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2002 - 2003 - 2004
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
AUSTRALIAN ENERGY MARKET BILL 2004
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Industry, Tourism and Resources
the Hon Ian Macfarlane
MP)
CONTENTS
1. General outline
2. Notes on clauses
AUSTRALIAN ENERGY MARKET BILL 2004
1. GENERAL OUTLINE
1.1 This Bill is part of a package of legislation to provide for the operation of an Australian energy market. The Commonwealth legislation complements legislation which is to be passed by State and Territory Governments in coming months. These arrangements will improve the quality, timeliness and national character of the Australian energy market.
1.2 In December 2002, the Council of Australian Governments (COAG) Independent Review of Energy Market Directions was released. The Review identified a number of strategic issues for Australian energy markets, and potential policy responses required from all governments to deliver an open, effective and competitive national energy market.
1.3 On 11 December 2003, the Ministerial Council on Energy (MCE) finalised a comprehensive response to the COAG Review. This report sets out the major policy directions for the MCE’s national energy market reform program, and was endorsed by COAG in April 2004.
1.4 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.
1.5 In accordance with the Australian Energy Market Agreement, the Commonwealth will introduce two separate Bills into the Parliament. Both of these bills are the outcome of close discussions between Commonwealth, State and Territory Governments and give effect to the Commonwealth’s commitment to the creation of the Australian energy market.
Australian Energy Market Bill 2004
1.1 This Bill, the Australian Energy Market Bill 2004, applies the National Electricity Law, the National Electricity Code (and other Rules) and regulations, as Commonwealth law in offshore areas. It also allows regulations to prescribe further State and Territory energy laws to be applied in the offshore areas.
Trade Practices Amendment (Australian Energy Market) Bill 2004
1.2 The accompanying Bill, the Trade Practices Amendment (Australian Energy Market) Bill 2004 provides for the establishment of the Australian Energy Regulator (AER) through amendments to the Trade Practices Act 1974 (TPA).
Nature of Revised Arrangements
1.3 Current energy regulation involves the Commonwealth Trade Practices Act 1974 (TPA) and co-operative legislative schemes for both electricity and gas comprising:
• the National Electricity Law and National Electricity Code under the National Electricity (South Australia) Act 1996 (SA), applied as a law of the jurisdiction by participating States and Territories; and
• the Gas Pipelines Access Law and National Third Party Access Code for Natural Gas Pipeline Systems under the Gas Pipelines Access (South Australia) Act 1997, applied as a law of the jurisdiction by the Commonwealth and participating States and Territories; and
• State and Territory specific regulation of electricity and gas, generally involving licensing and retail regulation.
1.4 This Bill provides for the application of the electricity laws (National Electricity Law, National Electricity Code and any other Rules and Regulations) as a Commonwealth law in offshore areas. This arrangement will enable the electricity market rules to apply consistently across all participating government jurisdictions.
1.5 The energy reforms provide for the establishment of two new bodies. The regulator, the AER, will be established by the Commonwealth through the accompanying Bill and will enable the number of energy regulators to be rationalised. The Australian Energy Market Commission (AEMC) will be established by South Australian legislation. The AEMC will be responsible for rule-making and market development.
1.6 Initially, the AER and AEMC will have electricity functions. The AER and AEMC receive their functions under both Commonwealth and State and Territory legislation. In due course, these bodies will be given gas functions too.
1.7 The AER will have responsibility for economic regulation of Australian energy markets and will perform functions and exercise powers as conferred by Commonwealth, State and Territory legislation. It will initially be responsible for regulation of electricity wholesale and transmission arrangements. The amendments required to the Trade Practices Act 1974 are set out in the accompanying bill.
1.8 It is intended that the AER will assume regulatory responsibility for gas access arrangements in 2005, and distribution and retail regulation (excluding retail pricing) in 2006 in accordance with the agreed MCE timeline and the Australian Energy Market Agreement. Further legislation will be required to implement these reforms.
