The Hon. Rob Lucas MLC

The Hon

Rob Lucas MLC



Essential Services Commission Bill

Thursday, 22 August 2002

Adjourned debate on second reading.
(Continued from 21 August. Page 737.)

The Hon. R.I. LUCAS (Leader of the Opposition): The opposition—the Liberal Party—supports the legislation as we have in another place. The Liberal Party has, in another place, highlighted that this legislation is essentially a rebadged version of the South Australian Independent Industry Regulator Act. For those who are interested, I commend the questioning of the Minister for Government Enterprises (Hon. Mr Conlon) by the shadow minister for energy, the member for Bright, in highlighting how this legislation is almost a carbon copy of the Industry Independent Regulator Act, but it has been dressed up, in typical Rann government fashion, to look to be something different with a more impressive sounding name, the Essential Services Commission.

I also commend a copy of the press statement issued by the shadow minister, which highlights in the important area of prices justification two or three pages of the legislation, which is almost word for word a repeat, and I will address that when debating the companion bill—the Electricity (Miscellaneous) Amendment Bill—to which the new Labor government has inserted only two minor clauses. It is fair to say that, on reading the debate in another place, the question¬ing of the Minister for Energy did embarrass and fluster him. He was not able to explain what plans the Labor Party had put in place since the election and, indeed, why various plans had not been put in place that had been promised.

We will have a chance to explore some of those issues during committee. Having looked at that debate, from a policy viewpoint, when I look at the Minister for Government Enterprises (Hon. Mr Conlon) I am reminded of fairy floss: it is all pink and sticky, no substance and, after you have consumed it, you know it was not worth the cost. When members read the debate in the House of Assembly I am sure that all members will agree that there is no policy substance at all from the fairy floss minister, the Minister for Govern¬ment Enterprises, the Hon. Mr Pat Conlon.

The debate that will ensue on this legislation and the Electricity Act will make it clear that, from a policy view¬point, there has been no substance from that minister or, indeed, from other ministers in this government. I want to go through in some detail the Australian Labor Party plan—which it announced to all and sundry prior to the state election—in relation to electricity. As is my wont, I do want to refer to the Mike Rann pledge card, which states:

"My pledge to you—Labor, the right priorities for South Australia."

Mr Rann's pledge to the people of South Australia was to fix our electricity system. He was going to bring in cheaper power via an interconnector from New South Wales. So, that is a clear commitment from the Hon. Mike Rann whose pledge card reads, `Keep this card as a check that I keep my pledges.' He was going to keep his pledge of lower power prices and cheaper power in South Australia if people in South Australia were to support the Labor Party. I want to go through those plans to see what has happened since then. I will do part of that in this contribution and then address it in much more detail during committee.

I alert the minister's advisers—the former hardworking officers from Treasury who worked for me—that they will have a little work to do during committee. I am sure that will bring a smile to their faces as they read assiduously the Hansard from this afternoon. The Labor Party announced in May 2000 its 15-point plan to solve the electricity problems in South Australia. Of course, just prior to the election some 18 months later, six of those points must have disappeared somewhere because it had a nine-point plan to solve the electricity problems in South Australia.

As I said, the pledge card from the Leader of the Opposi¬tion said that he would bring about cheaper power. We saw a massive scare campaign through all the marginal seats, as you, Mr Acting President, would know as a result of your campaigning. I will refer later to letters from candidates, such as the member for West Torrens, Mr Koutsantonis, who claimed that power prices would rise by 80 per cent after full retail contestability in January of next year. Various mem¬bers, candidates and shadow ministers claimed power price increases of 30 to 90 per cent after the onset of full retail contestability on 1 January next year.

When one looks now at what the Labor Party has done after almost six months in government it is fair to say that it has done precious little. It has done very little different to what had already been set in place by the former government. Certainly it has not matched its rhetoric and in any way the claims that it was making prior to the last state election. For example, the now Premier indicated that electricity would be his number one issue. He indicated on 4 February in a media statement that, within days of winning government, as Premier he would call together business leaders and the heads of the privatised electricity utilities to work together to tackle the electricity crisis.

Without again going through all the detail, he indicated that this would be his number one priority; that within days he would have a round-table conference of business people and the industry together to resolve this issue. As my colleague the Hon. Mr Redford has inquired, that was one of the first promises broken by the new Premier. He obviously decided that he never believed what he said, or he never intended to have the round-table conference—that was just for publicity; or, on advice in government, he realised what a silly proposal it had been and he decided that he would not proceed with it now that he was in government.

Whichever, it does not give us much confidence in the judgment of the now Premier and this particular government. The Liberal government was attacked last year for making only a few mentions in its budget documents about the electricity problems that were confronting South Australia at the time. It was criticised not only by the opposition but also the Advertiser. I defy anyone to go through the first budget of this Labor government and find any mention of the electricity problems confronting South Australia, because there was none. No mention was made by this government, this Premier or this Treasurer.

