- Home
- Hansard & Papers
- Legislative Council
- 9 May 2002
AGL Corporate Conversion Bill
Printing Tips |
Print selected text
| Full Day Hansard Transcript
« Prior Item |
Item 36 of 52
| Next Item »
Page: 1868
Second Reading
[Debate resumed.]
Ms LEE RHIANNON [3.10 p.m.]: The AGL Corporate Conversion Bill removes a number of corporate governance restrictions from the AGL and prepares it for corporatisation. This is a matter of concern for the Greens and we do not support the bill. The Greens are concerned that benefits argued by the Government do not outweigh potential costs to the community and to our environment. This is yet another example of Labor's infatuation with market solutions and the corporate culture. Members would be aware that many times in this House I have spoken of the damaging influence donations from corporate bodies are having on our political parties. We see this bill within that context. This type of legislation is introduced too often.
The AGL remains the monopoly owner of the pipes that reticulate gas to households and businesses throughout Sydney. Although, in theory, open access provides competition for gas bills, the extent to which this works in reality at the retail level is yet to be tested. In essence, Labor and Coalition governments alike have embarked on a massive experiment, and the subjects of those experiments are the people of Sydney. While the marketeers, the advertising firms and the corporate executives stand to become even wealthier than they already are, there is little or no experience to prove that the people of New South Wales will be better off. Indeed, judging from experience with privatised and deregulated electricity distribution and retailing in Victoria, there is much to be feared, especially by low income earners and those who care about the environment. The households and businesses of New South Wales are being exposed to significant risks of higher prices and lower quality of service with no better justification than the cant of the neo-classical economic fundamentalists who dominate the Treasury and, through it, this Government.
The Hon. Duncan Gay: This is not a privatisation bill. The AGL is already privately owned.
Ms LEE RHIANNON: It is already privately owned but you know that it can go one step further with all aspects of the industry going over to the private sector. The Deputy Leader of the Opposition has expressed pride that his party is standing up against the privatisation of the electricity industry, so I think he knows that this is a worry. The AGL is in a unique position in New South Wales as the private enterprise owner of essential infrastructure, the management of which exhibits large social and environmental implications. The Greens argue that protection of the public interest thus should not be left to market forces, to the accumulated consequences of mass individual self-interest.
It is interesting that the Minister's second reading speech uses the corporatisation of the erstwhile State Bank of New South Wales as an example of the process planned for the AGL. I have to say that this is a poor choice because the State Bank no longer exists, having been swallowed up by corporate giants. Its disappearance has been part of a larger trend in the run-down of banking sector services to the community. The Greens are worried that the same fate could befall the AGL. The Greens remain concerned that a dominant player in the gas industry is being handed over to the free market regulation model without appropriate protections being put in place for consumers or the environment.
In particular, we believe that the Government has an obligation to ensure that gas prices reflect not only people's ability to pay but also the environmental consequences. These are the safeguards that we think should be in place. Balancing the needs for affordability, particularly for low income earners, with environmental performance is a crucial yet complex task. It is naive in the extreme to believe that this could be achieved without deliberate and intentional Government intervention in the operations of a monopoly owner of the industry. Some of this could have been managed if the Government had done as it did in the 1994 Sydney Water Act, that is, introduced triple bottom-line accounting.
The Hon. Duncan Gay: This company is not a monopoly owner any more. It has not been for a long time.
Ms LEE RHIANNON: That does not mean that triple bottom-line accounting could not be used. Section 21 of that Act specifies that the objectives of the corporation include social, environmental and economic considerations. Section 22 ensures that these objectives are implemented in a meaningful way. Triple bottom-line accounting, while no panacea for the problems created by monopoly private enterprise infrastructure ownership, remains a useful tool for ensuring that there is some consideration of objectives beyond the simple maximisation of wealth for the shareholders. I would be interested to hear the Minister respond in relation to the possible use of triple bottom-line accounting.
In the case of the gas industry, the social and environmental consequences of decisions made by the AGL are significant. It is a matter of regret that this opportunity has been lost. The Greens and the environment movement hope that the Government will revisit this issue in the near future. The Greens do not support the bill. While the AGL's current regulatory structures and arrangements are less than perfect, this bill is based on a false adherence to market ideology and it does not provide adequate social or environmental protections that are needed if we are to ensure that future generations are able to enjoy the pleasures of this State as much as we do.