1.1 There is no need for a Cost Recovery Impact Statement to be prepared in relation to this Bill.
1.2 There is no need for a Regulation Impact Statement to be prepared in relation to this Bill.
2. NOTES ON CLAUSES
Clause 1: Short title
2.1 Clause 1 is a formal provision specifying the short title of the Bill. The Act will be called the Australian Energy Market Act 2004.
Clause 2: Commencement
2.2 Clauses 1 and 2 will commence on the day on which the Bill receives the Royal Assent.
2.3 Clauses 3 to 14 will not take effect until the day or days set by Proclamation. However, if any of the provision(s) do not commence within 12 months of the day on which this Act receives the Royal Assent, they will commence on the first day after the end of that 12-month period.
Clause 3: Definitions
2.1 Clause 3 defines terms used in the Bill:
• “adjacent area” in respect of a State or Territory is given the same meaning as it has in section 5A of the Petroleum (Submerged Lands) Act 1967. Broadly, these are offshore areas adjacent to the States and Territories, beyond the 3 nautical mile territorial sea, ending at the limit of Australia’s continental shelf.
• “Australian Energy Market Commission” means the body established by section 5 of the South Australian, Australian Energy Market Commission Establishment Act 2004. This body is also referred to elsewhere as the AEMC.
• “Australian Energy Regulator” is the body established by section 44AE of the Trade Practices Act 1974. This body is also referred to elsewhere as the AER.
• “National Electricity (Commonwealth) Law” means the provisions applying under clause 6 of the Bill. That is the National Electricity Law set out in Schedule 1 to the National Electricity (South Australia) Act 1996 (SA), as applied as a Commonwealth law.
• “National Electricity (Commonwealth) Law, Regulations and Rules” means the National Electricity (Commonwealth) Law, the National Electricity (Commonwealth) Regulations and the National Electricity (Commonwealth) Rules.
• “South Australian Electricity Legislation” means the National Electricity Law as set out in Schedule 1 to the National Electricity (South Australia) Act 1996 as in force from time to time as well as any regulations made under Part 4 of that Act, and any rules (including the National Electricity Code) made under the National Electricity Law, as in force from time to time. The National Electricity Law will be amended in accordance with the Australian Energy Market Agreement, in particular to confer functions on the AER, which will be established by section 44AK of the Trade Practices Act 1974.
• “Uniform energy law” means the South Australian Electricity Legislation and those provisions of a law of a State or Territory that relate to energy and are prescribed by Commonwealth regulations as in force from time to time. For example, a State or Territory electricity retail law or gas law could be prescribed as a uniform energy law.
2.2 Paragraph (2) of clause 3 provides that the words and expressions used in Schedule 1 to the National Electricity (South Australia) Act 1996, (which apply in the jurisdiction of the Commonwealth through the National Electricity (Commonwealth Law)), and appear in this Act, have the same meaning as provided for in that Schedule.
Clause 4: Crown to be bound
2.3 Upon commencement this Bill will bind the Crown as an Act, along with the National Electricity (Commonwealth) Law, Regulations and Rules and any other uniform energy law applied as a law of the Commonwealth, not only in right of the Commonwealth but also, so far as the legislative power of Parliament permits, the Crown in each of its capacities.
Clause 5: Extra-territorial operation
2.4 This clause conveys the intention of the Parliament that the operation of this Act, National Electricity (Commonwealth) Law, Regulations and Rules and any other uniform energy law applied as a law of the Commonwealth, should apply as far as possible to things situated and transactions occurring either within or outside Australia. It further provides that the operation of this Act applies to things and transactions that would otherwise be governed or affected by the law of a State, a Territory or a foreign country.
Part 2: Application of energy laws as laws of the Commonwealth
Clause 6: Application of National Electricity Law in adjacent areas etc
2.5 This clause applies the National Electricity Law of South Australia, as in force from time to time, as a law of the Commonwealth.
