Response to issues paper exempt selling regime madeleine kingston

Comment MK

It is unclear whether it is JGN’s intent to apply these considerations to the water meters and hot water flow meters that they inaccurately claim are part of the “distribution network.”

The National Gas Rules in place from May 2010²³⁰ includes the following metering definitions amongst others

meter means a device that measures and records quantities of gas by reference to volume, mass or energy content.

metering means measuring and recording the quantity of gas by reference to volume, mass or energy content.

metering communications procedures means the Procedures made under rule 308.

metering data means the data obtained or derived from a metering installation.

metering database means the database kept by AEMO pursuant to rule 308.

metering installation means the meter and associated equipment and installations installed as required under Division 3, Subdivision 4 for connection points.

metering point means the point of physical connection of a meter to a pipeline.²³¹

metering register means a register of information relating to metering installations kept by AEMO pursuant to rule 311 and forming part of the metering database.

metering register procedures means the Procedures made under rule 311.

metering substitution threshold means the metering error tolerance equal to twice the uncertainty limit fixed in accordance with the metering uncertainty limits and calibration requirements procedures.

metering uncertainty limits and calibration requirements procedures means the Procedures made under rule 297.

minimum exposure – See rule 256.

MIRN means metering installation registration number.

I now refer to Div 1 Part 9 Preliminary 69, of the published NGR Price and revenue regulation, p49 in relation to capital base, capital expenditure and confirming capital expenditure as follows. All of these definitions relate to gas pipelines not water infrastructure of any description. I have been unable to locate any reference at all to water meters or water infrastructure or their maintenance or replacement, including in terms of capital or operating expenditure.

“In this Part:

capital base, in relation to a pipeline, means the capital value to be attributed, in accordance with this Part, to pipeline assets.

capital expenditure means costs and expenditure of a capital nature incurred to provide, or in providing, pipeline services.

conforming capital expenditure means capital expenditure that complies with the new capital expenditure criteria.”

depreciation means depreciation of the capital base.

new capital expenditure criteria mean the criteria stated in rule 79.

non-conforming capital expenditure means capital expenditure that does not comply with the new capital expenditure criteria.

operating expenditure means operating, maintenance and other costs and expenditure of a non-capital nature incurred in providing pipeline services and includes expenditure incurred in increasing long-term demand for pipeline services and otherwise developing the market for pipeline services.

pipeline assets, in relation to a pipeline, means capital assets that constitute the pipeline or are otherwise used by the service provider to provide services.²³²

tariff class means customers for one or more reference services who constitute a tariff class under a full access arrangement.

I now refer to the operational National Gas Rules, Division 2 Access arrangement information relevant to price and revenue regulation

72 Specific requirements for access arrangement information relevant to price and revenue regulation

(1) The access arrangement information for a full access arrangement proposal (other than an access arrangement variation proposal) must include the following:

(a) if the access arrangement period commences at the end of an

None of these provisions appears to relate to expenditure incurred for water meters of their replacement of maintenance.

Further, bearing in mind the policy principles already encapsulated in draft form into the proposed NER Metrology Procedures pursuant to a current AEMC Change Determination, (ERC0092 for example) principles to also embraced within the gas markets under future proposed Rule Changes to National Gas Rules (NGR) as part of the NECF these questions needs addressing:

If JGN and others have chosen to diversity and increase their product range or service by taking on data meter provision servicing and maintenance of water infrastructure, what does this decision have to do with applicable energy laws?

Why are gas bills being issued to those who do not receive gas at all, and why should the public pay deemed to be receiving energy pay for infrastructure and associated costs that is unrelated to their direct energy consumption?

These questions are pertinent

What recommendations can be made to rectify this matter within both generic and energy laws?

In the interests of restoring community faith and equity principles should reconsideration be given by Parliament to through the presentation of a new motion to overturn some of the inequities enshrined, including the staggering requirement to make attempt to make inaccessible any right of appeal (see discussion elsewhere)?²³³

Whilst the assets cannot be unsold were disaggregation of infrastructure has occurred in some States such as Queensland, some matters may be redressed, which will presumably mean resurrecting the matter through the Queensland Parliament.?

On the other hand, since they effect national energy laws and rules their formation and implementation, should those particular matters be addressed at national level? The introduction of a new category of Metering Data Service Providers for Electricity under the proposed Rule Change Provisions to Ch7 of the NEL.