Reverend the Hon. FRED NILE [3.16 p.m.]: The Christian Democratic Party supports the AGL Corporate Conversion Bill. The main purpose of the bill is to modernise the AGL by regulating the administration of its corporate affairs and bringing the legal framework under which the AGL operates into line with that of other privately owned companies. If nothing is done the AGL will be disadvantaged, and in the long run this will affect all consumers who receive gas through the AGL. The bill will put the AGL on the same legal footing as its competitors in order to facilitate an open and competitive energy market. All members should agree with that in principle. The AGL was formed in 1837 as a gas utility under the Australian Gas Light Company Act. Therefore many of the laws and regulations applying to it are now out of date. On 10 April the AGL wrote to me about the bill. Mr Ian Woodward, Group General Manager Corporate Development, stated:
The Bill has been prepared in consultation with AGL and has been endorsed by the AGL Board.
His letter also stated:
AGL is currently a body with limited liability for its members, established under NSW legislation dating back to 1837. It is a registered body under the Commonwealth Corporations Act, but is not an incorporated body.
The objectives of the corporate conversion process is for AGL to become an ordinary public company fully regulated under the Commonwealth Corporations Act with a modern constitution, rather than one with a constitution made up of a mixture of NSW legislation, regulations and by-laws passed by the AGL shareholders.
The corporate conversion process only deals with AGL it as a legal entity—it will make no changes to the economic, consumer or environmental regulations affecting AGL as an energy supplier in NSW, or the regulatory framework applying to the NSW energy industry.
The corporate conversion process will result in the removal of the anachronistic and obsolete shareholding limitations and scaled voting mechanisms which currently apply to AGL.
The Bill has been developed to seek to ensure that the corporate conversion process does not give rise to any unintended or adverse consequences for AGL, its shareholders, the NSW consumer or the NSW Government. Whilst this has resulted in some complexity in the Bill, the principles remain clear—that AGL be converted into a modern body corporate governed by the laws applying to ordinary public companies as well as reinforcing the competitive energy market principles applying to the NSW energy industry.
We support the bill and commend the AGL as it serves the consumers of New South Wales.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS [3.20 p.m.]: The Democrats are a little concerned about some aspects of the AGL Corporate Conversion Bill. We note that a letter from AGL states that there will be no difference to the regulatory framework if the conversion takes place. No doubt that is true in the short term. However, as was shown following the privatisation of the supply of electricity in Victoria, the players in the market make a lot of difference to how the Government is able to regulate. However, there has been a general change from the interests of consumers to the interests of shareholders. The water industry and some public transport utilities are still in government hands, although Sydney Water is now a statutory corporation.
In Victoria the electricity industry has been privatised. Privatisation has not yet occurred in New South Wales—a position that may change despite assurances to the contrary. When utilities are moved from the public sector to the private sector there is a noticeable difference in service delivery. Banks were partly owned by government, and had the Government of the day wished it could have controlled bank behaviour to ensure quality services at a reasonable price. In the insurance industry, there was a Government-owned insurance company—
The Hon. Duncan Gay: Point of order: My point of order is relevance. The member is giving a dissertation on the evils of privatisation. This bill is not about privatisation—AGL is not owned by the Government. The bill is about the change of corporate structure of a privately owned company. I request that you draw the member's attention to that fact. If he persists, I ask you to rule him out of order.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS: To the point of order: In their usual dimwitted way members of the Opposition fail to see the relevance of my developing the philosophic line of the interests of the shareholders versus the interests of the corporate sector in a changing corporate structure. In a couple of minutes I will get to the point, but I would like to develop my philosophical argument without having my chain of thought interrupted by those who are unable to see where it might lead.
The DEPUTY-PRESIDENT (The Hon. Helen Sham-Ho): Order! I ask the member to get to the point quickly. No point of order is involved.
The Hon. Dr ARTHUR CHESTERFIELD-EVANS: I was speaking about the differences that the privatisation of electricity had made to its regulation. I had spoken about the banking and insurance sectors. The Government previously owned an insurance company and knew about the actuarial figures. The Government had an opinion, it had expertise in the regulation of premiums, and was able to have input into that activity. But the Government no longer has that expertise, because it no longer has that company, and it could become a player in the market and force others to compete with it. Therefore, we are currently at the mercy of people in Zurich about whether we have doctors in our hospitals or whether our children are able to use playgrounds—which are matters involving insurance. All that may seem irrelevant, as the Opposition would like us to believe.
I am well aware that AGL is a private company. It developed from a company having a limitation of 5 per cent shareholding to one that will be open to shareholders buying any number of shares, as happens with any listed company. That will mean that many people will be able to buy its shares and, therefore, its share price is likely to rise. I am not a whiz about the stock market; but even I know that if people are able to buy larger parcels of shares in a company, the price of those shares may well be affected. If that is the case, there may be also an effect on the price charged for gas. Technically that could be included in the corporation's regulatory framework.