It was interesting to note that no criticism was forth¬coming from the Adelaide Advertiser; that what was meant to have been the number one issue for the incoming Labor government did not rate a mention at all in its budget. In fact, amongst its budget changes—something I will address in the electricity bill—was the breaking of another promise or commitment that had been given by the former government to help pensioners and self-funded retirees with the impend¬ing increases in electricity costs in South Australia. That assistance was taken away cruelly by this government and supported by members of the backbench who, in a slothful way, sat on their tails and did nothing to assist the pensioners and self-funded retirees in South Australia who may well have needed that assistance.

The Hon. R.K. Sneath interjecting:

The Hon. R.I. LUCAS: Well, the GST now supported by Mr Crean.

Members interjecting:

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): Order!

The Hon. R.I. LUCAS: The Hon. Mr Sneath leads with his chin on most occasions.

Members interjecting:

The ACTING PRESIDENT (Hon. J.S.L. Dawkins): Order! The Leader of the Opposition has the call.

The Hon. R.I. LUCAS: During the House of Assembly debate on this legislation, and during the estimates commit¬tee, the Minister for Government Enterprises was asked to explain what the new government has done in six months. We know what it promised—it promised the world. It was going to fix everything and bring in cheaper power. But what has it actually done in the six months that it has been in government?

When one goes through the House of Assembly and estimates committee debates on this legislation, several claims were made by the minister. The first thing he claimed for the government was as follows:

We have put in place good policy and good planning that is necessary to address long-term issues with respect to wholesale prices. Unfortunately those things take some considerable time to flow through.

So, the government put in place good policy and good planning. The minister was not able to indicate what good policy or what good planning but, nevertheless, it was in place; and he indicated that it would take some time to come to fruition in terms of any claim benefits. He went on to indicate that the government was going to establish the Essential Services Commission which is, as I have indicated, essentially the independent regulator, rebadged. That has been adequately addressed by my colleague in another place, and we will address some of that detail in the committee stage. So, no difference there at all.

The minister then sought to explain the next thing that he had done by saying that he had attended a meeting of ministers in the eastern states. He reported that the meeting of ministers had determined that it would direct the National Energy Code Administrator (NECA) on certain policy matters within the national electricity code. I point out that the last two ministers for electricity from South Australia—Mr Matthew and myself—both agreed on that particular policy, that is, that there would be a rewrite of the national electricity code, that the legislation would provide some general power of direction on general issues of policy, and that provision would be there rather than in the national electricity code. The challenge for the current minister—and the previous two ministers—is to finalise the drafting and proceed with amendments to the legislation.

The Hon. R.K. Sneath: What took you so long?

The Hon. R.I. LUCAS: What is taking this minister so long? He has been there for six months and done nothing. The Hon. Mr `Slothful' Sneath has woken from his slumber to interject, and not in a helpful way.

The Hon. R.K. Sneath: If you can't win you get person¬al.

The Hon. R.I. LUCAS: You haven't seen anything. That's not personal.

Members interjecting:


The Hon. R.I. LUCAS: How sensitive is that? If he wants to see personal, he should hang around a little bit longer in this chamber—

The Hon. G.E. Gago: He is the only one listening to you.

The Hon. R.I. LUCAS: Well, that is the only thing we can congratulate him for. To give him credit he is at least awake and listening on this occasion. I will speak more quietly and let him go back to his normal processes. When the minister was then asked what else he had been doing, he said that he had been to a meeting of ministers in the eastern states, the outcome of which was to require NECA to undertake certain inquiries. Shock, horror. What a bold policy initiative. It had already been done by the former government. In fact, NECA had already been required to undertake certain inquiries in a number of areas. This `bolt from the blue' policy initiative from the fairy floss minister for energy that we have is just a continuation of what was already in existence.

The minister was then asked what else he had done, because that did not seem to be much. He gave details of another meeting he had attended in the eastern states at which a commitment was made to undertake a review of transmis¬sion policy, hopefully within the next 12 months. Again, another bolt from the blue. The minister attended a meeting of ministers in the eastern states and the outcome is a commitment that hopefully a review on transmission policy will be undertaken within 12 months. There had been an agreement for a review of transmission policy since last year. Again, the minister was asked what else he had been doing because it seemed there had been six months of slothful inactivity by the minister.

The Hon. R.K. Sneath: What does that mean?

The Hon. R.I. LUCAS: Goodness me. Get a dictionary for the man. The minister said, and it is very important:

"There was an undertaking to review the possibility of instituting a single national regulator."

