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- 8 June 2000
Independent Pricing and Regulatory Tribunal and Other Legislation Amendment Bill
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Page: 6904
Second Reading
Debate resumed from 31 May.
Mr BROGDEN (Pittwater) [11.07 a.m.]: I lead for the Opposition on this legislation and I do so on behalf of my colleague the shadow Minister for Energy, the Hon. Duncan Gay, in another place. He has principal responsibility for this legislation, on behalf of the Opposition, because the majority of the clauses refer directly to the energy industry and the Government's regulation of it. However, as shadow Minister for Sydney Water I have taken an interest in this legislation. Part of the brief of the legislation is to cover all government utilities. I indicate that the Opposition does not, in principle, oppose the legislation.
To that end we welcome its general direction. It is moving progressively towards a regulated general approach to government-owned monopoly utilities, recognising that Sydney Water, in its present form and in the short to medium future, will continue to operate as a monopoly on the supply of water and sewerage services to the people of Sydney, the Illawarra and the Blue Mountains. In contrast, the energy industry is entering into a new phase in competitiveness. However, government-owned entities recognise the role of the Independent Pricing and Regulatory Tribunal [IPART], a role commenced by the Greiner Government and enhanced by the Fahey Government. It is enhanced again today by this legislation, which receives the support of the Opposition.
As I have indicated, the bill is moving progressively towards the regulator general approach, which was adopted rigorously in Victoria under the Kennett Government and which continues under the present Government. This approach recognises that government utilities need to be regulated aggressively by the Government, particularly as they operate in a predominantly government-owned or monopoly environment. Therefore, it is important that the central regulator—in New South Wales, IPART; and in Victoria, the regulator general—have strong and independent powers. The Minister will recall that the Opposition had serious concerns about the present operating licence of Sydney Water Corporation.
Mr Yeadon: They were not serious concerns, they were nonsense.
Mr BROGDEN: They were serious concerns, many of which the Minister has now addressed. The House would be aware that at that stage the Minister was unwilling to talk to the Opposition about its concerns. All we sought was greater independence and a greater distance between the Minister and the licence regulators of Sydney Water Corporation. We were disappointed with the Minister's attitude. He had to be dragged kicking and screaming to the table by the crossbenchers of the Legislative Council. He came to heel in the end, only because he understood that the Opposition was serious in its intent when it moved a motion to disallow the operating licence in its previous form and to ensure that the Government introduced a fairer operating licence for Sydney Water Corporation.
When one considers that the operating licence is an all-powerful document that Sydney Water must abide by over a five-year period, the Opposition was acting responsibly to fight hard and to ensure that the Government at all times did the right thing. This legislation makes IPART the independent regulator of utilities in New South Wales. It formalises the proceedings for complaints against public authorities if it is considered they have not adhered to competitive neutrality principles as required under the Competition Principles Agreement. The first part of the bill deals with IPART. It confers on IPART certain regulatory functions relating to gas, electricity and urban water utilities. The three major aspects of the bill, as it pertains to IPART, are: improving the regulatory framework, increasing the independence of utilities' regulation in New South Wales and ensuring compliance.
As to licensing, IPART will make recommendations to the Minister in relation to the granting, transfer or cancellation of a licence, sanctions and remedial action, and the monitoring of and reporting to the Minister on compliance with a licence. The Minister will establish protocols in consultation with IPART as to the procedures relating to the seeking or making of recommendations to the Government. It is important, in this sense, that the role of IPART, as a licensing body for the government utilities it will regulate, be increased. As to auditing, the legislation will ensure that the relevant agency complies with the conditions imposed on it by its licence. This will apply to electricity, Hunter Water, Sydney Water and the Sydney Catchment Authority, but not to the gas industry.
IPART will assume the role of the current Licence Compliance Advisory Board, along with its powers and reporting obligations. The bill will seek to establish a Utilities Licensing Auditing Advisory Committee, which will advise IPART on the scope and methodology of the audits. The bill also allows for day-to-day monitoring of utilities and may impose a penalty of $10,000 on an agency that knowingly contravenes a licence. As part of Sydney Water reforms, all licences will be subject to more regular checks of compliance with IPART's determination. As to the energy industry, the current regulatory framework for New South Wales is within the Department of Energy. The Coalition is pleased to see that this specific role will be transferred from the Department of Energy to IPART, along with its staff. We are pleased that IPART, in gaining this new power, will receive the budget allocation from the Department of Energy and that it is revenue neutral.
