Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Chair of the Senate Standing Committee on Economics, Senator Hurley, I present the report entitled, The need, scope and content of a definition of unconscionable conduct for the purposes of Part IVA of the Trade Practices Act 1974, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

by leave—I move:

That the Senate take note of the report.

Section 51AC of the Trade Practices Act is very important and is going to be a crucial issue when it comes before this chamber in, I hope, the not too distant future. Section 51AC, and especially ‘unconscionable conduct’, is an area of serious concern for small business people around this nation, predominantly those who are dealing with retail tenancies in big shopping malls.

I would like to thank members of the committee for the work that was done through this process, and I see that Senator Cameron is in the chamber. Although members may not have come to a consensus in the report—there being additional comments by coalition senators and Senator Xenophon—there was general agreement that section 51AC needs to be tightened.

In this nation, we have to make sure that we maintain the capacity for those who wish to prevail in business to not be knocked out because they are not good at their job, or because they have a badly priced product or a badly priced service, or because they are being bullied out of the marketplace by terms that have been brought about because one player has excessive market power which is used to completely walk over the other player. To go about this process, and because of the lack of clarity of section 51AC, we need to get a more definitive approach. I stand to be corrected but I think only two cases have been prosecuted successfully by the ACCC under section 51AC in the last 10 years. That needs to be addressed by way of a stronger statutory definition of unconscionable conduct.

Unconscionable conduct has to stand in proxy where market forces have failed. If there were a strong market and ease of entry and exit, with alternative sources of supply and diversity of players, then there would really be no role for the Trade Practices Act, and that would be an idyllic world to live in. But when these forces are not present and we get a centralisation of players, or exploitation by a very strong group of players over a very weak group of players, then we have a role for the Trade Practices Act.

The issues that we looked at in section 51AC were such things as fair dealing, fair trading, fair play, good faith and good conscience. These are definitions which are not peculiar to the Australian people, and they are what a lady who runs a shop in a large shopping mall would be looking to the Senate to provide. In her negotiations with the landlord, she would be looking for fair trading, fair play, good faith and good conscience. Other people, when negotiating with centralised players in the marketplace, will look for the same outcomes. I look forward to giving the ACCC greater powers and, at times, a greater motivation to pursue these issues.

I commend the report to the Senate. I hope in relation to this matter that a reasonable approach is taken and that we see all those things that I have noted—fair trading, fair play, good faith and good conscience. They are the elements exhibited by this chamber when it comes forward with a stronger definition of 51AC so that the Australian people have access to the merchant class and have the capacity to be participants in the wealth of our nation. When the dreams and aspirations of people living in this marvellous nation of ours, Australia, and the economy—which is a manifestation of our nation’s benefaction—come forward into our legislation, we can give our citizens a better and fairer economy to enjoy and be part of.

Question agreed to.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Chair of the Senate Standing Committee on Economics, Senator Hurley, I present the report entitled Matters relating to the gas explosion at Varanus Island, Western Australia, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

I draw the Senate’s attention to the fact that this inquiry was referred to the Senate Standing Committee on Economics on 28 August 2008. Throughout the course of the inquiry, the committee conducted five public hearings—one in Perth, another in Bunbury in the south-west of Western Australia, and three shorter hearings in Canberra.

The committee was asked to examine the economic impact and government response to the explosions that occurred on Varanus Island on 3 June 2008. The explosions disrupted a third of Western Australia’s domestic gas supply. The committee received 32 submissions and heard from a wide variety of people at the five hearings. I would like to thank all those who took the time to write submissions or to appear before the committee at a hearing. I also thank the committee secretariat for their assistance in the conduct of the inquiry.

At the hearings in Bunbury, the committee heard from individuals who had experienced such significant dislocation that their businesses were faced with closure. The committee formed the view that, because industry in the south-west of Western Australia relies so heavily on gas sourced from the Varanus Island facility, there was a disproportionate disruption to that part of Western Australia.

The committee heard some particularly worrying evidence from several contractors in the south-west who were severely affected by the gas shortage. It was reported that Centrelink are limited in the assistance they can provide to independent contractors. The committee suggests that the Department of Human Services should undertake an investigation of these concerns.