I can at least indicate that that is something that has been introduced only in recent times. I think Mr Matthew might have had some discussions about it early this year. It is an issue that Mr Broad from Victoria has raised, and the ACCC and others are now looking at the possibility of a single national regulator. Being as fair as we are we certainly indicate that that is at least one review that may not have been in place for a long period of time under the previous govern¬ment. We will be interested to see what that review brings about.

So, all of those initiatives were previously in place or essentially the same as what had been done by the previous government. The minister then discussed two final areas. One area was the government's intended policy action in relation to securing gas supplies for South Australia. As you would know, Mr Acting President, there was activity in this area for over two years by the former government, which set in place a process where the SeaGas consortium was proceeding with a pipeline from the eastern states: Victoria to South Australia. There has been an alternative proposal and, when the Leader of the Government in the council made a ministerial state¬ment on this issue a few weeks ago, the opposition welcomed the progress. But, as I indicated at the time, the fact that it was to be a 14 inch pipe was not, in my view, the best solution for South Australia's gas industry, gas competition, or for the electricity industry and industrial development.

Had we been in government, we would have been much more active in trying to encourage the two groups to get together to bring a 16 inch pipe into South Australia, since that is basically what is required. Again, in that spirit of fairness for which the opposition is renowned, I indicate that getting two commercial groups to come together, when they do not want to, is something which is a difficult task for any government. There is no power of direction. There can only be a power of encouragement, of leadership and a power of policy direction, to encourage those two commercial groups to see that working together is in their best interests, as well as those of the state. A bigger pipe coming into South Australia would allow greater gas competition and also help with the electricity industry.

The final area the minister discussed was tougher penalties for rebidding practices that have been undertaken by some of the generators in the national market. The Liberal Party, when in government, led the charge in this at the national level. The South Australian government was the first to suggest that there should be tougher penalties on generators which engaged in inappropriate rebidding practices. We made policy judgements, as I think all others have now—although the Labor opposition at the time seemed to think that all rebid¬ding was bad and should be banned—that some rebidding practices were acceptable because, in fact, a significant number of the rebids are in fact at lower prices, rather than higher prices. So banning rebidding may well not assist the policy goal of seeing lower prices in the electricity market.

The former Liberal government did lead the charge to get tougher penalties of up to $1 million for inappropriate rebidding. At those meetings of ministers, it was the New South Wales Labor government and its ministers who were the flies in the ointment (if I can use a colloquial expression that even the Hon. Mr Sneath might understand) in relation to the policy proposals from the Liberal government. I will now explain in some detail why it was that the New South Wales Labor government opposed what the South Australian Liberal government—and now the South Australian Labor government—wanted to do in relation to rebidding practices.

I will obviously provide more detail, but put simply it is New South Wales government owned generators that have been behaving in the worst possible fashion in terms of their rebidding behaviour by ratchetting up prices in the national market not only in their state but also in our state. At a later stage, I intend to address the ongoing issue of Riverlink or SNI, bringing together this information on rebidding and the New South Wales government generators and the New South Wales Labor government's duplicity on the Riverlink or SNI proposal.

The information that I have on rebidding comes from an analysis from the National Electricity Code Administrator's (NECA) weekly market analyses and material available on the NECA web site over the last few months, and I will now put that on the public record. The New South Wales govern¬ment owned generators' bidding strategies involve presenting as much as a half of their capacity at prices above $5 000/MWh, and little or no capacity at prices between $400 and $5 000/MWh. Since April this year that practice con¬tinued at the new price cap with an average of 1 050 megawatts being presented at prices above $1 000/MWh of which 800 megawatts or 80 per cent has been priced at more than $9 000/MWh. That is, 80 per cent of their bid has been priced at more than $9 000/MWh.

The bidding and rebidding strategies target the 6 p.m. evening peak. They took effect for the first time on 18 May following a cold snap in New South Wales. They generally are a part of day-ahead bidding, although they are often much closer to final dispatch. As a result of the strategies in principle of Macquarie and Eraring there have been copycat strategies adopted by other generators in the national market.

The cold snap on the weekend of 18 and 19 May resulted in an additional demand of about 2 000 megawatts across the southern regions compared to the average at that time of day over the previous two months. Despite this increase, Eraring Energy and Macquarie Generation maintain the strategies that they had both established throughout April and May of bidding significant proportions of their capacity at very high prices. By early morning of 18 May, they had 55 per cent and 22 per cent respectively of their capacity priced above $5 000/MWh.

As a result, their combined output was reduced by around 1 200 megawatts over the evening peak. There was very limited capacity offered at prices between $400/MWh and $5 000/MWh across the southern regions. Despite very high price forecasts well in advance there was very little evidence of competitive response. On this occasion, the strategy resulted in a spot price of $5 807/MWh in New South Wales and close to $4 000/MWh in Victoria and South Australia. The spot price is a result of rebidding activities.

