Energy Legislation Amendment Bill 2023

Second Reading Speech

The Hon. PENNY SHARPE (Minister for Climate Change, Minister for Energy, Minister for the Environment, and Minister for Heritage) (23:11:12):

I move:

That this bill be now read a second time.

I am pleased to introduce the Energy Legislation Amendment Bill 2023 to the Legislative Council. The Government commissioned the Electricity Supply and Reliability Check Up earlier this year to kick the tyres on the energy roadmap to ensure that we had the right measures in place to meet our renewable energy and storage targets. We are pleased to be progressing the first round of legislative amendments to implement the check-up's recommendations.

Since the bill was introduced in the other place, it has been amended in two ways. First, the bill no longer seeks to amend the definition of long-duration storage infrastructure under the Electricity Infrastructure Investment Act. The check-up recommends a review of New South Wales' long-duration storage needs—that is, what minimum duration of storage is required to firm up a new energy system based on renewable energy. That work is currently underway and I intend to consult with industry on the appropriate minimum duration for individual long-duration storage projects in New South Wales. Second, the bill has also been amended to require that the board of the Energy Corporation of New South Wales must include at least one board member with skills and experience in community engagement. Community engagement is critical to ensuring that the energy transition can proceed in a timely manner and that our regional community benefit from this transition. The Government is deeply committed to this. The Government supported both of these amendments in the other place.

The Electricity Infrastructure Roadmap was enacted in 2020 with support from across the Parliament. I am hopeful that today we can maintain broad support for the successful implementation of the roadmap. Transforming our electricity system will provide New South Wales households and businesses with a reliable supply of clean, affordable electricity and support the green jobs of the future. Today we are getting on with the task of supporting the renewable energy transition. I understand that the bill has reasonably good support across the Chamber and we should be able to proceed quickly.

Hansard

I seek leave to incorporate the remainder of the second reading speech in .

Leave granted.

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 Administrations 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 this 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 of the bill. In total 15 amendments are made to the EII Act. They are minor amendments to some of the existing arrangements for entities who 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 the amendments relate to the ESTM. The purpose of the ESTM amendments are to enable a New South Wales‑based ESTM to oversee ongoing management of electricity supply reliability and the exit and entry of new generation capacity. This implements the New South Wales Government's response to recommendation three from the Check Up report.

The 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 proposed 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 the 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 that, 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 the ESTM. It is important that that 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, they 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 who 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 for 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 wight hours is 16 gigawatt hours. We are proposing to amend Section 44 to make this explicit and provide certainty to the market about the minimum infrastructure investment objectives.

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 they must publish on an exact day, which is not the intent. This 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 their review. The 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. It 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 as 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. It 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. It 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 of the bill. Schedule 2 amends the EUA Act related to the governance arrangements for the Energy Corporation of New South Wales [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 Roadmap. Schedule 2 makes changes to EnergyCo's governance arrangements to establish a formal governance board and associated reporting structure for EnergyCo. The 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 eight of the Check Up. The amendments are largely based on the model used for Sydney Metro under the Transport Administration Act 1988, which are appropriate for EnergyCo as a general government statutory body established under legislation.

The key differences between the amendments set out in the bill and the Sydney Metro model are that:

Under the Sydney Metro Model, it is the transport secretary rather than the Minister who issues the statement of expectations. The secretary may also appoint one director. These provisions give the Department of Transport more control over functions and determines the service priorities. In the model proposed in the bill, the Minister has control and there is no role for the Department except in the appointment of the CEO.

Under the Sydney Metro model, the Board exercises employer functions in relation to the CEO who is employed in the transport service under the Government Sector Employment Act 2013 [GSE Act]. In the model proposed in the bill, the CEO is employed in the Public Service under the GSE Act. and employer functions are exercised by the secretary.

There are also some other differences, such as shorter terms for board members in the bill.

The 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 manage 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. Regulations will set out further details of the reporting requirements.

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 NSW's Renewable Energy Zones and priority transmission projects with sufficient ministerial oversight, while maintaining the flexibility to act quickly and with a view to its long-term delivery mandate. The amendments recognise the important role EnergyCo is playing in the energy transition and reflects the move from the set-up phase to a mature organisation. The amendments set EnergyCo up for success in delivering its functions and is an important step in the evolution of the bipartisan roadmap. I commend the bill to the House.