The bill makes changes to the regulations of Sydney Water in light of the McClellan inquiry. Once again, we are pleased to see that, at the Opposition's insistence, an independent licence review body and an independent licence regulator are in the operating licence. We remain concerned, however, with the definition of "licence review bodies" in clause 1.1 of the Sydney Water operating licence, which gives the Minister administering IPART the discretion to take the licence review functions away from IPART and give them to "a person". In our negotiations with the Government about six months ago we expressed our concern that the Minister could determine that IPART was too busy to undertake the audit functions and appoint another body to do so. The Coalition contends that determination that IPART is too busy to undertake its responsibility is not the role of the Minister but the role of IPART. If IPART determines it is too busy, it has its role to contract an independent person to fulfil that responsibility. It is not for the Minister to determine that IPART is busy, and it is certainly not for the Minister to determine that another person will constitute the review body.
The second part of the bill refers to competitive neutrality and aims to establish a compliance mechanism to deal with allegations of failures on the part of public authorities that are public trading agencies to comply with competitive neutrality principles. It provides for a competitive neutrality complaints mechanism as required under the Competition Principles Agreement. The Coalition notes that IPART will act as a complaints body for State public authorities and will conduct private investigations and make recommendations to the Minister, except in relation to the following: first, tendering, which will be considered by the State Contracts Control Board; and, second, local government, where complaints will be dealt with by the Department of Local Government. We note also that the bill exempts the Freedom of Information Act in accordance with other IPART investigations.
As I said at the commencement of my speech, the Coalition will not oppose this legislation. We see it as progressive legislation, providing greater independence to the regulation of government-owned instrumentalities and utilities in New South Wales. It is an important step forward. Most importantly, we see that it is philosophically moving towards the concept of an all-powerful, independent, well-resourced regulator general who can bring to heel these instrumentalities when they fail to comply with their licence obligations. It is important that the public has confidence in this process. It is important that if we continue down this path—one which the Government and Opposition inevitably support—of corporatised government entities that we have a strong and independent body. Without that, the public will not have confidence in them.
The public must have confidence in the independent body. They must know that Sydney Water, for example, does not test its own water. They must know that the Minister responsible for Sydney Water does not appoint a person to regulate or review its licence. They must know that this independent body, which has respect in the community and a good track record, can fully implement the community's concerns. We are pleased that has been taken a step further with this legislation. As an individual member and as the shadow Minister for Sydney Water, I am pleased with the relations I have had with IPART over the past 15 months. Its officers are impressive and have an understanding of the issues. This legislation will give them sharper teeth to act independently and to ensure that utilities fulfil their licences.
It is essential that the public has confidence that, if the Government no longer fully operates its utilities in a direct sense on a daily basis through the Minister and the Executive Government, an independent body will do it. If government utilities are put on a commercial footing, the very nature of them changes. In that respect they have a commercial imperative—the energy sector and the water sector will return a profit to the Government—and they depart from the traditional role of government agencies: to deliver a service without a commercial imperative. When that commercial imperative is inserted into the agenda, it must be balanced by an independent regulator. That was the philosophy of the Greiner Government, which established IPART. It is pleasing to see that that continues to be the philosophy of this Government, supported by the Opposition.
The Coalition is very open to further discussion with the Government on the concept of a regulator general. We see that as the right way to move. We regard Victoria as a very successful model in that sense. Anecdotally I am aware of incidents in which the regulator general in Victoria has required electricity suppliers to replace toasters because of energy surges or blackouts in the neighbourhood. The Minister indicates that that is the sort of thing IPART can do. We are pleased to hear that. The community has to have that confidence that if the toaster blows up, if the kettle fuses out, if the water supply is inadequate or not clean, or if the sewerage supply is inadequate an independent arbiter—a middleman, somebody fairly close to the middle—will do the right thing by them, defend their interests and seek to ensure that they are properly compensated for whatever losses they might suffer. I am sure that my colleague the Hon. Duncan Gay, the shadow Minister for Energy in another place, will add to my comments when this bill comes before the Legislative Council.
Mr ANDERSON (Londonderry) [11.21 a.m.]: I support the bill. In particular, I support the move by the Government to put in place a stronger regulatory regime for the State's water and energy utilities. I am pleased to see that the Opposition supports the proposed amendments, because the Independent Pricing and Regulatory Tribunal [IPART] is recognised as having developed a higher level of expertise in its role of determining prices for the delivery of services by government monopolies in New South Wales. As honourable members are aware, IPART also undertook community consultation last year during its consideration of recommended terms and conditions for the Sydney Water operating licence.