In terms of the government response, the committee majority came to the conclusion that the former Western Australian government responded in an adequate manner to the crisis and that their management of the crisis was professional and effective. Some witnesses who gave evidence to the inquiry suggested that the Western Australian government should have invoked emergency powers in the aftermath of the explosions on Varanus Island so that the government could have taken control of the allocation of gas. However, most witnesses, including the Chamber of Commerce and Industry, the Chamber of Minerals and Energy and the DomGas Alliance, were supportive of the decision not to invoke emergency powers.

The committee majority formed the view that, given the circumstances of the incident and the consequences of forcing unaffected energy suppliers to break contracts and arbitrarily take gas away from one user to give to another, the government had limited capacity to invoke emergency powers and, therefore, the steps taken by the Western Australian government were appropriate.

While the committee found that the response by the Western Australian government was professional and effective, the committee recommends that the state government convene a forum of gas producers, suppliers, power companies, industry groups, media outlets and community representatives to discuss and develop a range of standardised emergency responses in the event that another gas crisis is experienced in Western Australia. This is a prudent course of action that should be undertaken in the aftermath of any significant incident, such as the one that occurred at Varanus Island.

For similar reasons, the committee also recommends that the state government should conduct an analysis of the effectiveness and appropriateness of the legislative framework to deal with periods of energy crisis in Western Australia. The new state government should also conduct the review of gas security, which was originally announced by the former state government on 6 August 2008.

The committee found that energy supplies in Western Australia are prone to serious dislocation due to the lack of a mature, diverse and competitive market. Similarly, the reliance on limited sources of domestic gas production and supply is a significant impediment to the continuity of energy supply for Western Australian consumers and industry. There is no short-term capacity to provide significant amounts of reliable and affordable supplies of alternative energy sufficient to prevent a similar crisis if another major gas failure is experienced.

Based on the evidence the committee received it is clear that, due to the prohibitive cost and technical and environmental challenges, the feasibility of developing emergency storage facilities in depleted reservoirs or other repositories is limited and would not result in continuity of supply during a similar crisis. The committee heard from a number of alternative and sustainable energy groups in Western Australia and recommends that the state government actively engage with the alternative energy industry in order to progress energy diversification through increased alternative energy capacity.

As part of the inquiry, the committee was asked to examine:

… the nature of contractual arrangements forced on business and industry during the gas crisis and their status since the resumption of gas supplies from Varanus Island.

Based on the evidence received, the committee could not reach a definitive conclusion in relation to these matters. A definitive conclusion was not possible due to the decision by Alinta, the major gas retailer in Western Australia, not to appear before the committee. I find Alinta’s attitude to the inquiry inexplicable. It is necessary to place on the record that Alinta were offered the opportunity to make a confidential submission and to give in camera evidence on a number of occasions. In an email to the secretariat on 27 October 2008, Mr Troy McKelvie, legal counsel to Alinta’s parent, Babcock & Brown Power, advised the committee:

After giving due consideration to Alinta’s various contractual obligations not to disclose confidential information, we regret to inform the Senate that Alinta respectfully declines the invitation to give evidence.

The committee secretariat yesterday received a specious letter from Alinta in which the company claims that the absence of a subpoena requiring them to give evidence to the committee prevented them from doing so because of a concern that they would not be protected from disclosing matters subject to contractual confidentiality obligations. Alinta’s comments attached to the letter have been accepted as a late submission.

Senators would be well aware that the use by committees of inquiry powers through the issuing of summonses is the exception rather then the rule. Committees usually invite witnesses to attend voluntarily and they usually do so. It is the practice of the Senate to require committees to marshal witnesses by way of invitation, unless there are circumstances that warrant the issue of a summons. At no stage of the inquiry did Alinta advance any request or argument for the issue of a summons. In my view, Alinta’s after-the-event justification for their nonappearance is disingenuous and reflects poorly on their bona fides. Other senators will, of course, draw their own conclusions.

