Electricity Transmission Authority Bill

Debate resumed from 27 October.

Mr ROGAN (East Hills) [9.52]: This bill had its origin in the other place, where amendments were moved. The Government subsequently accepted a number of those amendments. During the bill's passage through that Chamber, the Opposition indicated that it does not oppose the measure. We support the principle behind the legislation; that is, the establishment of a separate transmission authority with the role of opening up to competition markets on the electricity grid as this will bring benefits. We will be moving an amendment in Committee. The amendment was moved in the upper House but was rejected. I hope the Government has thought about the amendment again and that, on this occasion, it will be accepted. I will detail the amendment shortly but it has been circulated and the Minister has a copy.

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As outlined in the second reading speech, the purpose of the legislation is to establish the Electricity Transmission Authority which will take over the transmission function of the Electricity Commission. In May legislation was passed to allow the commission to establish a subsidiary company. Following the passage of that legislation a grid subsidiary company was established separating Elcom's generation and transmission functions, although that body will not be completely separated from the main organisation. This bill will enable the establishment of that authority.

When the other relevant legislation was passed earlier this year, the then Minister foreshadowed that this legislation would be introduced. The separation of Elcom's generation and transmission functions follows the Council of Australian Governments agreement for the establishment of a competitive electricity market of which the national grid is an integral part. The general competitive electricity market will be phased in from July of next year. Paper trials have been conducted during the past 12 months of this significant economic reform. Before the 1991 election the Opposition advocated this proposal as a way of producing lower prices and a more competitive market for electricity. I am indebted to the Parliamentary Library for its Bills Digest. This is the first occasion on which I have referred to one of its Bills Digest and having done some research I found it succinctly covers the bill. It states:

The economic benefits of electricity grid interconnections have been identified as follows:

* the efficiency of resource allocation can be improved as `interconnections between state grids can allow states with low cost power resources to export power to those states with high cost power sources.';

* interconnection between systems based on different technologies such as hydroelectric generation (which can respond quickly to changes in demand) and thermal coal stations (which are slower in response but provide cheaper power) can increase flexibility and reduce costs;

* lower reserve plant margins are needed to maintain supply which means that investment in new plant for this purpose may be deferred; and

* greater competition is possible in a larger interconnected network leading to efficiency gains.

The National Grid Management Council was established in July 1991 by a Special Premiers Conference for the purpose of encouraging and initiating `the further restructuring of the electricity industry in Australia so that the country can move ahead to more efficient generation, transmission, distribution, and use of electricity, thereby improving international competitiveness, particularly of manufacturing and energy-intensive industries.

This has been the subject of ongoing discussions at the Federal and State level. The National Grid Management Council, in order to meet the target date of 1 July next year, has established a comprehensive process. By Christmas of this year the council aims to have defined in detail the market model for the initial national market; prepared the first draft of a code of conduct to apply to market participants; identified all aspects of the market infrastructure required; developed a recommended approach for national system control; and put forward a suggested approach for administering the code of conduct pending the introduction of uniform legislation at a later date.

We are in a brand new age of the competitive market and of electricity reform. We must wait to see the final shape of this system. In introducing this legislation, New South Wales will be well and truly linked - if that term can be used in this context - to this competitive market. This legislation represents a sad day for people at the Electricity Commission and for those who have been associated with it over many years. They are seeing the complete separation of a significant section from the Electricity Commission. This body was established by a Labor government in 1950, amid a post-war crisis in power supplies to the State. This had been caused by a dramatic increase in demand for electricity as New South Wales industry and home building expanded, coupled with an ad hoc inadequate mix of private, government and semi-government power generation. This required government intervention.

The program of power station and transmission line construction commenced in the 1950s and continued into the 1970s and 1980s has put New South Wales in a secure position for electricity supply and has enabled this State to enter into contracts for interstate supply of power during the 1990s. Interconnection of the electricity transmission grid between Victoria, New South Wales and South Australia was also commenced under Labor. Under Labor, power costs in New South Wales were the cheapest of those in all mainland States and amongst the lowest in the world. Recognising the need for ongoing performance improvements, Labor established the McDonell inquiry into the electricity industry, which led to a package of legislation being passed in 1987. This consolidated the industry's legislative and operational framework along commercial lines. It provided greater coordination between all sectors of the industry and ensured more efficient use of the community's electricity assets. As a consequence of this legislative package Elcom is now required to prepare a 30-year plan on a three-year cyclic basis, thus improving its efficiency, accountability, performance and overall planning.

There is no doubt, though Government members will disagree, that this reform, initiated under Labor prior to it losing government in 1988, led to the great claims by this Government about improved efficiency of the Electricity Commission. These so-called improved efficiencies amount to the building on the reforms initiated by Labor back in 1987. The package of reform legislation I referred to previously was the most significant package dealing with the electricity industry in this State since the formation of the Electricity Commission in 1950. As a result, there will be no need to build any more power stations this decade. That is a significant cost advantage because the Electricity Commission is not required to embark on any major borrowing programs and by
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shifting a lot of the 132kV across to electricity distributors it has reduced its debt. That fact, together with the very low price it pays for coal, has enabled the Government Pricing Tribunal to effectively reduce electricity charges. Obviously, no government gives much credit at any time to the initiatives of an opposition, and one would not expect that to happen in this case. Nevertheless, I wanted to place that on the record. They are the facts, and they cannot be refuted.