2.6 As stated in clause 3 of the Bill, the National Electricity Law is contained in Schedule 1 to the National Electricity (South Australia) Act 1996. Other State and Territory jurisdictions have enacted legislation to apply the National Electricity Law within their jurisdictions, providing a common legal framework for electricity law across those jurisdictions.
2.7 Clause 6 applies the National Electricity Law as a law of the Commonwealth. It is only applied in the offshore adjacent areas ensuring that jurisdiction of the Commonwealth does not unnecessarily overlap with State or Territory jurisdictions. The Commonwealth is also empowered to further apply the National Electricity Law to any other places, or to any other circumstances or persons prescribed under Commonwealth regulations.
2.8 The clause also provides that this Law as applied by the Commonwealth may be referred to as the National Electricity (Commonwealth) Law.
2.9 This clause, together with clauses 7 and 8, apply the National Electricity Law, Regulations, and Rules as in force from time to time, as Commonwealth law in the offshore adjacent areas. Unlike much ordinary subordinate legislation made by a Commonwealth person or body, changes to the Law, Regulations and Rules will not be directly subject to Parliamentary disallowance.
2.10 Rather, the Commonwealth, States and Territories have agreed generally to apply the electricity provisions uniformly. All jurisdictions will therefore apply the Law, Regulations and Rules without subjecting them to Parliamentary disallowance in each jurisdiction. This is similar to the way in which the electricity scheme presently operates in participating States and Territories. It is also similar to the way in which the gas pipelines access regime operates in the Commonwealth, and participating States and Territories (see the Gas Pipelines Access (Commonwealth) Act 1998).
2.11 Further, the Commonwealth has certain controls over the laws to be applied. 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, which includes the relevant Commonwealth Minister. Under the South Australian Australian Energy Market Commission Establishment Act 2004, the Commonwealth nominates one of the three members of the AEMC, which is responsible for changes to the National Electricity Code and other Rules. Also, under clause 14(3) of this Bill, the Commonwealth has the power to modify or adapt by regulations under this Bill, the Law, Regulations or Rules, as they apply as Commonwealth law. Such modifying or adapting regulations are subject to disallowance in the usual way, by the Commonwealth Parliament.
Clause 7: Application of National Electricity Regulations in adjacent areas etc
2.1 Clause 7 applies the Regulations made under Part 4 of the National Electricity (South Australia) Act 1996 as in force from time to time as a law of the Commonwealth. They are applied for the purposes of the National Electricity Law as applied by clause 6. This means that they will only apply in the geographical areas or other situations where the National Electricity (Commonwealth) Law applies.
2.2 The clause also provides that the National Electricity regulations as Commonwealth laws may be referred to as the National Electricity (Commonwealth) Regulations.
Clause 8: Application of National Electricity Rules in adjacent areas etc
2.1 Clause 8 applies Rules (including the National Electricity Code) as in force from time to time, made under the National Electricity Law set out in Schedule 1 to the National Electricity (South Australia) Act 1996 as a rules in force for the purposes of the National Electricity (Commonwealth Law). Again, this means the Rules, including the Code, will apply where the Law applies by virtue of clause 6. It is proposed in the amendments of the National Electricity Law, in accordance with the Australian Energy Market Agreement, that the National Electricity Code will more clearly be rules made under that Law, and that it will be amended from time to time by the AEMC, established by section 5 of the South Australian Australian Energy Market Commission Establishment Act 2004.
2.2 The clause also provides that the Rules applying as Commonwealth law may be referred to as the National Energy (Commonwealth) Rules.