While there was no direct evidence before the committee on this point, it was clear to the committee that there was a perception of price gouging and unfair contracts among some witnesses who gave evidence to the inquiry. Given this, the committee majority concluded that it would be in the interests of the industry and government to examine ways to improve transparency and accountability from the gas and energy industry during periods of crisis. One way of doing this would be for the state government to establish a permanent gas bulletin board in Western Australia to support increased competition and to provide the community with improved information in regard to the gas market in Western Australia. It was really this issue—the need for increased transparency, accountability and diversity in the energy industry in Western Australia—that became most prevalent during the inquiry. The majority report provides some important recommendations about how it may be possible to address this need, and I commend it to the Senate.

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

On behalf of the coalition members of the committee, I would also like to make some remarks on the inquiry. The Varanus gas explosion and its sequelae have been a major disaster for Western Australia. The reduction in the supply of gas caused immediate and enormous disruption to industry around the state, particularly in the south-west, which overall, according to the Chamber of Commerce and Industry of Western Australia, lost an estimated $2.5 billion in income. Coalition senators are of the opinion that, while the state government appeared to move quickly to deal with the gas crisis, setting up both the Gas Supply Coordination Committee and the Gas Supply Disruption Recovery Group, this either disguises or ignores the fact that, despite two previous incidents where gas supplies were compromised, the state government did not have a contingency plan in place to deal with a major disruption in the supply of gas from Dampier such as was caused by the Varanus explosion. Accordingly, coalition senators believe that the state government deserves severe criticism for this omission.

There was evidence that the state government’s failure to keep business informed led to a fall in confidence in its ability to handle the crisis, particularly in the south-west. This was highlighted by the government’s decision, the coalition senators believe, to leave the distribution of gas to market forces—the bulletin board system—instead of declaring a state of emergency which would have enabled the state government to equitably direct gas to where it was needed. The role of Minister Logan was also a matter of concern to coalition senators. Although Mr Logan sought to defend the government’s actions in his answers to questions on various issues from coalition senators, including Senators Johnston, Bushby, Eggleston, and Adams, the coalition senators were not convinced by his answers. Coalition senators are of the view that Mr Logan, as energy minister, should have been aware of the 1998 ESSO Longford gas explosion and its consequences. He should also have been aware that New South Wales has a contingent emergency response plan in readiness for any possible disruptions to its supply of gas. From evidence provided to the committee, coalition senators concluded that Minister Logan understood the potential economic impact on industry, especially in the south-west, from any disruption to the gas flow through the Dampier to Bunbury pipeline. Accordingly, the coalition senators hold the view that his failure to put in place a contingency plan to manage such an event amounts to incompetence on his part for failing, as the minister, to ensure that such a plan was established.

Coalition senators are concerned that insufficient attention appears to have been addressed at government level to the potential danger of Western Australia’s heavy dependence on gas from the North West Shelf and believe that, if there is a lesson to be learned from the Varanus incident, it is that there is a need to diversify the sources of energy available to supply the south-west grid and the south-west of Western Australia in general. We concur with the majority report on these matters. While businesses across Western Australia have felt the impact of the Varanus explosion, coalition senators would like to make a special acknowledgement of the south-west region of the state, which suffered severely in the crisis. During the hearings in Bunbury, members of the committee heard firsthand what impact the loss of gas was having on industry. It was made known during the Bunbury hearing that various businesses in the south-west operated with equipment which required a consistent and predictable supply of gas. The operations of such businesses were compromised in this crisis by the intermittent nature of the supply of gas provided to them.

Coalition senators are of the view that the bulletin board which was established as a secondary gas market during the crisis was severely flawed in at least two areas. Firstly, it failed to ensure the provision of gas to essential services, including the food industry, and, secondly, it left small businesses at a disadvantage. Furthermore, it has also been submitted that, as a result of the failure of the state government to intervene, the bulletin board appeared to have allowed price-gouging tactics by energy suppliers. A most concerning feature of the aftermath of the Varanus gas explosion has been that, as the gas supply has been re-established, prices for gas—and, more importantly, electricity—have reportedly been substantially raised.

