Anne Urquhart (Tasmania, Australian Labor Party) Share this | Hansard source

I rise to speak on the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017. I want to say at the outset that Labor supports the bill and supports the abolition of the limited merits review.

Labor referred the bill to the Senate Environment and Communications Legislation Committee. We did it not to needlessly delay the bill or to frustrate customers or the energy industry but to ask genuine questions of industry, consumers and unions about what the impacts of this bill would be. The inquiry received 12 submissions. The committee held a short hearing in Melbourne just a couple of weeks ago and received evidence from energy companies, consumer groups, unions, energy industry experts and the government.

A number of critical points came out of the evidence to the inquiry. I want to thank the secretariat for their assistance in preparing the report and thank all those who gave submissions and gave evidence. It was important to take a moment to hear from all sides about the role of limited merits review—the current problems faced by consumers and unions and possible alternative approaches. I, for one, feel that it is never a good idea to simply abolish something without examining what the alternatives might be. In this case, it is clear that the limited merits review process appears to be slanted in the interests of network companies rather than the long-term interests of consumers.

While it may have been possible for the government to make amendments to the process, it's chosen to abolish the LMR regime. I note that the government introduced this bill to the parliament in August this year, after an announcement by the minister in June. Since its introduction, the minister has spoken on a number of occasions of the urgent need for this bill to pass. This is so that, after being in power for over four years, this government can say it's doing something to relieve pressure on energy prices for households. Energy prices have increased 63 per cent, on top of inflation, over the past 10 years. This is so that, after another year of indecision and infighting, the government can say it is putting pressure on energy companies. This is so that, after a year of being the minister, the member for Kooyong can hold doorstops and proudly claim to be a man of action.

Yet this bill will do nothing to put immediate downward pressure on power prices. As a result of this bill passing, power prices will not drop tomorrow or in fact next week. Importantly in this energy debate, this bill won't miraculously solve this government's infighting and it won't end the crusade by the member for Warringah. And it won't change the basic fact that this government has been in power for over four years and that for four years this government, under the current Prime Minister and the member for Warringah before him, has left this country without a clear energy policy.

So what is limited merits review? It was introduced 2008 following amendment of the national energy laws. Limited merits review was part of an attempt to balance outcomes between competing interests and to allow parties affected by decisions of the Australian Energy Regulator appropriate recourse to have decisions reviewed. Under the national energy laws, the Australian Energy Regulator sets the prices that businesses may charge for, and the revenue they may earn from, the provision of electricity network services and access to covered pipelines. The use of the regulator in setting the prices recognises the natural monopoly in the supply of electricity and gas. The current process by the AER arrives at its revenue and accesses determinations in lengthy and extensive inquiry processes, analysis and consultation. If an affected party or person disagrees with an AER determination, they may seek leave of the Australian Competition Tribunal to apply for a limited merits review of the determination. In making its determination, the Competition Tribunal must either affirm or vary the original decision, or set aside the decision and remit the matter back to the AER. After a limited merits review process concludes, affected parties may then seek a judicial review of the decisions.

Even with these qualifications and the intention that the LMR is used to seek a resolution to complex disputes, use of limited merits review has become a routine part of the regulatory process and has contributed to increased energy prices for consumers. The limited merits review regime has been reviewed by the COAG Energy Council twice—in 2012 and again in 2016. The 2012 review found the limited merits review regime did not adequately address all stakeholders' interests, especially those of consumers. It was excessively legalistic in its approach and was costlier, with cases taking longer than anticipated. As a result of the first review, the LMR regime was amended in 2013 to realign the processes and threshold to better incorporate the views of consumers. The second review, in 2016, resulted in agreement between COAG Energy Council ministers that the limited merits review regime was failing to meet its policy intent and had contributed to higher prices for consumers. However, there was no consensus on the Commonwealth's position that the LMR regime should be abolished. Instead, a wideranging set of amendments were agreed to in principle to enable significant and immediate reform to again improve the processes and thresholds to better meet the long-term interests of consumers.

Despite the COAG Energy Council's position of agreement in principle to amend the LMR regime, the minister in June this year announced he'd be moving forward alone with its abolition. As the member for Port Adelaide said in his address to the other place, it was pretty clear, looking at the national debate surrounding the COAG Energy Council over the past few years, that the loudest proponents of the abolition of LMR were Labor state governments in Victoria and South Australia, and the New South Wales Labor opposition. In fact, the strongest resistance to any abolition of the LMR came from the New South Wales Liberal government, particularly when Mr Mike Baird was the Premier.

I want to return now to the Senate inquiry and address a number of important points made by witnesses. First, the Electrical Trades Union and the Australian Council of Trade Unions expressed concern that the bill is being used as a blunt instrument to address high energy prices for Australian households and businesses, with little consideration for any unintended impacts on employees. The ETU gave one particularly strong piece of evidence that, as a consequence of a Competition Tribunal limited merits review in 2015, an estimated 2,000 electricity maintenance jobs had been saved across New South Wales and the ACT and the condition of those networks had avoided serious neglect.