The bill proposes a three-pronged approach to regulation of water and energy utilities, comprising licensing, monitoring and auditing in addition to IPART's current pricing powers. New powers relating to licensing and monitoring will be given to IPART. Existing auditing powers of the licence regulator for water and the Licence Compliance Advisory Board for energy are to be transferred to IPART. As a package these three initiatives will also provide IPART with statutory sanctions to ensure higher levels of compliance with the appropriate operating licences and authorisations. In addition the package provides extra incentives for utilities to comply with their respective licences.
The package as a whole is a significant step forward for utility regulation in New South Wales. For example, the new terms and conditions of the Government's licence for Sydney Water includes several new provisions. However, the current regulatory framework relied upon retrospective annual audits of the water and energy corporations. Ongoing daily monitoring, with the capacity for enforcement as envisaged in the bill, will ensure better compliance with the tough new licence. IPART's capacity to enforce a provision contained within a licence is significantly enhanced by the ability to impose a monetary penalty when a utility knowingly contravenes its licence in a serious or continuing way.
It should be noted that such penalties will not be issued without due process, and an appeal process to the Administrative Decisions Tribunal will be established. IPART will also be obliged to notify the utility of a proposed action where a licence is contravened, and to consider any submission by a utility in relation to a proposed action. Another new component is the establishment of the proposed Utilities License Auditing Advisory Committee. The role of the advisory committee is to advise IPART on the scope of its annual audits. The advisory committee is also a means to maintain input by the community into the audit process. The advisory committee will provide IPART with independent advice, with particular focus on environmental and consumer protection.
With a wider range of expertise, the members of the advisory committee will bring to IPART's attention particular issues that are worthy of attention in the annual audits. Advice provided by the advisory committee will be considered by IPART as it undertakes its annual operational audit of the utilities. Following the annual audit IPART will provide a report to the Minister concerning the utility's compliance. As is currently the case, the report will be tabled in the Parliament. What is most significant is that water and energy customers can be confident that they are receiving the best possible water and sewerage service. The package contained within the bill contributes to a strengthened regulatory framework to deliver better outcomes for customers. I urge honourable members to support the bill.
Mr YEADON (Granville—Minister for Information Technology, Minister for Energy, Minister for Forestry, and Minister for Western Sydney) [11.27 a.m.], in reply: As the second reading speech indicated, the bill assigns to the Independent Pricing and Regulatory Tribunal [IPART] licence auditing and monitoring functions. IPART will conduct annual and spot audits of the water utilities, monitor and report on electricity licensees, and monitor gas licensees. That is a substantial improvement on the current arrangements, because IPART will be an independent auditor, which is consistent with the recommendations of the recent Sydney Water inquiry. IPART will also have the resources to conduct rigorous audits and ongoing monitoring. The Government and the community can be confident that utilities are complying with their licences, and that any non-compliance will be detected early and consequently remedied.
IPART will bring to auditing and monitoring all of its considerable expertise in conducting investigations. It will be able to obtain information and provide an independent and thorough report. IPART will also have the benefit of advice from the environmental consumer and other representatives currently involved in the auditing process through the new Utilities Licence Auditing Advisory Committee. IPART will be able to combine its considerable expertise with the expertise of the advisory committee to deliver rigorous auditing and monitoring as demanded by the community, and expected by the Government.
I note the Opposition's support for this important bill. However, I would like to deal with Sydney Water's operating licence. Although I note the issue raised about the licence, the bill is not about the licence conditions for any of the utilities; it is very much about the new administrative framework and regime; it is about improving and ensuring compliance; and it is about providing the best outcome for the community through a stronger framework. That is not to say that licensing issues and conditions will not be looked at over time. However, I emphasise to this House and to the other place that this bill is very much about that administrative framework
It is my understanding that members in the other place have expressed concern that the bill introduces competitive tendering through the back door or in some clandestine way. I confirm to the House and place on the public record that this bill has nothing to do with competitive tendering. A component of this bill addresses competitive neutrality, but in no way is that to be confused with any sort of competitive tendering issue. I assure honourable members in this place and in the other place that competitive tendering is irrelevant to this bill. This bill neither facilitates competitive tendering nor impedes it. As I say, it is irrelevant to the bill. I thank the honourable member for Pittwater and the honourable member for Londonderry for their contributions to the debate. As the honourable member for Pittwater has said, the Opposition does not oppose the bill. I therefore commend the bill to the House.
Motion agreed to.
Bill read a second time and passed through remaining stages.
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