As a result of this inquiry, coalition senators believe that in the public interest there is an imperative requirement that there should be further investigation to determine whether the management of the crisis by the Western Australian government was negligent and that the question of compensation to injured parties should be considered. Coalition senators recommend accordingly that the state government be called upon to establish a judicial or other major independent inquiry to investigate the consequences and management of the Varanus gas explosion. I would add that the coalition senators concur with the majority report conclusion that there is a need for a conference of all interested parties to be held to plan for the response to any future such interruption of the gas supply through the Dampier-Bunbury gas pipeline.

Coalition senators also concur with the view that Alinta’s late correspondence to the committee, in which they claimed that they did not appear before the committee because they were not subpoenaed, is gratuitous because they were previously invited to appear before the committee and in writing responded saying that they would not do so.

We also agree that there could have been a far better response from the department of social security to assist those workers in various industries in the south-west who found that their employment was not continued due to the consequences of the Varanus gas explosion and its sequelae.

In conclusion, this has been a major disaster for Western Australia and, given the unusual dependence of industry in the south-west of Western Australia on a single gas pipeline, it really is imperative that a plan be put in place to ensure that any future incidents such as this will not have such severe consequences, if that is possible.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to add some brief comments on the Senate Standing Committee on Economics report entitled Matters relating to the gas explosion at Varanus Island. I believe the senators who came before me in this discussion on the report canvassed the issues that the committee covered fairly well. I want to comment mainly on chapter 5, which dealt with solutions, essentially: energy security, and diversifying sources of energy in Western Australia. Senator Cameron foreshadowed some of the evidence that we took from the renewable energy sector that probably provides some lessons for the whole country, even though the case studies that we were talking about were in Western Australia. This was an inquiry into the vulnerability or the resilience of the Western Australian energy sector, and this accident exposed just how fragile our energy system is, not just in Western Australia but I would suggest right across the country. We heard from the former energy minister, Fran Logan, that effectively there are two pipelines 1,500 kilometres long which bring 95 per cent of the gas from the north-west. That creates a unique vulnerability. What we saw was one accident at one plant which knocked out a substantial proportion of Western Australia’s gas supply, with quite severe economic consequences, and the committee heard about those in some detail.

What is not unique is that it is the nature of fossil energy networks that they only come in large centralised plants connected by cables or pipelines thousands of kilometres from the source to the load or the demand. That has an inherent vulnerability to it. So in the bigger picture it is quite important for us to take note of the fact that it is not unique to Western Australia—it is not even unique to Australia—that these fossil grids are actually quite fragile. The common myth is that fossil-fuel generators are reliable and that renewable energy is patchy and unreliable. We heard quite compelling evidence that exactly the opposite is the case. A vibrant renewable energy sector in Australia would look like thousands of small generators scattered around regional areas, particularly at the edge of the grid, which would have an enormous impact on energy security. This goes directly to the aims of the inquiry, which were not just to ascertain what happened but how to prevent this sort of event from happening in future.

We heard evidence from a wonderful and very active group in Western Australia called Sustainable Energy Now, who are dedicated essentially just to promoting solutions and modelling what a renewable energy grid would look like in Western Australia and how we can get there from where we are at the moment. They noted that relying on a few centralised sources for critical energy supply provides poor energy security, and that is what this report was all about. We heard from Dr Ray Wills, the head of the WA Sustainable Energy Association, that the peak demand in the grid—which a lot of gas is used for, for the peak generators that spark up when the load on the grid is greatest—is exceptionally well served by solar because obviously the sun is shining at exactly the time that people are switching on their air-conditioners and so on.

We also heard that renewable energy technology is not inflationary, and I think it is worth pausing to note exactly what that means. Once you have built the generators, the fuel source for most renewable energy technology is free. The way Dr Wills put it to us was:

One of the key advantages of renewables is that you know what your energy price will be in 20 years time because the sun will continue to come up, the waves will continue to wash on our shores and the wind will continue to blow past us. The cost of that energy source will not change. Sure, there will be maintenance costs, staffing costs, there will be other things that do add some inflationary pressures to that energy generation, but the reality is that we will still know the price of the source of the energy itself …

That is actually quite a profound statement. Once renewable energy architecture has been built and is in place, the fuel costs essentially are free for all time. In Western Australia the wind energy resource is superb, as I suspect it is in most of the rest of the country. It is also a load-following resource in that it tracks relatively smoothly the pattern of demand, just by pure coincidence. These are all things we should be pursuing.

