21 November 2023
On behalf of Mr Jihad Dib: I move:
That this bill be now read a second time.
I am pleased to introduce the Energy Legislation Amendment Bill 2023. The Electricity Infrastructure Roadmap, the roadmap, sets out how New South Wales will deliver its electricity system transition strategy. The legislative amendments proposed in this bill will help smooth the delivery of the energy transition. The bill amends two existing pieces of legislation that provide the framework for implementation of the roadmap: the Electricity Infrastructure Investment Act 2020, which I will refer to as the EII Act, and the Energy and Utilities Administration Act 1987, which I will refer to as the EUA Act. The bill implements some of the Government's response to the recommendations of the Electricity Supply and Reliability Check Up, the Check Up, to assist roadmap entities to successfully deliver on their functions. There are no large policy shifts introduced in the bill, keeping intact the current policy intent, which continues to enjoy multi-party support. I will address each schedule to the bill individually.
I turn first to the amendments in schedule 1 to the bill. In total, 15 amendments are made to the EII Act. These are minor amendments to some of the existing arrangements for entities that play critical roles in delivering the roadmap. They can be categorised into three areas of amendment, being changes to: the Energy Security Target Monitor, or ESTM; the Consumer Trustee; and miscellaneous amendments. The first of these amendments relate to the ESTM. The purpose of the ESTM amendment is to enable a new based ESTM to oversee ongoing management of electricity supply reliability and the exit and entry of new generation capacity. That implements the New South Wales Government's response to recommendation three from the Check Up report. Those amendments require the secretary to exercise the functions of the ESTM—rather than the Independent Pricing and Regulatory Tribunal—if a person or body has not been appointed in the role. That is consistent with the existing approach where the secretary takes on the functions of the Consumer Trustee in the absence of an appointment of the Consumer Trustee. As a consequence to the ESTM amendment, the terminology prescribed in reference to the default Consumer Trustee provisions will be amended to ensure consistency between both sections.
The proposed bill also allows for the secretary to delegate those functions to an employee of the department and any person exercising those functions will be protected from personal liability. The bill will enable the ESTM to share protected information with the Australian Energy Market Operator [AEMO] when the ESTM considers this necessary in the course of exercising ESTM's functions. For example, information may be shared if AEMO continues to carry out the technical modelling to inform the ESTM report. Consequential to this, amendments in the proposed bill prevent AEMO from disclosing any protected information it receives, without the Minister's approval. An example of what protected information could be includes information that stakeholders disclose in confidence when being interviewed by ESTM. It is important that this information stay protected, so that the ESTM has up-to-date and accurate information for the energy security target and stakeholders have confidence in how the information will be protected when disclosing this information. The bill also amends section 76 of the EII Act to enshrine the ESTM as an authorised officer who can issue penalty notices for offences under the Act.
I turn now to the amendments relating to the Consumer Trustee. Section 31 of the EII Act sets out how the Consumer Trustee considers the infrastructure planner's recommendations when authorising a network operator to carry out a renewable energy zone, or REZ, network infrastructure project. The EII Act prescribes that the Consumer Trustee may, after considering the infrastructure planner's recommendations, recommend to the Minister that a direction be given to a network operator for a REZ infrastructure project to be carried out. The Consumer Trustee may alternatively authorise the network operator to carry out the infrastructure project.
The section further prescribes that, if the Consumer Trustee authorises the network operator to carry out the infrastructure project, it must set a maximum amount for the prudent, efficient and reasonable capital costs for the development of the infrastructure project and advise the regulator of this amount. The section, lastly, prohibits that maximum amount being disclosed to any person and allows for the regulation to prescribe the eligibility criteria and selection process for network operators which may be authorised or directed to carry out a network infrastructure project.
The proposed bill clarifies this process by creating a new head of power in section 31 of the EII Act. This head of power will allow the Minister to make a regulation about the exercise of the Consumer Trustee's functions under this section. This amendment is consistent with a range of existing heads of power that enable the Minister to make regulations about how the Consumer Trustee will carry out its independent functions—for example, recommendations about long-term energy service agreements and the matters to take into account when preparing the infrastructure investment objectives report.
The bill also amends the minimum infrastructure investment objectives and the definition of long-duration storage. The primary purpose of these amendments is to make the original policy intent explicit—that is, that long‑duration storage has to have at least two gigawatts of capacity that can be dispatched for at least eight hours. Two gigawatts times eight hours is 16 gigawatt hours. We are proposing to amend section 44 to make this explicit and to provide certainty to the market about the minimum infrastructure investment objectives. The proposed amendment enables the Minister to respond flexibly to long duration storage needs by creating a head of power for the regulations to prescribe a different period of time.
The overall objective of these amendments is to accommodate longer periods where the demand for electricity is greater than the supply, hence this amount of energy storage is needed. The Minister for Energy will decide whether to make a regulation in 2024 to specify a different duration, following a review by AEMO Services Limited. I note that AEMO Services Limited is a subsidiary of AEMO, which I spoke about earlier. AEMO Services Limited has been appointed as the Consumer Trustee under the EII Act. Before making any decision about whether to specify a minimum duration different to the current eight hours, the Minister for Energy will consult with industry as part of the review.
