Luke Hartsuyker (Cowper, National Party, Deputy Leader of Opposition Business in the House) Share this | Hansard source

Certainly the Australian Energy Market Amendment (Minor Amendments) Bill 2008 has been brought into clear focus by the events that have occurred in Western Australia. These events show quite clearly how dependent any modern nation is on energy, how fragile our energy supply can be and the potential for knock-on effects throughout the entire economy.

In Australia we spend around $50 billion a year on energy. Our energy exports are worth some $24 billion per annum. These figures take into account coal, oil, natural gas, electricity, renewables and other forms of energy. As a society we require ever-increasing amounts of energy to maintain our high quality of life. By 2020, domestic demand for energy is expected to increase by some 50 per cent.

In 2002, a report entitled Towards a truly national and efficient energy market was handed down to the COAG Ministerial Council on Energy. The report found that Australia’s energy markets could benefit from greater national consistency of governance and regulation. The ministers agreed that further reform to the sector would lead to greater investment in Australian energy needs by lowering the cost and complexity of regulation and by providing investors with greater certainty about regulation. The council also found that reforming the energy system would lead to greater competition between providers and would encourage the further development of natural gas and renewable energy sources. It was envisaged that the proposed reforms would also help to address the issue of greenhouse gas emissions from the energy sector.

To replace the variety of governing bodies and regulators that control Australia’s energy markets, two new statutory bodies were created. The Australian Energy Market Commission has the responsibility for rule making and market development. The Australian Energy Regulator, or AER, has the responsibility for market regulation. The AER is a constituent part of the ACCC but operates as a separate legal entity.

Initially, the reforms were applied to the national electricity market, but they are now being expanded to include national gas infrastructure. The latest round of reforms will bring gas access regulation into line with the regulation of the electricity sector. As a part of the reforms to the gas access regime, the industry has put forward a proposal for a bulletin board that will provide information about gas services and assist in response to emergencies—a very timely notion at this point in our history. The bulletin board will be an important step in creating greater transparency within the market.

These reforms have been planned with the cooperation of the energy sector, the state governments and the Commonwealth, and advice and input have been received from the ACCC and the Productivity Commission. These changes have not been advanced without detailed and careful consideration, and I believe they will make a difference to Australia’s energy future. As we move towards a carbon constrained economy, gas will play a vital role in the provision of our energy needs. The Australian energy market reform process will provide incentives for investment in this important area. Companies will benefit from a light-handed regulatory system, regulatory certainty and improvements to the rules around cost recovery for investment in expanding existing gas infrastructure capacity.

Although the reform process will be of benefit to the companies involved, I should note that the Rudd government has taken steps to discourage investment and exploration in Australia’s gas fields by introducing an excise on condensate. Condensate is created as a result of pressure and temperature changes brought about by the pumping of natural gas from a gas field. Gas reserves are generally more profitable if they contain a mix of gas and condensate. The Howard government worked hard to secure an additional 2.5 million square kilometres of seabed for oil and gas exploration, and this tax grab by the Rudd government can only discourage potential investors from exploring this new territory. You must always be careful to observe what this government does, rather than listen to what it says. Natural gas is a vital component in the fight against greenhouse gas emissions. It is inconsistent that the government would introduce a tax that will discourage exploration for this resource.

The main objectives of the gas market reform are enshrined in the National Gas Law. Underpinning the National Gas Law are six principles that will guide the development of the regulation framework for gas pipeline access. The first principle is that a service provider should have reasonable opportunity to recover the costs brought about by complying with a regulatory obligation or requirement. This is essential to ensuring that service providers will continue to undertake further investment in gas infrastructure. The second principle is that service providers should be provided with effective incentives to promote economically efficient investment in and provision and use of pipeline services. The third principle ensures that the regulator takes into account previous determinations by the ACCC about existing pipeline infrastructure. This ensures that a company’s previous investment in pipeline infrastructure is recognised and taken into account when making regulatory decisions. The fourth principle ensures that prices and charges for the provision of a specified service allow for a return in line with the risk taken to provide that service. The fifth principle ensures that the Australian Energy Regulator will take into account the cost and risk of over- or under-investment by a service provider in the network. The final principle ensures that the regulator will take into account the possibility of over- or under-utilisation of a service provider’s network. These principles will guide the development of the regulatory framework and ensure that service providers are not disadvantaged by the reform process.

At the heart of these reforms is the consumer. A key objective of the Australian energy market reform is the promotion of the long-term interests of energy consumers. As the effects of the market reform begin to flow through to consumers, we should see improvements in the price, quality, reliability and security of supply of natural gas. Although these reforms are primarily economic in nature, if the gas market and access to pipeline services are economically efficient, the flow-on effects will undoubtedly be positive for consumers.

In keeping with the goal of providing improved consumer outcomes, the National Gas Law will permit the Australian Energy Regulator to publish regular reports on the financial and operational performance of service providers. This will add transparency to the industry and will be of great benefit to gas users and consumers. In order to safeguard the reputation of service providers, the providers will have the opportunity to do a review of the performance reports before they are released to the public and to request changes to the reports, based on factual evidence.

Australia has large reserves of natural gas. This resource will become more and more important to our energy security as we move towards a carbon constrained society. Gas generally produces fewer carbon emissions than coal or oil based energy production methods. As such, it is essential in the fight against climate change. Making gas more accessible and attractive for consumers and encouraging further gas exploration are important objectives, and these reforms will help meet those goals.

The legislation under debate today is a minor technical amendment which reflects changes in the timing of the implementation of this legislation. I believe that these energy market reforms will have a positive impact on the energy sector and I offer no objection to the passage of this legislation.

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