It is said that the former Government should not have embarked upon building some of the power stations that were built in the 1980s. However, the Bills Digest prepared by the Parliamentary Library outlines that in 1979 the Fraser Government encouraged State governments to develop resources infrastructure due to the expected resources boom through an infrastructure borrowing program. As a result, the Electricity Commission engaged in the rapid construction of substantial new generating plant capacity to meet expected growth during the 1980s. However, the expected industrial demand for energy did not eventuate and New South Wales was left with a level of generating plant over and above that which would normally be required to achieve reliability of supply. The bill deals with the separation of transmission from generation. Those who have been part of the commission all those years must feel somewhat nostalgic to see that separation. It is what could be described as progress, which it is hoped will lead to a new era of competitive power prices which will benefit New South Wales, other States and the nation by making Australia more competitive in the manufacture of goods.

When amendents were moved in the other place, the Minister there mentioned the establishment of a worker-elected board member, and referred to the current board member, Mr Leigh Brydson. The Minister was not very complimentary in his comments in regard to Mr Brydson. One of Mr Brydson's close personal friends, not Mr Brydson himself, spoke to me about what the Minister said. The excellent job Mr Leigh Brydson has done as a worker-elected board member should be put on the record. His solid understanding of the technical aspects of the industry has been of great benefit to other board members, given his knowledge of Electricity Commission operations. Most of these board members come from backgrounds other than the electricity industry. The only person on the board other than Mr Brydson who would have such knowledge would be the General Manager of the Electricity Commission. But when employee issues are raised, Mr Brydson is able to put a position representing the work force which bridges the communication gap that often occurs between the top management level, that is the board level of management, and the workers in the power stations.

Mr Brydson's role cannot be overstated, for it is of great benefit. I am given to understand that he has never breached any board confidentiality - as was implied by the Minister in the other place - at all times has kept his counsel in confidential matters, and has never made any inappropriate statements, even to his close friend who spoke to me. He has never been asked to leave a board meeting, as the Minister in the other place implied. The Electricity Commission does not have the best industrial relations record - it has been brought before the Industrial Relations Commission on more occasions than one would like to believe of such a body - but Mr Brydson's positive contribution as a worker-elected board member is improving that record. I could quote some of the condemnation heaped upon the Electricity Commission management by the Industrial Relations Commission over the years. However, I will not do so, except to say that it does not reflect well on many within the organisation who should know better on the question of industrial relations.

I understand that the Electricity Commission is one of the few large government organisations that has entered into an enterprise agreement with its work force. At the end of the day the acceptance of this enterprise agreement had much to do with the fact that the employee-elected director, Mr Brydson, was able to communicate with the work force. Generally at the end of the day the industrial enterprise agreement was accepted. The newsletter that Mr Brydson produces for the work force is another positive way of improving and facilitating communication between the board and work force levels of the Electricity Commission. Commission officers have spoken to me of this, saying it is an extremely beneficial initiative because it informs the work force of the policy directions the board is taking. For these reasons the Opposition will be asking the Government to agree to the amendment to provide for a worker-elected director of the new Electricity Transmission Authority to be established by this legislation.

I wish to make some general comments in relation to the bill, bearing in mind that the Opposition will not be opposing it. On reading the bill I was tempted to propose an amendment to clause 6, which outlines the principal functions of the authority. Unlike the Act that governs the Electricity Commission, this bill does not provide for the new board to give high priority to environmental issues. The bill refers to a number of functions of the authority but does not stipulate that the authority must take environmental matters into account when making decisions about the grid. However, as it is not the generating body, at the end of the day I decided I would not proceed with that amendment. When Labor comes to office it will certainly consider whether the charter of the Electricity Transmission Authority should include a commitment to protection of the environment.

Clause 6(e) deals with protection of the public from dangers arising from the transmission of electricity. Obviously the foremost concern of the new board will be a possible future definitive link between electromagnetic fields from transmission lines and some forms of cancer. That would mean either that many transmission lines would have to be moved or that people in close proximity to lines would have to be relocated. Certainly in my electorate of East Hills, 132kV transmission lines pass close to a
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number of residential properties. Many academic studies have been undertaken, are currently being undertaken and no doubt will be undertaken in the future and it is hoped that such a link is not established because of the public health implications and the immense cost to any government of remedial action.

It behoves any government or authority to consider the recommendations of former High Court judge Sir Harry Gibbs, who said in his inquiry report said that whilst he could not establish a link between EMFs and cancer, he nevertheless could not rule it out and recommended that authorities adopt a policy of prudent avoidance, that is, that any new powerlines should be placed away from residential areas so that if such a link is established in the future, suitable action can be taken. Clause 24(2) of the first print of the bill, dealing with the application of certain provisions of subsidiary companies, provides that the Freedom of Information Act 1989 applies to the authority and its subsidiaries. This is to be commended. The Opposition moved an amendment for that to apply to earlier legislation, and I am pleased it has been included in this bill. I refer also to the transfer of staff. An undertaking has been given by the Minister in the Legislative Council following discussions with various principal trade unions representing transferred staff of the Electricity Commission to the new authority. The Minister has given an undertaking about the conditions of employment of employees of the Electricity Transmission Authority. He said:

I am advised by my department that before the end of that two-year duration of the current enterprise agreement negotiations will be held to reach agreement on a new enterprise agreement. However, if the Labor Council and the unions are not able to reach an agreement on a further enterprise agreement the new transmission authority, the Labor Council and the unions will enter into a consent award for a period of two years that will mirror the conditions and rates of the current enterprise agreement. During the transition arrangement for the formation of the Electricity Transmission Authority the current Pacific Power manual of personnel policy and procedures will apply to all Electricity Transmission Authority staff.