Second Reading Debate

The Hon. AILEEN MacDONALD (23:13:14):

I lead for the Opposition in debate on the Energy Legislation Amendment Bill 2023. First I acknowledge the collaborative approach of the Government in discussions with the shadow Minister, Mr James Griffin, MP, in the other place. It is pleasing that the Government engaged and has considered our concerns. In September 2020 the Coalition Government released the Electricity Infrastructure Roadmap, a 20‑year road map to replace coal-fired power stations with clean energy sources. The road map was made possible by the Electricity Infrastructure Investment Act 2020. I could go into detail but it is technical and we do not want to be here all night so, in summary, the Act was to coordinate investment in new generation, storage and network infrastructure in New South Wales, and for other purposes. I am advised that the amendments made by the bill are in response to the Government's O'Reilly report. My colleague in the other place has placed on record the Opposition's view on the bill and its position.

The Hon. PENNY SHARPE (Minister for Climate Change, Minister for Energy, Minister for the Environment, and Minister for Heritage) (23:14:27):

In reply: I welcome the continued support across the Chamber for delivery of the road map and for the energy transition in New South Wales. I thank the Hon. Aileen MacDonald for her contribution.

The DEPUTY PRESIDENT (The Hon. Emma Hurst):

The question is that this bill be now read a second time.

Motion agreed to.

Third Reading

The Hon. PENNY SHARPE (Minister for Climate Change, Minister for Energy, Minister for the Environment, and Minister for Heritage) (23:15:06):

I move:

That this bill be now read a third time.

Ms ABIGAIL BOYD (23:15:23):NSW Electricity Supply and Reliability Check Up

I wish to speak to the third reading because the second reading debate moved a little too quickly. I will not be long. On behalf of The Greens and as spokesperson for energy, I indicate that we will be supporting the legislation. The bill amends the Electricity Infrastructure Investment Act 2020 and the Energy and Utilities Administrations Act 1987. The intent of the legislation is to implement some of the government response to recommendations emerging from the Cameron O'Reilly report entitled . The check-up made clear the parlous state of our renewable energy transition a mere two years on from the passage of the energy road map. At a time when we need to be going further and faster, the much‑lauded Renewable Energy Zones continue to languish in inaction.

The bill makes various amendments relating to the Energy Security Target Monitor, confers various regulation‑making powers and makes other largely administrative changes. It places slight restrictions on the process for amending the statutory risk management framework that applied to the road map scheme, which I am told is designed to provide greater confidence and certainty for road map participants. Those are all technical tweaks that have arisen following the check-up and we support them insofar as they are all working in harmony together to accelerate and drive forward the absolutely urgent energy transformation that we are so vitally interested in seeing succeed.

The major substance of the bill lies in schedule 2 with the formation of the Energy Corporation of New South Wales board, or EnergyCo. The intent of the bill is to properly formalise EnergyCo as a full entity and give it greater powers and authority in order to fulfil its functions as infrastructure planner. The bill leaves the composition of the board relatively wide, but I understand from conversations with the Minister's team that the broad intent is for the board to have a similar make‑up to that of the advisory committee.

In determining the final make‑up of the EnergyCo governing board, I urge the Government to consider including voices that are able to strongly advocate for workers and communities. In the rollout of new renewable energy projects, we run the great risk that in responding with the appropriate urgency social considerations may fall by the wayside. It would be a tragedy if we lost the hard‑won gains of the union movement over generations, which built up jobs in the traditional energy industries and supporting occupations into well‑compensated vocations that could support a worker throughout their entire working career. There is so much economic opportunity latent in the clean energy transition and we need to make sure we safeguard that economic opportunity for the workers of this State rather than leaving it prey to the tentacles of global capital.

Unfortunately the bill will do absolutely nothing to reverse the disastrous privatisation of our energy network. A strengthened EnergyCo is welcome, but unfortunately it will be constrained by the neoliberal market‑led approach championed by both major parties. The market is finally groaning into much‑delayed action and billions of dollars of private investment are beginning to be funnelled into new renewable energy generation. It is incumbent on this Government to ensure that the transition is a just one and that its benefits are fairly distributed, and that it does not simply result in a wealth and power accumulation of astonishing scale. With those comments and with thanks to the House for its indulgence, The Greens support the bill.

The DEPUTY PRESIDENT (The Hon. Emma Hurst):

The question is that this bill be now read a third time.

Motion agreed to.

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