However, this company is almost a monopoly; it has the lion's share of the Sydney gas market. The corporation has been restructured so that there are what are called paper walls between its retail and wholesale operations. Theoretically, the separation of the retail and wholesale operations could allow the Treasurer to say that there is competition in the gas market, and certainly there is—but it is a market with a dominant player. The removal of the 5 per cent shareholding may make a difference to the ownership—it would be unlikely that it did not—and that may make a difference to the company's corporate behaviour and its regulatory framework and the way it is implemented.
While I agree it is preferable to have uniformity in the way that corporations are listed, I would not object to the bill at a philosophic level. I flag, however, that the public interest needs to be taken into account. Changes to the insurance and banking markets included full privatisation of those activities. What needs to be taken into account, however, is shareholder interest versus consumer interest in a political and economic framework. The Democrats urge the Government to ensure that the changes will provide more corporate freedom and get rid of exemptions. It should diligently look after the interests of consumers in a framework of changing power relativities between shareholders and consumers that accompanies such legislation.
The Hon. RICHARD JONES [3.29 p.m.]: I support the legislation. I do not have the same feelings as some others about the corporate conversion of AGL. It is interesting to note the origins of the company, which was set up in 1837 to light the streets of Sydney. In those days there were gas lights in the streets. It was a very different world. Many things have changed. One of my colleagues intended to move amendments to the legislation dealing with the triple bottom line but, unfortunately, the amendments have not been prepared. Had the amendments been moved and agreed to, they would have ensured that AGL had cognisance of what is now called the triple bottom line.
Peter Duncan, the Chief Executive Officer of the Shell Company of Australia, recently attended Outlook 2002 and stated that companies that take a broader role in society also perform better financially. He said that in today's competitive global economy many businesses are looking beyond short-term financial considerations and are delivering against the triple bottom line of social and environmental impact, as well as economic performance. He said that the responsible behaviour of companies is becoming an important influence in the choices of consumers and employees. Companies that are able to measure, digest and report on a wide range of financial and non-financial measures are more than likely the ones that know the workings of the company best and, therefore, what is driving change within the business and external environment. In the long run this will benefit profits, the environment and our community. His comments are very forward thinking.
Around the world the Shell Company is looking very much more at the triple bottom line, which is now common currency in Europe and America. Unfortunately, we are dragging our feet in recognising the importance of the social and environmental behaviour of companies, which also financially benefits companies. The director of the Eco Fund, Susan Gosling, said that investors are coming to the conclusion that certain ethical issues and, in particular, factors relating to environmental sustainability are an increasingly important determinant of the financial success of business and, hence, of investment returns. She said that positive decision-making criteria could assist fund managers to select companies with a superior social or environmental performance and potentially superior returns. A recent review concluded that the effects of socially responsible investment screening on the portfolio returns is at least not negative, and the majority of recent studies indicate that the effect is positive.
In other words, if AGL starts looking at the triple bottom line—and I believe it will—it will find that profits and investor confidence will increase. It would probably be a very good company in which to invest. I hope that it stays in Australian hands after its conversion. Recently, the Australian Conservation Foundation highlighted a report by Australian Collaboration that reveals that, unfortunately, we are a bit slow in adopting the triple bottom line. Emeritus Professor David Yencken, author of the report, said that regular, comprehensive and independent reporting of social, cultural, environmental and economic trends is of fundamental importance to the future of our nation. Without triple bottom line economic, social and environmental reporting there is an inadequate basis for good decision making, not only by government but by many other groups seeking to plan effectively.
Australian Collaboration is a group of leading community, consumer and environmental organisations including the Australian Conservation Foundation, the Australian Council of Social Service, the Australian Consumers Association, the Australian Council for Overseas Aid, the Aboriginal and Torres Strait Islander Commission, the Federation of Ethnic Communities Council of Australia, and the National Council of Churches in Australia. Many organisations are aware of the importance of the triple bottom line. I note that, as result of a motion in this Chamber, the triple bottom line is incorporated in the objects of Sydney Water. The truncated principal objectives of the corporation are to be a successful business, to protect the environment and to protect public health. Section 22 of the Act, under the heading "Implementation of principal objectives", provides:
(1) In implementing the principal objectives set out in section 21, the Corporation has the following special objectives:
(a) to reduce risks to human health,
(b) to prevent the degradation of the environment.