I suggested to the Labor Council when it dealt with the subsidiary company legislation earlier this year that it should write to the then Minister for Energy, the Hon. G. West, seeking discussions to enable the council to have input into the drafting of the new legislation. On 29 June the Labor Council wrote to the Minister for Energy indicating the concerns of employees, stating:

The unions affiliated to the Labor Council with members employed in this area of Pacific Power's operations seek to meet with you to discuss the impact of the proposed changes in the operation of the grid system and the impact they might have on the conditions of employment of those employees currently employed by Pacific Power in the grid system.

The Labor Council subsequently received a letter dated 28 July from the Minister, who stated:

Should the Government decide to proceed with the formation of a separate Statutory Authority for the Grid activity, I would be happy to meet with you together with representatives of Pacific Power to discuss any issues and concerns you may have.

Lo and behold, the Labor Council heard nothing and the first I heard that legislation had been introduced was when I read the Hansard report of the upper House the week following the Thursday the bill was introduced. When legislation is introduced I am obliged to speak with all interest groups to seek their views. When I spoke to the Labor Council it said that the Minister had not spoken to any members of its affiliates, and that the complete lack of consultation was again symptomatic of the Government. During debate on the police bill the honourable member for Liverpool said there had been no consultation with the police force. My illustration is also indicative of the lack of consultation by this Government.

When the Minister got the message, obviously he decided he had better talk with the union. I do not consider that to be consultation. Consultation is getting interested parties together to seek their views on the development of legislation. A government will not always accept the views of all interested groups - that is clearly impossible - but at least those groups should be given the opportunity to put forward their views, and the Government should consider them when drafting legislation. At a late hour the Minister spoke to representatives of the Labor Council and subsequently gave the House the assurance that I just read about working conditions and the transfer of employment from the Electricity Commission to the new authority.

Again this illustrates that this Government is not sincere about consultation. Due credit must be given to the former Minister for Police, and Minister for Emergency Services. I am sure that if he had retained the energy portfolio, that would not have been his style of operation. It is certainly the style of the present Minister in another place and it is typical of the way this Government operates. I recently attended a fairly large public meeting held at Armidale Town Hall. Residents of the New England area expressed great concern that the eastlink 330kV power line going from the Armidale district into Queensland was not necessary.

Mr West: What has this to do with the bill?

Mr ROGAN: It is directly linked to the bill because one principal responsibility of the new authority will be what to do with the eastlink grid between Queensland and New South Wales. That will be an integral part of the national grid network because at the moment Queensland and New South Wales are not linked; the 330kV line will directly link the two States. It is an integral part of this proposed legislation. A major decision of the new authority will be the route of the line and whether arguments can be advanced as to its necessity. At the public meeting I indicated the Opposition's overall support for the national grid concept. Because a number of serious issues were raised and because of the degree of opposition in the New England area - indeed, a busload of people came from Queensland - in response to a request by a member of the audience I said that I would move for an inquiry to be established.

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Consistent with the Opposition upholding its promises, as it will when it is in government, in the week following the public meeting I gave notice of the establishment of a select committee of the Parliament to consider and report upon the economic, environmental, health and community impact of the construction of the 330kV eastlink transmission line between New South Wales and Queensland, and to consider the justification for the building of this transmission line and its association with the national electricity strategy. This link is a very significant part of the national grid concept. In the upper House the Opposition raised its concern about the threat of privatisation of the electricity industry. The Opposition believes the Government has a secret agenda, though it has backed away from publicly committing itself to the privatisation of the electricity industry.

If the Government is re-elected with a working majority, it will proceed with its secret agenda, which is the sale of the generation, transmission or distribution arms of the electricity industry. For this reason the Opposition moved an amendment in the upper House - which to the Government's credit it accepted - that any sale of the transmission assets or of any subsidiary companies that might be established by the transmission authority would have to come back to the Parliament for approval before the sale proceeds. One function of the new authority will be to look at rural distributors. Serious attention must be given to the concern expressed to me - I know it was expressed to the then Minister, and no doubt also to the Minister in another place, who now has the responsibility - that rural distributors feel they would not be able to compete in the new market in which the national grid will compete.

I am interested in the concept of deputy directors, and as I have not heard of any other authorities having deputy directors I would ask the Minister, in his reply, to comment on them. The role of the officers has been spelled out in clause 4(1) of schedule 1 that the Minister may, from time to time, appoint a person to be the deputy of a director, and the Minister may revoke any such appointment. In the absence of a director, the deputy may, if available, act in the place of the director, and while so acting has all the functions of the director and is taken to be a director. I do not have any great opposition to that, but it is an interesting concept and I wonder at the rationale behind it.

The last annual report of Pacific Power shows that its asset value was close to $10 billion. The assets of the Pacific Power grid are worth of the order of $1.644 billion. Therefore it will require a significant step to separate the two functions of transmission and generation. How will this new authority operate? Which of the 132kV lines will it take over? Throughout rural areas the voltage which is used is 132kV. I want to know whether or not the new authority will be required to take over a lot of those transmission lines which at present are owned by the Electricity Commission or its subsidiary. Will some of the transmission lines that have been taken over be returned to distributors? If so, on what terms? When the 132kV transmission lines were taken over by the four major distributors a while ago I think their value was about $600 million. That transaction was paid for by money taken from a raid on Sydney Electricity, or the old Sydney County Council.