Weekly average prices reached as high as $154/MWh in Queensland, $143/MWh in New South Wales, and around $100 in the Victorian and South Australian markets. Turnover in the energy market increased to as high as $450 million a week, more than four times the average since the summer of 2000-01. The June quarter prices averaged $66/MWh in New South Wales, $58/MWh in Queensland and around $50 in Victoria and South Australia. Quarterly prices doubled in New South Wales and increased by 40 and 67 per cent in the other regions compared to the same period last year.

Bidding activity added almost a third to the overall average prices for 2001-02 in both New South Wales and Queensland. The spot price exceeded $2 500/MWh in New South Wales on 21 occasions throughout the quarter, representing more than half of all prices above that level since market launch. The highest spot price ever of $8 049/MWh occurred on Sunday, 30 June in New South Wales. Prudential cover required to be provided by participants, the costs of which are a potential barrier to new entrant retailers, in¬creased by $700 million in just one week. I seek leave to have inserted in Hansard a table of a statistical nature setting out spot price comparisons of prices in the four states in the national electricity market.

Leave granted.

Spot price comparisons
Qld. NSW Vic. SA
April-June 2002 58 66 49 50
April-June 2001 34 34 32 36
Change from previous
quarter Ù65% Ù137% Ù83% Ù76%
Change from previous year Ù67% Ù96% Ù52% Ù39%

The Hon. R.I. LUCAS: This table, which compares the spot price comparisons in the four states in the national electricity market, shows that when one compares the April to June quarter this year (that is, the quarter in which the New South Wales government owned generators were rorting or distorting the national electricity market) with April to June last year, there was a 39 per cent increase in the electricity price in South Australia, a 67 per cent increase in Queens¬land, a 96 per cent increase in New South Wales and a 52 per cent increase in Victoria.

The spot price for that quarter this year was $66 in New South Wales compared to $34 dollars the previous year. That is almost a doubling of the spot price for the quarter as a result of the distortions in the market brought about by the New South Wales government owned generators. As a result of that, the flow-on price in South Australia jumped from quarter to quarter from $36 to $50 (a 39 per cent increase).

Macquarie's bidding strategy during this period was to rebid prices above $9 000/MWh beginning the weekend of 13 and 14 April this year. They repeated that pattern on 52 evenings over an 11-week period, typical gouging in the order of 800 megawatts (or 25 per cent) up to a maximum of 1 400 megawatts. The rebid reasons that were given related to `financial optimisation'. The behaviour abated in the first two weeks of July, that is, in the first two weeks after the end of the financial year in relation to moneys that needed to be moved in and out of various accounts in New South Wales to the benefit of the budget and some of the electricity utilities in New South Wales.

The pattern has recommenced for the second half of July in the order of 500 megawatts. The Eraring bidding strategy has been as follows. The bidding pattern changed from 18 May of this year. It typically presents half of the available capacity at prices more than $9 000/MWh over weekends. It rebids capacity into lower prices closer to dispatch, except during the evening peaks, the pattern repeated over the evening peak through to early June. It has consistently presented capacity at prices between $100 and $5 000/MWh only over the evening peak since mid June. Obviously, there was much more information available on the NECA web site and through various NECA analyses that have been provided, but time and the patience and my colleagues will not allow that to be put on the public re¬cord.

I want to give two examples of particular events on particular days to demonstrate what the New South Wales Labor government owned generators have been doing to the market. On Saturday 18 May, the New South Wales spot price was $5 806/MWh. At around 7.15 a.m. Macquarie Genera¬tion, the New South Wales Labor government-owned generator, rebid 510 megawatts of capacity from prices less than $100 a megawatt to prices greater than $9 000/MWh. The reason given was `adjustments to seek improved profitability'. Macquarie Generation presented up to a total of 810 mega¬watts, or around one-quarter of its capacity, at prices greater than $9 000/MWh. Rebids by Eraring Energy during the day saw 150 megawatts shifted from prices greater than $9 400/MWh to prices less than $100/MWh. The reasons given included `improve revenue position by optimising dispatch' and `FCAS/energy trade-off'. There remained 1 350 megawatts, or close to half its capacity, priced at greater than $9 000/MWh. There was no other significant rebidding.

The other example I want to put on the record is Sunday 26 May when the New South Wales spot price peeked at $52 243/MWh. Conditions at that time saw actual demand slightly more than forecast with prices generally reflecting those in Queensland. Imports from the Snowy were con¬strained for seven dispatch intervals to around 3 000 megawatts. Macquarie Generation presented a total of 1 400 megawatts, or more than one-third of its capacity, at prices greater than $9 000/MWh through day-ahead bids. Similarly, Eraring Energy presented a total of 1 460 mega¬watts, or more than half its capacity, at prices greater than $5 000/MWh. There was no significant rebidding. The reason I want to put that in some detail on the record is because I do not think more than a handful of people have looked at the NECA web site or the NECA market analyses as to what is going on in the national electricity market.