How can any authority regulating the energy industry under energy provisions have control in the first place of water provisions?

Who should or will take charge of this matter and ensure that fairness is delivered?

Will interpretation of “joint metering installations” be misinterpreted to include the following?

Comment MK:

Having skimmed through the newly published National Gas Rules (NGR) and the proposed NER (see especially Ch 7 and mark-up revisions AEMC website) I cannot find reference to water meters or infrastructure in any of the existing or national provisions as instruments through which gas consumption may be measured.

Water infrastructure is being inappropriately and unnecessarily used to calculate alleged gas usage by those who do not receive gas at all (recipients water reticulated in water pipes only after being centrally heated by a single gas meter – multi-tenanted dwellings (or for that matter shopping centres).

The proper meaning of the terms metering installation and meter within energy laws have become blurred and now taken to mean instrument (such as a water meter or hot water flow meter) that can measure some commodity, as a substitute for the proper instrument of trade, using the right instrument for the proper purpose using the prescribed unit and scale of measurement.

The proper interpretation of the original and proposed deemed contract or standard contract have also become blurred on account of this, thus leading to imposition of contractual status on the wrong parties, leaving aside the trade measurement considerations.

Since this has direct contractual implications on the financially responsible customer or end-user (of heated water) this matter deserves serious attention.

Assuming that it is the policy intent to move on to gas and try to capture the gas market into these philosophies without recognizing the differences between gas and electricity markets (a common allegation made by market participants and others); then on what basis does the AEMO, AEMC, MCE, AER and other relevant bodies believe that this is reasonable under energy laws?

Again if the answer is yes to (1) above, how would such a philosophy be reconciled to the concept of “direct flow of energy” encapsulated within the proposed National Energy Retail Laws and Rules (NECF2 Package); the concepts of legal traceability and best practice; changes to national measurement laws; unfair contract terms that may be voidable under existing and proposed changes to generic laws (TPA – to be renamed Competition and Consumer Law).

On what basis could the principles of competition within the energy arena be justified by overlooking the fact that water meters and hot water flow meters are being tacitly or explicitly permitted to post as gas or electricity meters?

Such a distortion of measurement and contractual practices need to be scrutinized

What was meant in the (then Treasurer’s Second Reading Speech of 11 October 2006, “Energy Assets (Restructuring and Disposal) Bill”²³⁴ regarding alleged:

“transfer process(es)…utilized in South Australia, Western Australian and Victorian legislation relation to the alleged “rationalization of their electricity entities.”

On what basis have these arrangements and alleged warranties been taken to apply to the provision of gas (see reference to “rationalization of electricity entities”

On what basis did the then Treasurer of Queensland (or any other players in facilitating sale of energy assets under similar circumstances in other States (the Queensland then Treasurer cited South Australia, Western Australia and Victoria). It was in fact Victoria who first initiated the Bulk Hot Water Guidelines in the belief that consumer interests were being “protected”

Far from achieving prevention of price-shock, and notwithstanding the sanction of those participating at the time in the debate, consumers of centrally heated water faced high costs, metering data costs; inflated outsourcing costs; unwarranted supply and GST charges; inappropriate imposition of contractual status and unwarranted obligations such as conditions precedent and subsequent, all of which properly belong to the Developer or Owners Corporation making the arrangements in the first place and directly responsible for fitting, repair, maintenance and replacement of common property infrastructure.

On what basis could the then Treasurer of Queensland (now Premier) believe that the decisions made would be final and conclusive without the possibility of challenge, appeal, review, quash under the Judicial Review Act 1991 (p1 second reading speech 11 October 2006) under Supreme Court or other action?

To make presumptions about the decisions of the open courts on issues of presumed unaccountability is to undermine the power and strength of the courts and the enshrined confidence in fairness and the neutrality of the legal system.

I directly quote from the some comments by Independent Member Mrs. Cunningham in this regard – and share her views, more particular in relation to the matter of endeavouring to quash appeal of any sort, thus making the decision-making process unaccountable, unchallengeable and apparently above the law.

The Bill had also sought to ensure that future asset sales would not require the sanction of Parliament, thus challenging community expectation of the checks and balance that exist in the current constitutional system.

I would like to see re-examination of the issues and some explanation.