If any of the 132kV transmission lines are taken by the authority I would like to know what compensation will be paid to the distributors who are losing them. I have given the Minister a copy of the amendment which the Opposition proposes to move in Committee which will give effect to our commitment to worker-elected board members. I reiterate that the Opposition is not opposed to this legislation. We have some concerns in relation to various areas that will be impacted upon, not the least of which is the Eastlink powerline which I referred to, rural distributors and the role of this new authority. As I said in my introductory remarks, the new authority is part of the agreement between the Commonwealth and the States for a national grid and a new, competitive electricity market, which we all hope will ultimately be of great benefit to the community.

Mr NEILLY (Cessnock) [10.32]: I support the Electricity Transmission Authority Bill. As has been mentioned by other speakers, the bill deals essentially with the capacity of New South Wales to participate in the proposed national grid system. Reference has been made to the national grid system and to competition that could arise interstate and intrastate with the introduction of that system. Sometimes people lose sight of the need to utilise the national grid system to overcome the mentality that each State should structure its power station development to meet peak loads in the winter, and to save this country enormous capital outlays.

Competition is surely part of a national grid system. We can reduce public expenditure in the development of power stations by using different time frames and time delays and by utilising current and future generating capacities, thus ensuring surplus power is available for utilisation most of the time. I hope what transpires with the national grid system is not what was suggested yesterday in Akerman's column in the Daily Telegraph Mirror. I hope the national grid will be fruitful in the development of this country and this State. I also hope - and this is referred to specifically in the legislation - that non-discriminatory access to the transmission system will enable intrastate competition.

Over the past three or four years we have seen a turning back of the clock in the electricity industry. I grew up in an area which was not controlled by an electricity supply authority. The northern coalfields established the fact that they needed power to operate the mines and they created their own generating capacity. They also provided power for other needs in the community, including street lighting, household power and ancillary industrial requirements. In the late 1950s, with the establishment of the Hunter Valley county council, which now forms part of
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Shortland Electricity, we departed from that system. Recently the Land and Environment Court decided to uphold a decision taken by Singleton Council to develop Redbank power station. I believe that the technology used to establish Redbank power station is good, clean technology which will overcome some of the problems experienced in ordinary coalmining and washing processes and will allow maximum extraction on the sites owned by mines, as less area will be required for the holding of waste matter.

This opens up an area which to date has not been exploited - before the introduction of this legislation there was little chance of exploiting it - that is, the capacity of private power generators to tap into coalmine waste resources and create power that can be sold directly to mining operations. Coalmines are a big utiliser of power and this is an opportunity to integrate that capacity. As I understand it, Redbank power station was too inhibited to pursue such a course because it was part and parcel of the State system and could sell power to the local county council. Surplus power could be utilised by the electricity supply system. It transpires that Redbank presold 30 years of power to Shortland Electricity at a price approximately 30 per cent below the Electricity Commission's prevailing tariffs.

At present Redbank power station is re-evaluating its financial situation. I hope that, with the passing of this legislation, the Government will be able to implement the program that is used to some extent in America which enables medium and large consumers to buy power direct from a supplier. Admittedly, Redbank power station is not a big generator of power; its potential capacity is only about 100 megawatts, but it has the capacity to attract industry and development. Redbank power station is able to deal directly with some of the persons interested in purchasing power. The system used in Wheeling, America, enables medium to large users of electricity to negotiate directly with power generators, which makes their businesses competitive. Separate transmission systems in America enable users of electricity to participate in this direct marketing arrangement.

At present, power prices for New South Wales industry - I again refer specifically to medium and large users - are subject to pressure because of competition emerging from Victoria and Queensland. The potential that exists through the independent transmission system gives industry the flexibility it needs to obtain power. The legislation is beneficial. It will enable us to compete both on an intrastate and an interstate basis. We will rue the day if we do not grasp the opportunity presented by this legislation to enable New South Wales to retain its place as perhaps the primary industrial State within this nation. It is hoped that the initiatives presented by this legislation are utilised to good advantage. I support the bill.

Mr MILLS (Wallsend) [10.41]: The Electricity Transmission Authority Bill, as outlined earlier, has the support of the Opposition because it is a manifestation in this State of the Council of Australian Governments agreement to set up a national grid for the establishment of a competitive electricity market. Legislation was passed in May to allow Elcom to establish subsidiary companies, and on 1 July PacificGrid Proprietary Limited was established. Further legislation was foreshadowed to constitute the transmission authority, which is what we are now discussing. In his second reading speech at page 3908 of Hansard the Minister said, "This statutory authority, to be known as the Electricity Transmission Authority, will take over the functions of PacificGrid". I would have preferred to have a clearer picture of exactly what that meant. I put the Minister on notice that I am not happy about the lack of information we have received from either the Government or the Minister about a number of matters, which I will refer to subsequently.

The Minister also said, "The authority will contribute to the electricity development and fuel sourcing plan which will continue to be prepared by the Electricity Commission". A pecking order is being established. Elcom will remain the superior arm of government in the electricity industry. The overall plan will be prepared by the Electricity Commission and the ETA will determine its policies, but presumably it will be subservient to Elcom and in that way report to the Minister. The Minister may give the board written directions in relation to the exercise of the authority's functions, which is usually the case. Later in his second reading speech the Minister said, "The authority must supply the Minister or a person nominated by the Minister with such information relating to its activities as the Minister may require".

