House of Representatives

Second Reading Speech

Mr Ian Macfarlane (Minister for Industry, Tourism and Resources)

I move:

That the bill be now read a second time.

A secure, reliable and affordable energy supply is a fundamental input to Australia's economic wellbeing. For this reason, it is critical that the regulatory framework governing our energy sector is sound. The Ministerial Council on Energy is the peak energy policy body in Australia and has made significant progress in its extensive energy market reform program.

In improving the operation of Australia's electricity and natural gas markets, the Ministerial Council on Energy takes advice from many sources. A key input to its work in natural gas has been the Productivity Commission review of the gas access regime commissioned by this government. The regime governs the regulation of services provided by means of natural gas pipeline infrastructure, and operates through a cooperative legislative scheme involving the Commonwealth and all of the states and territories.

The primary aim of the review was to examine the extent to which the existing gas access regime:

•

balances the interests of service providers and gas pipeline users;

•

provides a relevant framework that enables efficient investment in new pipeline infrastructure; and

•

assists in facilitating a competitive market for natural gas.

•

The commission found that changes to the regime could assist in the achievement of these goals.

The majority of the Ministerial Council on Energy's policy responses to the recommendations of the Productivity Commission will be implemented through further amendments to the gas access regime which are intended to come into force in 2007. However, in seeking to ensure there is ongoing efficient investment to meet Australia's growing energy demand, the ministerial council wishes to send a positive signal to market participants as soon as possible.

The ministerial council therefore agreed to adopt and build on some of the commission's key recommendations ahead of the introduction of the new legislative regime. The ministerial council decided to implement in the existing gas access regime two specific incentives aimed at encouraging investment in greenfields pipelines. Legislation implementing these incentives was introduced to the South Australian parliament on 11 May 2006.

The first incentive allows the proponent of a proposed pipeline to seek a full exemption from regulation under the gas access regime for the pipeline's first 15 years of operation. The second incentive allows proponents to seek an exemption from price regulation for a proposed international transmission pipeline which will deliver foreign gas to Australia. The key driver for this incentive is the importance of securing Australia's long-term energy security needs, while recognising the additional complexity of international infrastructure projects.

For both incentives, an independent body, the National Competition Council, will undertake an assessment of market power and public interest matters before the relevant minister makes a decision on whether to grant the incentive. This will ensure the incentives are granted in the appropriate circumstances. Most importantly, the incentives will provide the necessary regulatory certainty for investors where market circumstances indicate the demand for potential new developments.

The amendments I am introducing today will further promote the opportunities to gain that regulatory certainty and thereby enhance the benefits created by the gas access regime. They have the full support of my state and territory colleagues on the Ministerial Council on Energy.

In particular, the Energy Legislation Amendment Bill 2006 implements key changes to Commonwealth legislation to ensure that the incentives can function properly. Firstly, they remove the possible application of regulation under part IIIA of the Trade Practices Act to a pipeline granted one of the incentives. Secondly, they ensure that the gas access regime can remain a certified effective access regime, notwithstanding the availability of these incentives.

Finally, I am introducing some machinery changes to the gas access regime and the electricity regime. These include:

•

amendments to the Trade Practices Act and the Gas Pipelines Access (Commonwealth) Act which update the provisions which allow the National Competition Council and Commonwealth minister to have functions, powers and duties imposed on them under the state and territory gas access regimes; and

•

amendments to incorrect references in Commonwealth legislation to parts of the national electricity law.

I commend the bill to the House.

Debate (on motion by Mr Gavan O'Connor) adjourned.