The ETU explained that if network companies are forced to operate below recovery costs for the efficient operation of their businesses then workers will have very little protection when businesses decide the easiest path to reducing their costs is by downsizing, or by terminating maintenance workers' employment and re-employing them under a contractor. While this may be seen by some as an indirect matter, the rise of contracting and insecure work is of real concern to millions of Australians. Under a contractor workers would face a pay cut and less secure working hours, and the general conditions that they're working under would be less safe.

The ETU advised that, in their experience, employment under a contractor is more precarious, and safety may be compromised through the drive to get jobs completed. This may be seen by some as efficient and driving down costs, but lowering costs should not be done at the expense of the working conditions and safety of Australian workers. So what is the virtue in it? I can guarantee the energy network company will still find a way to extract the same rate of return for its shareholders. In the case raised by the ETU and the ACTU, the ability of the company and the union to take the determination to the Competition Tribunal for a limited merits review enabled a higher revenue determination and those jobs to be saved.

I note that the AER responded to this evidence by saying that it sets an overall revenue allowance and that it is up to the business to decide how it operates, including how much money it spends on operations and maintenance. I also note that the Department of the Environment and Energy stated that an impact on the workforce is a commercial decision on the part of the business concerned. While both responses from the regulator and the department were expected, it is disappointing and downright disgusting that workers can be used as cannon fodder by huge businesses. Whether they are energy network operators, shipping companies, manufacturers or whoever, I for one will stand here and say that this isn't right and that I, together with people across the country, will be watching the new process of the AER with great interest.

With that, I want to move on to the need for greater stakeholder participation in AER determinations, particularly those for consumers and unions. While the department noted in evidence that the very best place for consumers to engage is the regulator's primary decision process—and I note that the AER gave evidence that there have been positive changes in the engagement between some network businesses, their customers and the AER—the AER also indicated that it is working to ensure that consumers are fully included in its decision-making processes. Further, the minister has allocated an additional $67 million over the next four years to the AER. However, the clear evidence from the inquiry was that, while engagement with stakeholders was increasing, it was not always adequate. As such, I proposed a recommendation to the committee's report that reads:

The committee recommends that the Commonwealth Government gives consideration to amending the statements of expectations for the Australian Energy Regulator to emphasise that more effective engagement of consumers, relevant unions and stakeholders is expected.

In preparing this recommendation, it was brought to my attention that the government hasn't produced a statement of expectations for the Australian Energy Regulator since 2014. Such statements are often issued at the start of a new parliament or as policies change. As such, if the minister is to present a new statement, it should include specific direction to emphasise that effective engagement with consumers and unions is both expected and absolutely necessary for the proper functioning of the national energy market, that the current approach of improving empowerment for consumers is welcomed and that there is a need for the AER to do more for consumers and to embed unions into the process. I encourage the minister to look favourably upon this recommendation and to update the parliament on his actions in the coming months.

Finally, with the passage of this bill there will still be a review option available: the judicial review. Evidence to the inquiry was quite clear that, while access to judicial review was possible, it was viewed as not being an adequate avenue for redress for industry, and there is concern that key stakeholders such as unions and consumer groups will not have standing within a judicial review and that, if they were to actually get that standing, they may face exorbitant cost orders that would prevent them initially from bringing forth a review. So I welcome the comments from the AER that there is likely to be a need for improvement to the process to ensure standing and provide cost protections for consumer groups in relation to judicial review. However, I'm concerned that the AER again is neglecting the important role of unions in this conversation. They represent tens of thousands of people in the energy sector, and I believe that any moves to improve the process to ensure consumers have standing and are protected from cost orders must be extended to unions and their members.

In conclusion, I come back to the minister's urgency to pass this bill. Why is it that this minister is in a huge rush to pass this bill but at the same time is part of a government that has no energy policy, has no ideas for providing long-term certainty to the energy market and wants to abolish the energy supplement for 400,000 aged pensioners, 105,000 carers, 109,000 disability support pensioners, 138,000 single parents and many other income support recipients besides? This is a supplement whose sole purpose is to relieve the pressure from electricity bills on some of the most vulnerable members of the Australian community, a supplement that currently relieves pressure on hundreds of thousands of households' electricity bills, and yet we're here abolishing a review process that will not affect prices tomorrow or next week.

Labor supports the limited merits review for electricity and gas networks. It's a regime that has been twice reviewed and, while amendments may have improved the regime, the government has taken the option of abolition. Labor referred this bill to the Environment and Communications Legislation Committee, as I said earlier, and it was not to needlessly delay the bill or to frustrate the energy industry but to ask genuine questions of consumers, of the industry and of unions on the impact of this bill. I thank the Senate.