Will a question in Parliament about the Electricity Transmission Authority be answered by the Minister? This matter has been of concern to members of the Opposition for a number of years, as we have seen the change in the way Government trading enterprises report to the people of New South Wales through this Parliament. For example, whenever I ask questions about the Hunter Water Corporation I am told that I have to go to the corporation itself. That occurs in respect of a number of Government corporations and Government trading enterprises. When they are off-budget it is hard to track down the accountability process. I would like some assurances or a clear indication of the position with regard to the Electricity Transmission Authority.

I referred earlier to my concern about the way in which the ETA is being established. There has been a lack of information about the size, the scope and the overall shape of the new authority. I know it is early days, but we are in the dark. I read the bill carefully, as I read the Parliamentary Library's Bills Digest and I read the Minister's second reading speech, but the detail is not there. The picture is not properly described. The Government is creating an opaque shell and we cannot yet see inside. For instance, how many employees does the Government expect will transfer to the new authority? Is it 5 per cent, 20 per cent or 50 per cent of Elcom's employees? I do not know. I would have appreciated, as a member of this Parliament, being given some idea of the size, shape and scope of the new organisation.

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Approximately what value of assets will be transferred from Elcom? Is it 2 per cent, 5 per cent or 20 per cent? I do not have any idea of the value. A better picture would have enabled all honourable members to understand exactly what was being done. That is why I referred to it as an opaque shell: we do not know what is there. What value of assets will be transferred from the new company PacificGrid? What assets does PacificGrid, which kicked off on 1 July, have? The Minister said that assets will be transferred from PacificGrid as well as Elcom. What assets went into PacificGrid when it was established? The Parliament has not had a report about that. The Minister's second reading speech would have been the ideal opportunity to provide us with a report about the current status of PacificGrid Proprietary Limited - how many employees it has, what its interim performance is and what it is doing.

How much debt will transfer to the new Electricity Transmission Authority? Elcom has a fair swag of debt. It has been restructured and moved around in the past six years, since the Curran report. I imagine the authority will be given some debt as part of the transfer of assets. Unfortunately that has not been described; it would have been better had the Minister given us some idea of how the transfer was going to proceed. In his second reading speech the Minister said that he proposed to set up an establishment board that would be responsible for negotiating a statement of financial performance and an implementation team to develop an implementation timetable. Those things will be set in train. I know it is early days, but some idea of what the Government envisages would have helped members to better understand what is being done. In his second reading speech the Minister also said:

The authority will not be liable in damages to any person by reason of any partial or total failure of the supply of electricity from any cause, except to the extent, if any, that the authority otherwise agrees.

Who will be responsible for any blackouts, trip outs, or phase problems as the Government goes to a separate authority that will oversee those problems, a separate authority that will have to deal with people it is not used to dealing with, the sorts of people described by the honourable member for Cessnock when he talked about private companies, people using coal washery waste for energy production, solar power or other generators of electricity and existing generators? They will all be dealt with in a new way. They all move power in and out of a grid. If things go wrong now we know that Elcom carries the bag. If the new authority will not be liable, who will be? The Minister should address that in his reply.

I hope that the creation of this separate authority and the possibility of its having subsidiary companies do not lead to big bucks for the lawyers sorting out liabilities and responsibilities. I am also concerned about what performance contracts will be extracted from the new authority regarding such things as transmission failures and how complaints will be dealt with. When a corporatisation is proposed those sorts of commitments have to be revealed, but no such commitments have been revealed in the bill. What performance contracts are likely for efficiencies, which is one of the achievements intended, for productivity, for industrial relations, for financial control? What performance contracts are likely for environmental responsibility and protection?

The honourable member for East Hills referred to these matters when he led for the Opposition in this debate. What performance contracts are likely for health and safety? I support the remarks of the honourable member for East Hills about a policy of prudent avoidance in high voltage transmission engineering. A little more of the picture would have been appreciated. The honourable member for East Hills referred to a letter from Minister Pickering to John Robertson, the industrial officer of the Labor Council, representing the employees of Elcom, Pacific Power, PacificGrid and others, indicating that he would be happy to meet representatives of Pacific Power, to discuss any issues and concerns that the union might have. The Parliament would have appreciated a report on the outcome of those discussions and negotiations but honourable members were left in the dark.

There was nothing in the Minister's speech about support of the union movement or the problems envisaged. If the Government is seeking and getting bipartisan support, why can it not be open about some of those matters? I am talking about the way things are being done, not about the fact that the transmission functions are being separated from the Electricity Commission. The Minister in his second reading speech said that the bill is not about corporatisation or privatisation, but then went on to say that the authority must not without the approval of the Minister sell or otherwise dispose of any interest in a subsidiary company so that as a result of the sale or disposal it ceases to be a subsidiary company. Only ministerial approval is required to sell or privatise, in whole or in part, the new authority. I again ask the Government for more openness and accountability. We do not want secret deals. We want that sort of activity out in the open and that is why the Opposition has foreshadowed an amendment that would require parliamentary approval for any disposal or sale.

Clause 3(1) in part 2 of schedule 2 to the bill concerns the first board, to be an establishment board. The establishment board is to hold office on a transitional basis as determined by the Minister. I commend the Government for its good sense in stipulating that the initial board will be an interim body. The establishment board will be responsible for achieving implementation goals set by the Minister by direction to the board. The Minister's speech did not make clear just what those implementation goals might be. I do not know whether he has determined what the goals will be. This again is evidence of the opaque shell to which I have referred. I would have appreciated it had the Minister given a much more comprehensive statement about the goals he will direct to the establishment board.