One of the most compelling cases for a large-scale baseload renewable energy sector was made by Dr Michael Ottaviano of the Carnegie Corporation, who spoke to the fact that the wave energy resource in Australia is spectacular and somewhat unheralded, although I suspect that is all about to change. The Carnegie Corporation is a WA based innovator of wave energy technology. Last year it calculated just how much potential wave energy there is in Australia. In the deep water sense—that is, at a depth of 100 metres or more—there is something like 500,000 megawatts, roughly 10 times Australia’s current installed capacity. This is a vast, globally distributed resource which is basically untapped. Wave energy is not an intermittent source of energy. The reality is that in Australia we are incredibly fortunate. We have a constant source of energy. We also have a very long coastline exposed to that energy which, according to the Carnegie Corporation, could make a significant and reliable contribution to the grid as early as 2011.

The committee also heard that the UK government spends $20 for every $1 that the Australian government spends on trying to harness its wave energy resource, despite having a resource that is only one-thirtieth the size. So it is really time that Australia caught up with the rest of the world. This inquiry adds another dimension to the fact that a renewable energy network in Australia is not only possible and essential but would add to the resilience of energy security in this country.

Because these are start-up technologies, what they need now is support through both federal and state government processes and a national gross feed-in tariff. It was suggested that what we are facing today is really not that different to the situation at the beginning of the last century, when governments were involved in the public interest, in the creation of our current energy-generation infrastructure. They did not leave it to the market. They built wires, they built power stations, they put in the infrastructure. That is the point we are at now, because we are changing our energy-generation paradigm, not just because it would be a nice thing to do but because we have no choice; we have to undertake these changes.

I particularly commend the committee’s recommendation that:

The Western Australian Government should actively engage with the alternative energy industry in Western Australia in order to progress energy diversification through increased alternative energy capacity.

The committee agreed that WA does not necessarily need more expensive contingency options, because that is not necessarily the best response. The best response probably is the development of smaller scale alternative energy—small scale in terms of the size of the actual generators but very, very large scale right across the state, putting the generators where the resource is, whether it be sun, wind, wave, biomass or geothermal energy. Such an energy grid would be resilient; its fuel is non-inflationary; it would reduce our dependence on imports of foreign fuels; it would create thousands of jobs in regional areas; and it would tackle the big one that confronts not only us in this chamber but people right around the planet, which is of course climate change. We were left with the question: why on earth is this not already happening?

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak, in the short time that is available, on the report of the Senate Standing Committee on Economics, entitled Matters relating to the gas explosion at Varanus Island, Western Australia. The significant impact of the Varanus Island gas explosion was apparent to senators a long time before we came to this inquiry, and the inquiry indeed substantiated the significant economic impacts.

The committee sought a way to ensure that Western Australia is prepared in the circumstances that the unthinkable happens again, and I think the committee’s recommendations set that out very successfully. In terms of market transparency, emergency powers and issues in relation to pricing, our recommendations certainly point a way forward. But I want to challenge senators opposite in relation to the dissenting report. In the parliamentary hearings we had, there were plenty of opportunities to prosecute the former WA Minister for Energy, Fran Logan, but there was no evidence through which senators opposite were able to substantiate their recommendations calling for a judicial or other form of inquiry. That way forward offers very little for the people of Western Australia by way of ensuring that this kind of circumstance does not happen again. We require diversification of the energy markets in Western Australia, which was well established in the majority report; we require greater transparency in relation to those energy markets; we require a permanent gas bulletin board; and we require an examination of emergency powers and the market. These are substantial directions for a way forward, and I am disappointed that the opposition have sought to turn this into a parochial political witchhunt.

Debate interrupted.