The Hon. Caroline Schaefer: I can't bear to start the day without it!

The Hon. R.I. LUCAS: Exactly; my colleague says that she can't start the day without it—I would be surprised. It is important because at the time of the debate about the national electricity market and privatisation, shadow minister Conlon, shadow minister Foley and the Leader of the Opposition were leading the charge in relation to this rebidding and attacking the privatised electricity generators in South Australia and elsewhere. All the sins of rebidding were sheeted home to the former government's decision to privatise electricity. The government of the day did not get much publicity in response when it pointed out that this was a deficiency in the national electricity market design—not an issue of privatisation—because New South Wales Labor government-owned generators were engaging in rebidding strategies up to their necks, as were the privately owned generators.

The Labor Party and their apologists within South Australia refused to accept or believe that, because they had this tunnel vision that any problem that existed in the electricity industry was because of privatisation—any problem was as a result of privatisation. The chickens have come home to roost for minister Conlon and this government. That is why we do not see any criticism from this government at the moment about the privatisation of the generators in relation to rebidding. That is why there is no railing about NRG, in particular, in South Australia. The people who are distorting the market at the moment, at a cost to the national market—which I will highlight later—are New South Wales Labor government-owned generators, Macquarie Generation and Eraring Energy, in particular.

The Hon. R.K. Sneath interjecting:

The Hon. R.I. LUCAS: No, the solution is to do what we have been seeking to do—but we have been stopped by the New South Wales government ministers—that is, to ban inappropriate rebidding practices; whack in the million dollar penalties to stop them from doing this. We have been stopped or hindered all the way by Mr Yeadon, Mr Egan and the Labor government ministers in New South Wales, advised by Danny Price (of all people), Professor Anderson and others in New South Wales. There will be more of those gentlemen later when we talk about Riverlink or SNI.

This is a deliberate strategy by the New South Wales Labor government to distort the national electricity market at a cost to all consumers throughout the nation. What have we heard from this new Labor government in South Aus¬tralia? We have not heard a squeak from minister Conlon, Treasurer Foley or Premier Rann against the activities of their colleagues in New South Wales—some of Premier Rann's best mates. We do not see Premier Rann hopping on a plane to do a deal with Premier Carr to ensure that the New South Wales government-owned generators do not screw the national market in terms of its price at a cost to all consumers across the nation. We will be pursuing this issue during the committee stages of the bill. It is an important debate and the people of South Australia—or at least some of them—ought to be aware that the New South Wales Labor government is not that benign friend that many in the Labor Party and its supporters believed when they came offering us gifts, as they did, with their support for Riverlink and SNI—and there will be more on that later.

I now turn to some other issues that have been raised during the debate on this legislation and the companion bill, the Electricity Act. During the debate on this matter, the Minister for Energy has continued to make a number of untrue claims in relation to the background to electricity reform in South Australia. One which continues to be repeated by the minister and other members of the Labor Party is that the Liberal government during the privatisation process was interested only in the value of the assets to be disposed of and had no concern at all for consumers in South Australia. That is untrue, and the Minister for Energy knows that to be untrue. During debate on this bill, and also the companion bill, I intend to put on the record why those claims were untrue.

If the Liberal government was interested only in the value of assets during the privatisation process and not concerned at all with consumers and competition, it would not have done a number of things because they significantly reduced the value of our electricity assets during the privatisation process. First, the former government would not have disaggregated to the degree that it did the Electricity Trust of South Australia and Optima. The board of Optima, the generation company, strongly opposed the Liberal govern¬ment's view that it should be broken up into two or three competing generators. It said—and rightly—that it would be more valuable as an asset if sold as a whole, as a monopoly provider of generation capacity in South Australia. Certainly, I think the view was the less the extent of disaggregation, the greater would be the value, that is, if it was broken up into two, it would be better than breaking it up into three compet¬ing generators.

Mr President, if you speak to your colleagues in Western Australia, you will know that a similar debate is going on in Western Australia with the Western Australian Labor government looking to disaggregate electricity companies in Western Australia and the boards opposing the break-up of their companies in Western Australia. The former South Australian government took the pro competition policy viewpoint. It accepted that it would be more valuable to sell this asset, Optima, as a whole, but in the interests of competi¬tion it needed to disaggregate to the greatest extent possible and took the view it would disaggregate into three competing generators; that was the position the South Australian government then proceeded to implement, against the wishes and views of some members of the board of the company.