I am pleased to say that State Forests, which has changed radically from when I first came into this House some 14½ years ago, is also considering the triple bottom line. It is doing some very interesting work on a number of issues. In the Bush Telegraph State Forests stated that there is a growing trend among organisations toward measuring and reporting the performance against the triple bottom line, a catchphrase for what is ultimately sustainable management. It went on to say that a balanced triple bottom line is one that successfully maintains economic prosperity, environmental quality and social responsibility. Accounting for, and reporting on, the triple bottom line requires an organisation to monitor performance with measures that are transparent, verifiable and meaningful. In 2001 State Forests established a new staff group to investigate triple bottom-line accounting and reporting options.
One of the group's first projects was to develop a triple bottom line, or sustainability report, outlining State Forests performance in sustainably managing a range of environmental, social and economic values. Wyong Shire Council has adopted the practice and, apparently, Westpac is involved in a triple bottom-line stocktake. A report in ethicalinvestor by Mr Shaun Mays, the Westpac Commercial Services Managing Director, has called for the better use of information already available within companies to measure environmental, social and economic performance. Large corporations and corporations such as Wyong Shire Council and State-owned corporations are already involved. After the conversion takes place I will urge AGL to have a close look, as these other large corporations are doing, at the triple bottom line to ensure that it is not in business just for the profits, but also for social and environmental reasons. I believe AGL will do that in any event.
The Hon. Dr PETER WONG [3.36 p.m.]: The Unity Party will not oppose the AGL Corporate Conversion Bill. I appreciate that the legislation will allow AGL to restructure and modernise its corporate and management structure. I appreciate that, as a public company, AGL should be able to operate on a level playing field with its competitors. I note with interest the history of AGL. The legislation was intended to ensure that AGL did not come under the influence of one owner. That is probably not a bad idea. I am concerned that, regardless of the safeguards, the removal of the 5 per cent on shareholdings in AGL will allow it to be taken over by another company, or companies over time, resulting in a greater concentration of ownership in the energy industry. AGL is the only gas provider for the people of Sydney. I hope that it continues to provide a high standard of service under its corporatised structure. I trust that the Energy and Water Ombudsman will have adequate power and resources to continue its watchdog role.
The Hon. CARMEL TEBBUTT (Minister for Juvenile Justice, Minister Assisting the Premier on Youth, and Minister Assisting the Minister for the Environment) [3.37 p.m.], in reply: I thank all honourable members for their contributions to the debate. The AGL Corporate Conversion Bill deals with AGL as an entity, as was pointed out by a number of members. It is about the corporate structure and arrangements governing one of New South Wales oldest businesses. I make it very clear that the bill is not about changing the regulatory framework for the electricity and gas sectors, nor will it alter the consumer and environmental protections, or the economic regulation of the industry. A number of members seemed to think that was the case. Ms Lee Rhiannon raised some specific issues that are outside the auspices of the legislation. All energy companies, including AGL, are regulated by a series of State and Commonwealth statutes. These changes affect AGL as a corporate entity.
There is no proposal to make changes to the economic consumer or environmental regulations affecting AGL as an energy supplier in New South Wales. The bill is also important in achieving a level playing field between AGL and other energy companies in a competitive New South Wales energy market, and ensuring that AGL is treated in the same way as other companies that are regulated in the energy sector. Although the legislation deals with complex, corporate, regulatory issues, the policy is simple: AGL will become the same as any other company participating in the energy sector. This is a good outcome for AGL, its shareholders and consumers because it reinforces our competitive market. Redundant and inappropriate provisions will be removed to better reflect the reformed gas, electricity and utilities markets.
A number of members made reference in one way or another to triple line reporting, so it is worthwhile addressing that issue. Whilst it is important that all corporations be conscious of the environmental impact of their activities and conform with the changing expectations of the community, the Government does not believe that it is appropriate for this legislation to compel a single company, that is AGL, to undertake triple bottom-line reporting. As honourable members will recall, one of the key purposes of this bill is to remove company-specific regulation and to place AGL on the same footing as its competitors and other listed companies. Placing an additional requirement on AGL through this bill would be inconsistent with this objective.
The Government understands, however, that peak environment groups have raised these issues with some members—in particular AGL's demand management initiatives, environmental targets and the environmental sustainability of its activities. The Government has referred these issues to AGL's attention. AGL has advised the Government that it does report on some social and environmental issues already and a great deal of information is publicly available on its web site. For example, AGL already undertakes a social responsibility reporting mechanism, has long adopted a health safety and environmental policy for its employees, and has a customer council to overview its relationship with its customers. AGL has further advised the Government that it is prepared to meet with the peak environmental groups and discuss the issue of reporting by corporations on the triple bottom line. I commend the bill to the House.
Motion agreed to.
Bill read a second time and passed through remaining stages.
Last modified 05/12/2007 16:37:27 : Update this page