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I wish to refer briefly to the quantity of the dividend. Budget Paper No. 2, at pages 4-14 and 4-15, shows under dividends and community contributions a figure of $323 million for Pacific Power and under tax equivalents a figure of $222 million for Pacific Power. The total of $545 million from Pacific Power accounted for more than 58 per cent of the 1994-95 estimated total income from commercial sector enterprises. That is a significant proportion of government revenue. I am not criticising that in this context. It is important to note, however, that if the grid management efficiencies are to be achieved and if we are to have a reduction of costs, which is one of the goals of establishing the new authority, then we face a future reduction of those dividends. In the long term that outcome will threaten the financial viability of this State.

As we head down the path of national cooperation we need to keep in mind the financial viability of this State. I guess that in some generation later than mine Australia will be headed towards a diminution in the States' authority - perhaps the disappearance of the States if that is what the people eventually decide - but a reduction of dividends such as that to which I have just referred will lead to future difficulties in maintaining the financial viability of the States. The honourable member for East Hills referred to some of his concerns about environmental matters. The commentary section of the Bills Digest by Vicki Mullen of the New South Wales Parliamentary Library states:

If access to the National Grid in the future is truly competitive, new technologies for the production of electricity may begin to play an increasingly larger role as consumers become more aware of the damaging effects on the environment of the current production processes.

There is some promise of environmental progress. I hope that the Minister, when replying to the debate, will make it more clear to the House exactly how the Government envisages environmental matters will be protected under the bill.

Mr CRITTENDEN (Wyong) [10.56]: In my contribution I do not intend to traverse the same ground covered by the honourable member for East Hills, the honourable member for Wallsend and the honourable member for Cessnock. I have one or two concerns about the bill. It was in 1989 or 1990 that the former Greiner Government last transferred transmission assets to electricity councils. At that time the county councils concerned were not overimpressed. Illawarra Electricity Supply, for example, claimed that it was not getting an asset at all at the stipulated price but was getting a liability. Illawarra Electricity Supply wanted to write off the 132kV transmission assets completely, but to keep the auditors happy it merely wrote down the assets to $14.8 million.

The annual report of Illawarra Electricity Supply for the year ended 30 June 1990 under the heading "Notes to the Accounts" stated that $16.4 million was spent on the acquisition of 132kV assets from the Electricity Commission. On the basis of a discounted cash flow analysis, $14.8 million of the transfer price was subsequently written down. The Greiner Government in effect made Illawarra Electricity Supply buy an item for $16.4 million when in fact its worth was $1.6 million. The situation was worse in the case of Sydney Electricity. Again under the heading, "Notes to the Accounts", the annual report of the Sydney County Council for 1990 states that 132kV transmission assets of the Electricity Commission of New South Wales located within the Sydney County Council district were acquired on 28 December 1989 for $410 million. It is stated further that the premium on purchase was $129 million, which was written off as an extraordinary item. That is the record of the present administration in the transfer of transmission assets to county councils in that case. I have read the Minister's second reading speech presented in the Legislative Council on 13 October. The only reference in his speech to the unfortunate incident that occurred in 1990 - and we cannot be sure another similar incident will not occur - stated:

Assets are to be transferred from the Electricity Commission and PacificGrid without compensation.

On the face of it, I guess that is all right. The following sentence of the Minister's speech, however, stated:

If agreement cannot be reached on assets and liabilities to be transferred within six months of commencement of the Act, the Minister may direct that the transfer take place.

Illawarra Electricity Supply did not want a transfer of the so-called assets from the Electricity Commission in 1989-90 but it was certainly made to take those assets, at a ridiculous price. It is important to examine clause 5(2) of the bill, which gives the Minister great control. I have no doubt that when the honourable member for East Hills is Minister he will exercise his functions in a judicious manner. That time is not too far away either; it is a mere four months away. The bill gives no guarantee that the financial approach adopted by the Greiner Government, of which the Fahey administration is a follow-on, will not be taken again. Clause 5(1) states that the Minister may give the board written directions and clause 5(2) states that the board and the chief executive must ensure that the authority complies with any such direction. The only latitude the authority has is to request the Minister to review a direction. Obviously this is firmly in the Government's mind. It has covered its bases well. It has said it will set up a bureaucratic review mechanism. The bill states that a review may be requested if it is considered that:

(a) the Authority would suffer a significant financial loss as a result of complying with the direction; and

(b) the direction is not in the commercial interests of the Authority.

The Minister's decision is final; there is no comeback. The situation could become a disaster and a travesty of the financial management that occurred in 1990. As the honourable member for Wallsend pointed out, the second reading speech told us nothing at all. It was contradictory in parts, and we do not know what price will have to be paid for these provisions.

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Mr WEST (Orange - Minister for Police, and Minister for Emergency Services) [11.00], in reply: I respond briefly to some comments of members opposite. The honourable member for Wyong spoke of his concerns about the powers of direction of the Minister. They are exactly the same powers that the Minister has under the principal Act with regard to Pacific Power. Nothing different is being proposed.

Mr Crittenden: Illawarra and Sydney had to pay because of this.

Mr WEST: This has nothing to do with Illawarra and Sydney. This is about the powers of the statutory board. Those powers are being conferred on the statutory authority that will be established as a result of the legislation. Members opposite have spoken about assets that will be transferred and about the size of the organisation. They fail to appreciate that the legislation is enabling legislation. It is the structural legislation that will allow all assets to be transferred from the current subsidiary of Pacific Power to the full stand-alone statutory authority under this mechanism. It is important that the legislation is recognised for what it is. Comments were made about the concept of a deputy director. That is not a new concept. If the director of the board is away for any length of time on duties outside the country or is unable to attend board meetings for a certain time and a quorum is needed, the Minister may appoint a deputy for that period of time.