The second matter is that the South Australian government would not have fast-tracked Pelican Point if we had wanted to maximise the value of our generation assets. Mr President, I assure you that, if you are wanting to sell Torrens Island—an ageing electricity plant in the north-western suburbs—the last thing you would do is to fast-track a modern, much more efficient 450 megawatt (with the potential to go up to 800 megawatt) gas-fired generator just down the road at Pelican Point. What you would have done—because we could not prevent Pelican Point from being built—is left the proponents of Pelican Point to fight their way through the government departments and agencies.

My colleague the shadow minister will know that any company or proponent seeking to fight its way through all those various departments and agencies would have found that they become lost among the Aboriginal land rights claims, health issues, protests from the Labor Party being led by Mike Rann and Mr Foley, environmental issues, public works issues and parliamentary issues. In fact, everything and anything you could think of would have held up Pelican Point for many years. We fast-tracked Pelican Point for the reasons that I will outline a little later; that is, we basically needed the power, and we needed it very quickly.

The government also fast-tracked other capacity. Since December 1998, in the three years of the Liberal government, we increased the power generation capacity in South Australia by almost 40 per cent—in fact, 37 per cent. Osborne generation, Ladbroke Grove, Hallett, the Quarantine Station, the small station at Lonsdale and Pelican Point added up to about a 37 per cent increase in generation capacity in just three years of fast-tracking by the government. Why? First, we needed the capacity; and, secondly, we needed more competition in our marketplace. I compare that activity with that of the last Labor government.

Between 1982 and 1993, what did the then Labor govern¬ment do in relation to power generation in South Australia? Mr President, there was a 90 megawatt peaking station at Mintaro (of which you may be aware), and there was also some additional capacity at Port Augusta during that decade. That was all, in 11 years of Labor government administration, in relation to in-state generation capacity in South Australia. In just three years, between 1998 and 2001, we saw almost a 40 per cent increase in in-state generation here in South Australia. If you want to increase the value of the sale of your generation assets, you would not have been fast-tracking this huge increase in generation capacity in South Australia. We also fast-tracked the MurrayLink underground, unsubsi¬dised, unregulated interconnector through the Riverland. I was pleased to see the press state¬ments in the past week indicating that energy will be flowing, so the proponents say, by the end of this month from the eastern states through the Riverland into South Australia.

I will talk in a moment about Riverlink and SNI, but there were a number of other aspects of additional capacity in terms of exploring options for interconnection into South Australia and also into Victoria from either Tasmania, with Basslink, or through the Snowy with SNOWVIC, which also will assist South Australia's capacity. Another area that impacted on the value of our assets was the decision of the government with respect to grace period customers. The government continued the subsidy for all the medium and large sized businesses until July 2001, at a cost to the value of the assets that we sold. If that grace period subsidy had not been included in the privatisation process, the government would have been able to receive a higher value for some of its assets during the privatisation process.

In all those areas, the government deliberately made decisions, knowing that it would reduce the value of our assets, but supporting them because they were competitive in their nature and would, therefore, be in the public interest as part of our privatisation process. So, claims made by the member for Elder and the minister that the government was only interested in the asset values and had no concern at all for consumers were untrue. In particular, I refer to a state¬ment that the minister made on page 96 during the estimates committees when, in talking about the sale of the assets and the protection of consumers, he said:

"It was largely driven by the former Treasurer, despite advice from bureaucrats, I might say."

That is untrue. Any of the bureaucrats who worked with me during that period would advise the minister that that statement was untrue. The essential policy positions that were put by the government during that period were not meant to be supported; they were in accordance with the advice, by and large, that had been given by the policy advisers within Treasury—because they were providing advice to me. It may well be the case that there were bureaucrats in other depart¬ments who might have had different views but, certainly, not the ones who were advising on this process.

The discussion on Pelican Point now leads us into the discussion on Riverlink and SNI. We have had four years of discussions about Riverlink and SNI in this chamber, and members will be delighted to know that I do not intend to go through all the detail of that again. But, certainly, for the new members, it will be useful to provide a very quick, potted summary. Before mid 1998, the South Australian electricity utilities and the New South Wales electricity utilities were jointly looking at the option of a Riverlink proposal and a transmission interconnector through the Riverland, connect¬ing New South Wales and South Australia.

In mid 1998, as we were going through the privatisation process, the advice that was provided to me by the advisory team—both the bureaucrats and the consultants—was that this state urgently needed additional power by the end of the following year—that is, the end of 1999—and that, if we did not have additional power locked in and available for the summer of 1999 2000, we faced significant potential blackout problems because, as I said, for the past 11 years, a slothful, inept Labor government had done very little in relation to increased generation capacity in South Australia. The advice was strong, and it said that we needed to act, and act urgently.

