Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

Happy new year to you, Deputy Speaker Payne. I rise in support of the Competition and Consumer Amendment (Australian Energy Regulator Separation) Bill 2024. This bill resolves some longstanding issues with the current governance arrangements for energy regulation in Australia. It responds to the needs of the rapidly changing Australian energy market and also positions the sector for the future.

The Australian Energy Regulator, or AER, has been in operation for nearly 20 years. It is one of the three major market bodies that oversee national electricity and gas markets in Australia. The Australian Energy Market Commission develops the rules for market operation, the Australian Energy Market Operator controls the day-to-day operations of those markets and the AER has the role of monitoring compliance with the regulations and performance. Each agency supports the Energy and Climate Change Ministerial Council to develop and support Australian energy policy, with the basic understanding being that markets create the lowest prices.

The AER regulates electricity networks and gas pipelines in all states and territories excluding WA. This translates to around 800,000 kilometres of overhead electricity lines and underground cables, servicing about 11 million customers. The gas pipelines are over 73,000 kilometres long and provide gas for more than 4.3 million customers. The key role of the AER is to set the maximum amount of revenue that electricity and gas providers can earn. The AER's decision-making process evaluates the projected demand for electricity and natural gas, the age of the infrastructure, the operating and financial costs and the reliability of the network, including its safety standards. The AER regulates the wholesale gas and electricity markets, where prices are set by matching supply with real-time demand. When I say real-time demand, I mean that you can actually just go on the webpage and see how the spot prices are changing second by second. The AER monitors the elements of this process, including network constraints and outages, demand forecasts, production forecasts, and market dispatch and prices.

The other important role the AER has is to help customers make informed choices about which provider supplies their energy. They protect consumers from prices that are too high and approve customer hardship policies amongst other safeguards so that people aren't sitting in the dark or the cold. As the AER states:

Consumers are at the heart of everything we do.

The AER works to ensure energy consumers have access to a reliable and secure market and that they pay no more than necessary for energy to their homes and businesses.

Deputy Speaker, you can see the AER has a comprehensive and wide-ranging mandate. It was established nearly 20 years ago under the umbrella of the Australian Competition and Consumer Commission. Its initial budget way back in 2004-05 was $6.5 million. In 2023-24, the budget grew to over $95.6 million. The organisation has seen a rapid growth in the number of employees as well. When it began, there were 15 staff; it now has approximately 400 employees. It's been acknowledged for some time that, due to both the wide-ranging remit of AER and its growth, the current governance structure is not fit for purpose. This bill before the chamber, therefore, establishes the AER as a standalone Commonwealth entity separate from the ACCC.

The reforms will give the AER authoritative control over both its funding and its employees. Currently the chair of the ACCC is technically responsible for leading, governing and setting the strategic direction of the entity of which the AER is a part. However, the AER's independent board retains ultimate accountability for these factors. Obviously this is a clear disconnect between authority and responsibility.

The bill amends the Competition and Consumer Act 2010. It establishes the AER as a non-corporate Commonwealth entity for the purposes of the Public Governance, Performance and Accountability Act 2013, so the AER board will become the accountable authority of the body. The AER chair will become the head of the agency to align with the Public Service Act 1999, implementing these arrangements for the 400 employees. This bill also establishes the ACCC enterprise agreement for the new AER entity.

This bill does not alter the remit of the AER, which I outlined at the start of this speech. The changes have the support of the 2020 review of the Energy Security Board. They were driven by consultation over many years with the Treasury, the Department of Finance, the Australian Public Service Commission, the ACCC, energy ministers from the states and territories and the AER itself. The necessary approval to amend the Competition and Consumer Act was granted by state and territory energy ministers way back in May 2023.

The implementation of the bill recognises the need to maintain the independence of the AER. Consequently, the Minister for Climate Change and Energy will not have ministerial powers over the AER. The minimalistic approach to this separation guarantees that the ACCC and its constitution are not affected. Both entities will continue to benefit from the information-sharing arrangement currently in place. Importantly, staff will not be disadvantaged in any way by the reform. The AER will transfer all existing staff and be able to employ its own staff moving forward.

There are numerous benefits to these reforms. Primarily, it sets the AER up to be more agile in the face of a changing energy landscape. It makes decision-making and governance more streamlined, eliminating duplicate decision-making, and it removes the dual ministerial responsibility for the AER's activities. Currently the Minister for Climate Change and Energy has portfolio responsibility for the AER and the Treasurer has responsibility under finance law that pertains to the ACCC.

Finally, it removes the governance risk that currently exists. It will end the governance of AER employees by the ACCC so that the AER becomes independently responsible both for its strategic direction and for its employees, as I previously mentioned. The need for this is reflected in the AER's Strategic plan 2020-2025. This plan recognises the importance of organisational culture with a focus on achievement and innovation. The AER board will be able to drive their cultural goals more effectively, as their employees will no longer be embedded in the ACCC.

The reforms in this bill have been backed by stakeholders and experts for some time. There have been a number of public reviews recommending an autonomous AER. In 2015 the review of governance arrangements for Australian energy markets recommended establishing the AER as a standalone body. This was then reinforced in 2017 in the Independent Review into the Future Security of the National Electricity Market.

This bill enables the AER to respond quickly to changing consumer energy demands and to independently continue its critical role in ensuring affordability for Australian consumers. As our nation moves forward towards net zero, it is vital that energy market governance is clear and the AER is able to fulfil its purpose to ensure energy consumers are better off now and into the future. I commend the bill to the House.

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