Mr Rogan: Are they appointed in other boards?

Mr WEST: Apparently the provision was inserted on the advice of the Parliamentary Counsel. There are precedents in other areas; it is not a new concept. Reference was made to what provisions may need to be included in the bill in relation to the environment. The new authority will be subject to environmental planning laws, as is Pacific Power. The rules will oversee the way in which the statutory authority complies with the law. Reference was made to the enterprise agreement between Pacific Power and its employees - probably one of the better examples of the way enterprise agreements are arrived at.

As the responsible Minister at that time, I did not become involved in the politics of the enterprise agreement. It was successful because it was an employer-employee negotiation. Pacific Power is a large organisation. The police enterprise agreement was finally resolved when I took the role of the Minister out of the negotiations and let the employer, the chief executive officer, negotiate with the employees. That is the way enterprise agreements should be conducted. I have been fortunate to be able to sit back and allow people to negotiate their problems and do a good job. The question of a staff-elected representative will undoubtedly result in a division between the Government and the Opposition during the Committee stage. I will not comment on whether the staff-elected representative on the subsidiary is performing his duties. I do not know and I do not want to be in the position of knowing, because I understand that staff-elected representatives on the boards of Pacific Power and the Sydney Electricity Commission work well.

However, there are times when such people could be put in a position of conflict when they are called upon to represent the union to which they belong. As a result of the negotiations that are taking place between the Government and the Opposition relating to the corporatisation of the Water Board it has been decided to move away from the concept of a staff representative towards the concept of the Minister approving a person from a panel of names submitted by the Labor Council. That would overcome the difficulties that may be experienced. Even the Opposition's amendment states that any person to be appointed to this position has to be approved by the Labor Council. The Government and the Opposition are not too far apart. The Government's proposal is a step in the right direction. I thank honourable members for their contributions to the debate and I commend the bill to the House.

Motion agreed to.

Bill read a second time.

Clause 16

Mr WEST (Orange - Minister for Police, and Minister for Emergency Services) [11.08]: I move:

No. 1 Page 8, clause 16 (2), lines 5-7. Omit all words on those lines, insert instead:

(2) The Board is to consist of 7 directors appointed by the Governor on the recommendation of the Minister. The persons appointed are to be selected for their relevant expertise and one is to be a person (not being an employee of the Authority) selected from a panel of 3 persons nominated by the Labor Council of New South Wales.

The Government believes this is the appropriate direction to take as a result of negotiations with the Opposition in respect of the Water Board corporatisation. This proposal will not put staff-elected directors in the difficult position in which they find themselves from time to time.

Mr ROGAN (East Hills) [11.09]: The Opposition will persist with its amendment as circulated, which will require the work force itself to be the body responsible for the election of a worker-elected board director. This person will not be selected from a panel but will be the democratic choice of the work force overall. This, we believe, is the appropriate way to handle such an appointment.

The principle of worker-elected directors has been accepted overseas for many years and has been shown to be of great benefit. I referred to many of the benefits in my contribution to the second reading debate and I shall not repeat them to the Committee. The Minister in another place in opposing the concept of the worker-elected director made the point that, because of the appointment by the work force, that person could be put in a position of conflict. The arguments of the Minister for Police have no validity. Worker-elected directors are fulfilling the obligations placed upon them. If a matter of conflict arises, the worker-elected director simply puts the position as he or she believes it relates to the work force.

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Similarly, if parliamentarians do not understand and reflect the viewpoints of the people they represent, at the end of the day they will cease to be members of Parliament; the electorate will see to that at the next election. The same principle applies with worker-elected directors. That person is charged with the responsibility to present to management, the senior level of the organisation, the views of the general work force. In this way the communication gap is overcome. The concept of worker-elected director has been quite successful. I realise, however, that some directors have had reservations.

The Chairman of Sydney Electricity, Mr Moyes, in discussions facilitated by the Government to brief the Opposition on the operations of the organisation, expressed the view that there was initial scepticism about the value of the contributions of worker-elected directors with regard to potential conflicts of interest. But he gave me to understand that, after some initial period, the concept appeared to be working quite well. Certainly the worker-elected board member of the Electricity Commission is fulfilling his role admirably. Obviously there will be periods of disagreement between the worker-elected director and other board members, as indeed there will be times when other members of the board will not be in full agreement. After all, it would be a strange board if every director agreed with every decision that was taken. Most disagreements can be talked through and worked out. If they cannot be worked out, a vote is taken and the majority decision prevails. It is as simple as that.

I do not understand the objection the Government has to the Opposition's foreshadowed amendment. My mind goes back to 1988 when former Minister Neil Pickard moved an amendment to the Electricity Commission Act, proposing that persons nominated for appointment as commissioners must have such managerial, commercial or other qualifications as the Minister considered necessary to enable the commission to carry out its functions. And who was the first appointment under that Act? Kathryn Greiner! I have nothing against Mrs Greiner; she is a very capable woman. But when I asked the Minister at the time what managerial, commercial or other qualifications Mrs Greiner had, the Minister was silent. There was never any answer to that.