We had a number of options. The option supported by the New South Wales Labor government and, ultimately, by the Labor Party in South Australia and its sympathisers on that issue—the Hon. Mr Xenophon and other odds and sods such as Mr Duffy, Danny Price, Dick Blandy and some business leaders in South Australia—was that that additional power should be provided by Riverlink or SNI. My very strong advice was that we could not guarantee Riverlink or SNI being built by the end of 1999, because we did not control the decision making processes. It had to get approval from NEMMCO, an independent national authority, that it could be built as a regulated asset, and we did not control that independent body. It also required environmental approvals through the Riverland and parts of New South Wales, and there was significant opposition already for an above ground interconnector going through the Bookmark Biosphere in the Riverland or farming communities in the Riverland.

The advice that was given to me (and, as I said, advice with which the Labor opposition in South Australia and Mr Xenophon and others disagreed) was that the only way of guaranteeing the additional power we needed was to fast-track new generation. We had to find a place to do it, and we decided on Pelican Point. That is the sole reason why the government went so strongly down the path of Pelican Point during that period—because we knew it was the only way we could guarantee the additional power by the summer of 1999 2000. So, in mid 1998 I wrote to NEMMCO asking it to defer its decision. We had other reasons; for example, its arguments about its being more sensible to support an unregulated interconnector. Already there were proponents who were prepared to look at putting in unregulated rather than regulated interconnectors, and we wanted to explore those options as well. I repeat: the South Australian government never has had and still does not have the power to stop or to approve an interconnector like Riverlink or SNI. We asked for a deferral of the decision from NEMMCO. As it turned out, NEMMCO had already made its decision by the time it had received the letter.

Everyone received a decision from NEMMCO indicating that Riverlink did not pass the benefit test and, therefore, would not be approved as a regulated asset in the national electricity market. As a result of that, there were changes to the benefit test to allow Riverlink or SNI to see whether it could meet a new benefit test. Eventually, at the end of 2001, almost three years later, NEMMCO finally gave approval for SNI to be a regulated asset. That decision is now being challenged by the Murraylink proponents and other genera¬tors in the National Electricity Tribunal, and that process is going on at present. I understand from people who have some knowledge of this issue that some stunning evidence will be given on this issue in the National Electricity Tribunal. I understand that some grave accusations will be made against the New South Wales Labor government in relation to threats that it made. I also understand that significant questions will be asked about the approval process of NEMMCO eventually in approving Riverlink/SNI as a regulated asset. There will be more of that later. As I understand it, a number of people are aware of this information, and it is likely to achieve some publicity. However, those who went arm in arm with the New South Wales Labor government as the saviour of South Australia may become a little embarrassed when this information or evidence is provided in the National Electri¬ci¬ty Tribunal.

The Labor Party and its proponent sympathisers claimed that there would be billions of dollars in savings if Riverlink or SNI were to be built into South Australia. TransGrid gave evidence to the Economic and Finance Committee—and I will need to check this—but my recollection is that it was claiming savings to the South Australian community of $150 to $190 million per annum for some years if Riverlink were to be built. As members would know, the Liberal government at the time challenged those claims, even though they were supported by the Labor Party and some sympathis¬ers. I know that some business leaders at the time accepted those claims being made by the Labor government. We highlighted the fact that electricity consumers would pay a cost for the building of Riverlink, even if in the future we were not to use Riverlink. At the time we claimed that the cost was about $10 to $15 million. People have now settled that the cost could be about $10 million when and if this project proceeds even if it is not being used.

These claimed price advantages in South Australia from New South Wales cheaper power, as promised by Mike Rann in his pledge card, are based on New South Wales prices being significantly lower than South Australian prices. When I speak on the electricity bill, I will provide more detail on this. I refer to the volume weighted prices per megawatt hour for the various states. These prices are for the last 52 weeks up to 10 August this year, so they are very much up to date. They are off the NECA web site. They show that, for the last 52 weeks, the price in South Australia was $36.54; the price in New South Wales was $42.03—on a volume weighted basis they are some $6 higher than the price in South Australia.

If those prices were to persist for a good part of the length of the life cycle of the Riverlink interconnector—if it is built—if you have a price of $42 in New South Wales and $36 in South Australia, it does not take much to realise that it will be only at times of very significant shortage that we will import electricity from New South Wales. In fact—and this is happening now—we would export power from South Australia to Victoria because the South Australian prices are lower than those of Victoria. Therefore, we are using the existing interconnector to export power into Victoria. Certainly, at times of shortage, $42 will be cheaper than peak prices from peaking generators. That is an important back-up. For that reason, the Liberal opposition supports additional interconnection between the states to provide that additional back-up or security and power.