This is beyond the scope of the AER and AEMC enquiries but does have impacts on policy and regulatory implementation of those policies, now that nationalization of energy policy is to become a reality in the near future.

“Mrs CUNNINGHAM (Gladstone—Ind) (12.53 pm): I rise to speak to the Energy Assets (Restructuring and Disposal) Bill 2006 and in doing so at the outset put on the record my general opposition to the sale of strategic infrastructure.

This has been my position when I was elected and prior to being elected to this parliament, including when negotiations occurred for the sale of the power station in Gladstone, only because I firmly believe that strategic assets should be retained by government for the security of supply and availability for the people in the community. I thank the minister for the briefing we were given on the bill prior to the election, and of course the bill dropped off the list after the parliament was prorogued. However, there are a few issues of concern that I want to raise. There is a clause in this legislation that removes the ability of decisions made under this legislation to be reviewed, including judicial review. In our original briefing I was advised that that in part was to have regard to the caretaker convention should an election occur before this bill was fully enacted. Given that the election has been completed, I question why that condition has to be reinserted to the same extent as it was previously or whether there are other purposes for that non-reviewable clause to be included.”

Were similar arrangements made in other States?

Clarification of the question – MK comment

The (then) Treasurer of Queensland, The Hon Ann Bligh, MP, now Premier and also MP for South Brisbane on page 2 of her Second Reading Speech Energy Assets (Restructuring and Disposal) Bill Hansard 11 October 2006 referred to gazetted “transfer processes” available for public inspection at an office stated in the transfer notice.

The matter was continued on 12 October²³⁵

In this paragraph the (then) Treasurer referred to

“similar transfer processes that were utilized in the South Australian, Western Australian and Victorian legislation in relation to the rationalization of their electricity entities.”

In addition, the Treasurer referred to her empowerment (in that Office – 2006) to

“give a direction of an energy entity (as defined by the bill) requiring it do something considered necessary or convenient for effectively carrying out the project.”

At this point, the Treasurer noted that in that Office her

“….powers in this regard will cease on commencement of FRC). For example a direction may be issued to the Board of Energex to execute a sale agreement and dispose of its shares in Sun Retail, a third party purchaser.”

Further the (then) Treasurer The Hon Anna Bligh, stated that

“The Bill does not require the Treasurer to publish the direction and operates in the same way as the directions power under section 299 of the Electricity Act.

Of greater concern was mention of the provisions of Clause 50, of which the Treasurer said in that speech

“Clause 50 provides that a decision under this Act is final and conclusive, cannot be challenged, appealed against, reviewed, quashed, set aside or called into question in any other way, under the Judicial Review Act 1991 or otherwise by Supreme Court, another court, a tribunal or another entity); and is not subject to any writ or order of the Supreme Court, another court, a tribunal or another entity, on any ground.

However, the clause may effect contestable gas and electricity customers and persons (other than customers) in relation to any commercial agreements between them and energy entities.

There are three circumstances in which third parties’ otherwise commercial rights may be affected by the Bill:

The disclosure of confidential information without third parties’ consent

The transfer of business assets and liabilities between the energy entities without third parties’ consent; and

The issue, amendment, transfer, cancellation and surrender of retail and distribution authorities under the Gas Supply Act and Electricity Act in relation to any subsequent sale of Ergon Energy’ Pty Ltd by the purchaser to another person.

Given the State’s proposed timeframe and the need for certainty and speed in which things need to be done for this project, any legal proceedings could adversely affect sale process.”

Exactly what arrangements were made, or will be made?

In Queensland?

In South Australia?

In New South Wales?

In Western Australia – which is not yet part of the NECF?

In Victoria?

Note that Victoria was the first to formalize and initiate the bizarre, scientifically and legally unsustainable “bulk hot water or serviced hot water policy arrangements” now encapsulated into its Energy Retail Code which energy retailers are apparently required to abide by under proposed Energy Laws, albeit that its provisions are discrepant with all other provisions, and the concept of “flow of energy” as also encapsulated into the proposed National Energy Retail Laws and Rules and proposed AEMC MDS metrology procedures, though the exempt selling regime will produce its own challenges in this regard

In New South Wales on the brink of selling its electricity assets?

In ACT? Who will be the next after NSW to be assessed for retail energy competition, presumably as before without due regard for the wholesale market

In Tasmania?

