

INDUSTRY CODES AND RULES

Clause 28: Codes and rules

This clause provides that the Commission may make codes or rules relating to the conduct or operations of a regulated industry or regulated entities.

PART 5

COLLECTION AND USE OF INFORMATION

Clause 29: Commission's power to require information

The Commission is empowered to require a person to give the Commission information in the person's possession that the Commission reasonably requires for the perform­ance of the Commission's functions.

Clause 30: Obligation to preserve confidentiality

This clause requires the Commission to preserve the confi­dentiali­ty of commercially sensitive material received by it.

PART 6

REVIEWS AND APPEALS

Clause 31: Review by Commission

Under this clause, the Commission may—

×on application by the Minister, or by a regulated entity to which the determination applies, review a price determina­tion

×on application by a person of whom a requirement has been made for information under Part 5, review that requirement

×on application by a person who has been given notice under Part 5 of the proposed disclosure of information that the person claimed to be confiden­tial information, review the decision of the Commission to disclose the information.

Clause 32: Appeal

This clause provides that the applicant for a review under Part 6, or any other party to the review who made submis­sions on the review, who is dissatisfied with the result of the review may appeal to the Administrative and Disci­plinary Division of the District Court. The Court may, on appeal, affirm the decision appealed against or remit the matter to the Commission for con­sideration or further consider­ation in accordance with any direc­tions of the Court.

Clause 33: Exclusion of other challenges to price determi­na­tions

Under this clause, the validity of a price determination may not be challenged in proceedings apart from a review or appeal under Part 6.

PART 7

INQUIRIES AND REPORTS

Clause 34: Inquiry by Commission

The Commission is empowered by this clause to conduct an inquiry of its own initiative.

Clause 35: Minister may refer matter for inquiry

The Commission is required to conduct an inquiry into a matter if required to do so by the Minister administering this measure or a relevant regulated industry Act.

Clause 36: Notice of inquiry

This clause provides for the various notices that must be given of an inquiry.

Clause 37: Conduct of inquiry

This clause provides for the Commission's procedures and powers on an inquiry.

Clause 38: Reports

A report on an inquiry must be made to the relevant Minis­ter and tabled in Parliament.

PART 8

MISCELLANEOUS

Clause 39: Annual report

Annual reports on the Commission's operations must be made to the Minister and tabled in Parliament.

Clause 40 : Warning notices and assurances

This clause allows the Commission to issue warning notices and obtain assurances from persons who contra­vene the measure.

Clause 41: Register of warning notices and assurances

The Commission must keep a register of warning notices and assurances. The registers may be inspected without fee.

Clause 42: Injunctions

This clause allows for various court injunctions to be obtained against persons contravening the measure.

Clause 43: False or misleading information

It is to be an offence with a maximum penalty of $20 000 or imprisonment for 2 years if a person makes a false or misleading statement in any information given under the measure.

Clause 44: Statutory declarations

The Commission may require that information provided to it be verified by statutory declaration.

Clause 45: General defence

Under this clause, it will be a defence to a charge of an offence if the defendant proves that the offence was not committed inten­tionally and did not result from any failure on the part of the defendant to take reasonable care to avoid the commission of the offence.

Clause 46: Offences by bodies corporate

If a body corporate is guilty of an offence against the measure, each director of the body corporate is, subject to the general defence, guilty of an offence and liable to the same penalty.

Clause 47: Continuing offence

This clause provides a daily penalty for continuing of­fences.

Clause 48 : Order for payment of profit from contra­ven­tion

The court convicting a person of an offence against the measure may order the convicted person to pay to the Crown an amount not exceeding the court's estimation of the amount of any monetary, financial or economic ben­efits acquired, or accruing to the person as a result of the commission of the offence.

Clause 49: Immunity from personal liability

This clause provides an immunity from personal liability for a person engaged in the administration or enforcement of the meas­ure for acts or omissions in good faith. The liability will instead lie against the Crown.

Clause 50: Evidence

This clause provides assistance in the proof of various matters in prosecutions and other proceedings.

Clause 51: Service

This clause deals with the methods of service of docu­ments re­quired or authorised to be given under the meas­ure.

Clause 52: Regulations

The Governor may make regulations for the purposes of the measure.

Clause 53: Review of Act

Under this clause, the Minister is to review the measure as soon as possible after the period of 3 years from the date of assent. A report on the outcome of the review is to be completed within 6 months after that period of 3 years. The report must be tabled in Parliament.

SCHEDULE 1

Appointment and Selection of Experts for Court

A panel of experts is to be established to sit as assessors with the Court consisting of persons with knowledge of, or experience in, a regulated industry or in the fields of com­merce or economics.

SCHEDULE 2

Repeal and Transitional Provisions

The Independent Industry Regulator Act 1999 is repealed.

The Commission is declared by this Schedule to be the same body corporate as the South Australian Independent Industry Regulator established under the Independent Industry Regulator Act 1999.

The person holding office as the South Australian Inde­pendent Industry Regulator is, under this Schedule, to be taken to have been appointed as the Chairperson of the Commission.

SCHEDULE 3

Consequential Amendments

This Schedule makes consequential amendments to the Local Government Act 1999 and the Maritime Services (Access) Act 2000 replacing references to the South Australian Independent Industry Regulator with references to the Essential Services Commission.

One White

Ms CHAPMAN secured the adjournment of the debate.