When one looks at a figure of $42 in New South Wales and $36 in South Australia, one does not see any of these $150 to $190 million a year savings that the Labor govern¬ment, the Labor Party and the New South Wales Labor government were claiming for South Australian consumers. On this basis, if we never used the interconnector, electricity consumers in South Australia would still have to pay $10 to $12 million a year in subsidies to the New South Wales Labor government for the joy of building the interconnector—even if we get no power at all down the pipe. When you put this issue together with the issue I raised earlier about the distortion of the market by the New South Wales Labor generators, one can see the duplicity of the New South Wales Labor government in this whole debate over power and power policy.

I am afraid that Labor and the Hon. Mr Xenophon accepted the New South Wales Labor government's view that they were here as friends to assist us in providing cheap power into South Australia. What they finally got was approval through NEMMCO—as I said, that issue will be subject to some challenge—late last year. As soon as they got approval for that, which is a guarantee of about $10 million a year in consumer subsidies from South Australian electrici¬ty consumers to the New South Wales Labor government, they then moved into Stage 2 in which they used their government owned generators in New South Wales to distort the market price and to ratchet up the price—as I highlighted earlier—with increases of 40 per cent to 96 per cent in New South Wales from this quarter, April to June this year, compared to April to June last year. They got the approval for the subsidy on the interconnector. They then went to their government owned generators and distorted the market, they used their rebidding policies and they ratchetted up the price not only to the cost of their consumers but to us. So they got to have their cake and eat it, too.

The sad thing is that they were assisted by the Labor Party in opposition and by their sympathisers who knew not what they did—the Hon. Mr Xenophon, in this case, and others such as Professor Blandy and some business leaders in South Australia, who accepted that the New South Wales Labor government was here to help us by providing cheap electrici¬ty prices.

I place the Leader of the Government on notice that, when we debate this in committee next week, this issue in this bill and in the next bill will be pursued at length and in detail. We want to know what this government is doing in relation to the policies of the New South Wales Labor government and we want to know whether it will now admit the error of its ways in relation to its statements on this issue in those long years of this debate when it was in opposition.

The final issue that I place on the record in relation to the essential services legislation is the other furphy that has been raised, again in debate in another place and also in the community generally, and that is the area of blackouts. I place on the record some figures to assist those members who want to argue with fact rather than with fiction. As members know, for the past 18 months to two years, the Labor Party and others have highlighted the claim that, since the electricity businesses have been privatised, and under a Liberal govern¬ment in particular, blackouts have been much worse than under a Labor government and under public ownership.

I have a graph which I know I cannot have incorporated in Hansard but I will describe it. I am happy to provide copies to any member who wants to follow the issue through. I highlight the particular figures provided by ETSA Utilities. In 1989-90, under a Labor government and under public sector ownership, the average time without power per customer in South Australia was 253 minutes, and in 1990-91 it was 263 minutes. So, under a Labor government and public ownership it was 253 minutes and 263 minutes.

In the seven years under a Liberal government between 1993 94 and 1999 2000, the average lost time was between 112 minutes and 119 minutes—in that order. So, the number of minutes lost during that period was less than half. It is true that 2000 01 was a terrible year: it was the hottest summer in 96 years and we had a terrible year of transformers blowing. As a result, ETSA Utilities spent $12 million replacing transformers. I do not have the exact figure but I think, even in that terrible year, the time lost was around 170 minutes per customer—still significantly less than the 250 minutes and 260 minutes per customer under a Labor government in 1989-90 and 1990-01. I understand that in the most recent year the number has declined significantly again and is closer to the 120 minute mark but, because the full year of 2002 has not been completed, we will not see those figures until later in the year.

I place those figures on the record because, if you listen to talk-back radio, in pre-privatisation times we never had a blackout in South Australia, and in post-privatisation times the world has fallen in and we can never get power in any way. Let us argue the facts in relation to these issues. More importantly, we will ask the Labor government, given that it campaigned on this, what it intends to do that is different from what the former Liberal government did in these areas.

In conclusion, I indicate that this new government, whilst it talked big in opposition about a plan to solve the problems of electricity supply, has done nothing in six months that had not already been put in place by the former Liberal govern¬ment or has been rebadged in some way—such as the Essential Services Commission as opposed to the Independ¬ent Industry Regulator. As we go through the committee stage of this bill and the electricity bill, we will be able to demon¬strate that even more clearly.

The Hon. G.E. GAGO secured the adjournment of the debate.

Source: Hansard


You can write to Rob at his
GPO Box 2264

His office contact
number is:

Telephone: +61 8 8226 1866

Alternatively, you can email Rob with any issues or feedback.

Rob Lucas on
© Rob Lucas 2016 | Authorised by Rob Lucas, Parliament House, Adelaide SA 5000