Together, the long-duration storage amendments in the bill provide flexibility to the Consumer Trustee in how it tenders for long-duration storage to meet the reliability standard. The bill preserves the Consumer Trustee's independence in deciding which mix of projects and duration is needed to achieve the minimum infrastructure objectives. The bill also amends when the Consumer Trustee must prepare the infrastructure investment objectives report stipulated in section 45 of the EII Act. The section, as currently particularised, creates a potential interpretation that it must publish on an exact day, which is not the intent. The bill clarifies that the two‑year cadence is approximate.
Then there is the risk management framework. Section 51 of the EII Act provides that the Minister for Energy may require the Consumer Trustee to amend the risk management framework following a review of the risk management framework by the regulator. The proposed amendments will ensure that any amendment to the risk management framework must be in accordance with a recommendation made by the regulator following its review. This amendment will clarify the protective nature of the Minister's power so that they may only make a direction to the Consumer Trustee if it is consistent with a recommendation from the regulator. The bill also proposes miscellaneous amendments that relate to the scheme financial vehicle [SFV] and correcting cross‑referencing errors.
The bill amends section 55 of the EII Act, which relates to payments out of the Electricity Infrastructure Fund. This is a minor amendment to allow the SFV to recover administrative costs directly from the Electricity Infrastructure Fund, subject to ministerial authorisation. Administrative costs include legal and insurance costs, which the SFV currently recovers via the Financial Trustee. Without these amendments, the administrative costs process is complex and lacks transparency. The proposed amendment streamlines the SFV's administrative processes and provides greater transparency because costs will be in its own name. It will also bring the process in line with other entities such as the Consumer Trustee and the Financial Trustee, which recover their costs directly from the Electricity Infrastructure Fund under section 55 (b) of the EII Act. This is a minor statutory revision that addresses an omission in the legislation.
When the EII Act was made, it was envisaged that the Financial Trustee would have a greater role in the administration and operation of the SFV. However, the SFV has a more substantive role in its operation than was originally envisaged. The ability to recover operating costs will address practical issues with invoicing and will enable the SFV to procure legal advice and insurance in its own name. The last proposed amendment to the EII Act is to correct a minor cross-referencing error in the application of division in section 36 that arose from when the original bill was passed by both Houses in Parliament. This ensures that the Minister is satisfied of the relevant matters before authorising network operators to carry out a priority transmission infrastructure project.
I now turn to schedule 2 to the bill. Schedule 2 amends the EUA Act related to the governance arrangements for the Energy Corporation of NSW—EnergyCo. EnergyCo is constituted as a corporation under the EUA Act. The EUA Act sets out the governance arrangements for EnergyCo. EnergyCo has functions under the EUA Act, and functions as the infrastructure planner under the EII Act for New South Wales renewable energy zones and priority transmission projects. The amendments in schedule 2 recognise the important role that EnergyCo is playing in the energy transition under the bipartisan road map. Schedule 2 makes changes to EnergyCo's governance arrangements to establish a formal governance board and associated reporting structure for EnergyCo. These amendments will support EnergyCo moving to a mature operating state, with improved decision-making and risk management processes, as committed to by this Government in response to recommendation 8 of the Check Up.
These amendments will introduce a governing board that consists of between three and eight members appointed by the Minister, which will replace the secretary and advisory board once dissolved, which currently manages EnergyCo under the EUA Act; retain a ministerial power of direction and control which prevails over a policy or direction of the board to the extent of an inconsistency; enable a chief executive officer to be appointed by the secretary and be responsible for the day‑to‑day management of EnergyCo; introduce provisions about the members and procedure of the board; enable advisory committees to be established to provide advice to the board, including provision for the continuation of existing committees and power to dissolve committees; require EnergyCo to determine its service delivery priorities, having regard to the Minister's expectations; require EnergyCo to prepare a statement of corporate intent for each financial year and to exercise its functions under the EUA Act and any other Act, including EnergyCo's infrastructure planner functions under the EII Act, in accordance with the statement of corporate intent, and of which regulations will set out further details of the reporting requirements; and update existing delegation powers to reflect the new governance arrangements.
Lastly, schedule 2 makes other minor and consequential amendments, omits redundant provisions and inserts a standard provision to enable savings and transitional regulations to be made. Schedule 2 will commence on proclamation, which enables EnergyCo to continue to be managed under the existing governance arrangements until the board and chief executive officer are ready to be appointed. The changes in schedule 2 are necessary to introduce a governing board and associated reporting structure for EnergyCo to address recommendation 8 of the Check Up, within the existing legislative framework. Schedule 2 does not change EnergyCo's functions under the EUA Act or the EII Act. Schedule 2 also does not change the Minister for Energy's power of direction and control of EnergyCo.
Making these changes now is a priority for the Government and will enable the new governance arrangements to be put in place for EnergyCo in the first half of 2024. These changes will better enable EnergyCo to deliver on its functions as infrastructure planner for New South Wales' renewable energy zones and priority transmission projects, with sufficient ministerial oversight, whilst maintaining the flexibility to act quickly and with a view to its long-term delivery mandate. These amendments recognise the important role EnergyCo is playing in the energy transition and reflect the move from the set-up phase to a mature organisation. These amendments set EnergyCo up for success in delivering its functions and are an important step in the evolution of the bipartisan roadmap. I commend the bill to the House.