Clause 9: Functions and powers of the Australian Energy Market Commission under the National Electricity (Commonwealth) Law, Regulations and Rules
2.1 This clause provides that the Australian Energy Market Commission (the AEMC) has the functions and powers conferred on it under the National Electricity (Commonwealth) Law, Regulations and Rules. Any delegation by the AEMC is taken to extend to and have effect for the purposes of those laws, regulations and rules. This ensures that the AEMC, which is a South Australian statutory body, may perform the functions, and exercise the powers, conferred on it, by the National Electricity (Commonwealth) Law, Regulations and Rules.
Clause 10: Functions and powers of the Australian Energy Regulator under the National Electricity (Commonwealth) Law, Regulations and Rules
2.2 This clause provides that the Australian Energy Regulator (also known as the AER) has the functions and powers conferred on it under the National Electricity (Commonwealth) Law, Regulations and Rules. This ensures that the AER, may perform the functions, and exercise the powers, conferred on it, by the National Electricity (Commonwealth) Law, Regulations and Rules. Any delegation by the AER is taken to extend to and have effect for the purposes of those laws, regulations and rules.
Clause 11: Interpretation of some expressions in the National Electricity (Commonwealth) Law, Regulations and Rules etc.
2.3 Subclause 11(1) provides a series of terms with definitions that are to be used in the interpretation of the National Electricity (Commonwealth) Law, Regulations, and Rules:
• “Court” means the Federal Court of Australia.
• “Legislature of this jurisdiction” means the Legislature of the Commonwealth.
• “magistrate” means a Federal Magistrate of the Federal Magistrates Court.
• “the jurisdiction or this jurisdiction” means the Commonwealth.
• “the National Electricity Law” or “this Law” means the National Electricity (Commonwealth) Law.
2.4 Subclause 11(2) provides that the Acts Interpretation Act 1915 of South Australia, and other Acts of South Australia, do not apply to the National Electricity Law as set out in Schedule 1 to the National Electricity (South Australia) Act 1996, to any regulations made under Part 4 of that Act or any rules (including the National Electricity Code) applied as laws of the Commonwealth.
Clause 12: Application of other uniform energy laws in adjacent areas
2.5 This clause provides that any other uniform energy law applies as a law of the Commonwealth in the adjacent area of each State and Territory. The application of uniform energy laws as Commonwealth laws is confined to adjacent areas, ensuring that applied Commonwealth laws do not unnecessarily overlap with those of States or Territories. This clause will facilitate the further implementation of national energy cooperative legislative arrangements. However, under the definition of uniform energy law in clause 3, new laws can only be applied by regulation, allowing for Parliamentary scrutiny.
Clause 13: Application of the Administrative Decisions (Judicial Review) Act 1977
2.6 This clause extends the application of the Administrative Decisions (Judicial Review) Act 1977 to any decision made by the AER under the National Electricity (Commonwealth) Law or the National Electricity (Commonwealth) Regulations, or the National Electricity (Commonwealth) Rules, or a uniform energy law applied as a law of the Commonwealth. This will allow judicial review of AER decisions under those laws by the Federal Court.
Clause 14: Regulations
2.7 This clause empowers the Governor-General to make regulations under the Act.
2.8 This includes regulations providing for the interpretation of a uniform energy law that is applied as a law of the Commonwealth. These regulations may provide that any Commonwealth, State or Territory law or provision of a law, including those specifically relating to the interpretation of laws, do not apply to a uniform energy law applied as a law of the Commonwealth. This provides the Commonwealth with the capacity to adjust the application of a uniform energy law to meet the particular needs of operating within Commonwealth jurisdiction.
2.9 Regulations made under this clause may also modify or adapt any provision of the National Electricity (Commonwealth) Law or the National Electricity (Commonwealth) Regulations, or the National Electricity (Commonwealth) Rules, or a uniform energy law applied as a law of the Commonwealth. This will ensure that the application of laws as Commonwealth laws is appropriate. For instance, it would allow regulations to modify an applied law to deal with the offshore environment in the adjacent area, or to conform within limits on Commonwealth constitutional powers in relation to things like the separation of judicial and executive powers.