During the soul-searching by the Liberals after the close call in 1991 it was generally conceded that the appointment of Mrs Greiner to the board was one of those acts that almost brought about the coalition's defeat at the 1991 election, and I believe would have brought about its defeat but for the rorts of ticks and crosses. As this amendment does not cover ticks and crosses I will not canvass that issue. When this amendment of the Government is defeated I foreshadow that I shall move the following amendment:

Page 8, clause 16, line 5. After "selected", insert "(except in the case of the staff elected director referred to in subsection (3))".

In the event that that amendment is carried, I shall move amendments 2 and 3 circulated in my name. The Opposition will vote against the Government's amendment because it believes that the work force should be given the right to appoint a director who will act in its interests rather than have a director appointed from a panel from which the Government may choose a person sympathetic to its views. The role of the worker-elected director of the Electricity Commission, Mr Leigh Brydson, has been a very positive one and I can think of no better example that would support the inclusion of the concept in this legislation. The Opposition will oppose the Government's amendment and press ahead with its amendment.

Mr MILLS (Wallsend) [11.20]: I appreciated the Minister's comment in reply that the two sides are not that far apart, but we are debating the distance between us. The question is who will represent the workers on the board. Will it be someone - as the honourable member for East Hills and the Opposition would prefer - elected by the workers, or will it be a nominee of the Labor Council of New South Wales? The Opposition has indicated its clear preference. Under the Government's proposal, in the energy nest of public agencies there would be PacificGrid with worker-elected board members and Elcom with a worker-elected board representative, but the new Electricity Transmission Authority would have a Labor Council nominee. There would be an inconsistency. If this is a different approach of the Government, it is a fairly recent one. As recently as January last year the board of the Hunter Area Health Service was re-appointed following the dismissal of the former board, and the Minister for Health appointed a worker-elected representative to that board. To everyone's surprise, the workers elected not a nurse but a doctor - one of the medical superintendents. The workers themselves made an interesting choice. That choice supports the Opposition's belief that, in the interests of decent work force representation on the board, workers should have responsibility for choosing their representative.

Mr J. H. MURRAY (Drummoyne) [11.22]: Obviously, there is a difference in terms of mechanism but no difference in terms of principle. There is a need for, and advantage in having, a worker representative on the board. It is thought good enough to provide a mechanism for an elected member on the Sydney Area Health Board, which works very effectively, as do area health boards throughout New South Wales. An appointed member of the Sydney Area Health Board is a psychiatric nurse, and a doctor has been elected to the Western Area Health Board. The Government has provided that mechanism, which has worked in a most satisfactory manner. Yet the Minister says that system cannot be used and that there must be a period of appointment. The board is appointed for five years. There are no problems of time or any other component which would prevent election of a board member. The Government has set up a mechanism through the Electoral Commission to undertake elections. The amendment foreshadowed by the honourable member for East Hills has been shown to be workable and, more important, will allow the work force to exhibit proper selection functions.

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Question - That the amendment be agreed to - put.

The Committee divided.

Mr Armstrong Mr W. T. J. Murray
Mr Beck Mr O'Doherty
Mr Blackmore Mr D. L. Page
Mr Causley Mr Peacocke
Mr Chappell Mr Petch
Mrs Chikarovski Mr Phillips
Mr Cochran Mr Photios
Mrs Cohen Mr Richardson
Mr Collins Mr Rixon
Mr Cruickshank Mr Rozzoli
Mr Debnam Mr Schipp
Mr Downy Mr Schultz
Mr Fraser Mrs Skinner
Mr Griffiths Mr Small
Mr Hartcher Mr Smith
Mr Hazzard Mr Souris
Dr Kernohan Mr Tink
Mr Kinross Mr Turner
Mr Longley Mr West
Dr Macdonald Mr Windsor
Ms Machin Mr Zammit
Mr Merton Tellers,
Ms Moore Mr Humpherson
Mr Morris Mr Jeffery

Ms Allan Mr Markham
Mr Amery Mr Martin
Mr Anderson Ms Meagher
Mr J. J. Aquilina Mr Mills
Mr Bowman Mr Moss
Mr Carr Mr J. H. Murray
Mr Clough Mr Nagle
Mr Crittenden Mr Neilly
Mr Face Ms Nori
Mr Gaudry Mr E. T. Page
Mr Gibson Mr Price
Mrs Grusovin Dr Refshauge
Mr Harrison Mr Rogan
Ms Harrison Mr Rumble
Mr Hatton Mr Scully
Mr Hunter Mr Shedden
Mr Iemma Mr Sullivan
Mr Irwin Mr Thompson
Mr Knight Mr Whelan
Mr Knowles Mr Yeadon
Mr Langton Tellers,
Mrs Lo Po' Mr Beckroge
Mr McManus Mr Davoren

Mr Baird Mr A. S. Aquilina
Mr Fahey Mr Doyle
Mr Kerr Mr McBride

Question so resolved in the affirmative.

Amendment agreed to.

Clause as amended agreed to.

Schedule 1

Mr WEST (Orange - Minister for Police, and Minister for Emergency Services) [11.30]: I move:

No. 2. Page 21, Schedule 1, line 23. Omit "punishable.", insert instead:

punishable; or

(i) in the case of a director selected from a panel nominated by the Labor Council of New South Wales (as referred to in section 16(2)), becomes an employee of the Authority.

Mr ROGAN (East Hills) [11.32]: The Opposition does not oppose this amendment as it is consequent upon the first amendment moved by the Minister. That amendment was passed and the Opposition accepts the decision of the House, but it reiterates that it is most appropriate to have an employee-elected representative on the board.

Amendment agreed to.

Schedule as amended agreed to.

Bill reported from Committee with amendments, and report adopted.