In Northern Territory?

How often have the impacts of these arrangements been monitored through RIS processes and what has been done to correct problems identified?

MK Comment:

Having studied the Licencing provisions for each of the host retailers as issued by the Victorian ESC, it is clear that ownership of water meters and their re-sale in the event that an Owners Corporation (the customer) wished to change retailers, implied that the intended “customer” of metering and data services, including water meter data collection, management, reading and billing was intended to be the OC, not the end-user of heated services.

Whilst distribution a monopoly, change of retailer is a theoretical option for individual renting tenants, but rather for the OC entities seeking to change retailers responsible for sale and supply of energy to a single gas or electricity meter firing a communal water tank centrally heating water that is then reticulated in water service pipes (not gas service pipes or electrical conduits) to individual renting tenants or other occupants in strata titled property (multi-tenanted dwellings.

TRUenergy (wholly owned by the China Lighting and Power Consortium); separated from the distribution arm of SPI.

AGLE (a retail arm separated from the generation and distribution businesses, but nevertheless with a common parent owner in the Singapore Power International (SPI) Consortium.

The AER State of the Energy Market (SEM) publication 2-09 reports that

“AGL energy is the leading energy retailer in Queensland, New South Wales and Victoria

Is a major electricity generator in eastern Australia

Is increasing its interests in gas production –beginning by acquiring CSG interests and Queensland in Queensland and NSW in 2005”

In my 2007 analysis of the market at the time of my public submission to the AEMC's Review of the competition in the electricity and gas markets in Victoria I analyzed some of the structure and impacts of vertically and horizontally integrated energy providers with emphasis on the host gentailers and impacts on second-tier retailers.

The AER’s SEM (2009) on p23 tables unpublished data from EnergyQuest (2009) showing AGL’s market share of domestic gas production, by basin in Surat-Bowen Queensland to be 5.1%; 50% in NSW; and in all basins 1%.

(UED, Alinta, Agility and other bodies including Trust companies and holding companies are all part of the Singapore Power (SPI) consortium). The Jemena Group of companies also has in-house data metering agents and some unspecified outsourced arrangements regarding metering data services, as briefly discussed elsewhere and in my original submission to the AER of April 2010

Origin Energy (separated from the original Owner Boral)

On what basis do the current practices known “bulk hot water arrangements” and associated metering data provisions consisted the requirement within the now operational National Gas Rules,²³⁶ (p323) to adopt the following:

“good gas industry practice” means the practices, methods and acts that would reasonably be expected from experienced and competent persons engaged in the business of providing natural gas services in Australia, acting with all due skill, diligence, prudence and foresight and in compliance with all applicable legislation (including these rules), authorizations and industry codes of practice.”

On what basis will embracement of either explicit or implied industry codes be consistent with good industry practice (leaving aside best practice or trade measurement requirements) if those codes permit the use of, or overlook the use of water meters effectively posing as gas meters for the purposes of imposing contractual status ort calculated deemed gas (or electricity usage)

Could such endorsement, (for example 3.2 of the Victorian Energy Retail Code v7 February 2009) bulk hot water billing, transferred from the Bulk Hot Water Charging Guideline(2)(1) (now repealed) be construed as facilitating poorest practice rather than good or best practice, or the requirement to ensure consistency with other regulatory provisions by providing non-conflicting instructions that embrace the principles of best practice?

Though the Victorian ERC is intended to relate to retailers of energy (not includes what is termed as “delivery of gas or electricity hot water, using metering terminology inconsistent with every other current or proposed definition, the intended National Energy Law and Rules (NELR) are clear about sale and supply of energy being intended through direct flow of energy to the party deemed to be contractually obligated and also allows through the tripartite governance model for similar responsibilities and liabilities to apply to either distributor or retailer .

The question of liability of third parties is determined on the basis that whether the distributor or retailer procures these services, ultimately, liability rests with either the distributor or retailer, with one or other expected to reclaim from the other any liabilities determined by a customer or end-consumer.

See case studies cited by professor Stephen Corones regarding liability, statutory and implied warranties and findings in open courts, including the New Zealand experience

What do policy makers, rule makers and regulators intend to do to correct this anomaly

How will these matters impact on consumer confidence and proper market functioning?

Will interpretation of “joint metering installations” be misinterpreted to include the following?

Comment MK:

Having skimmed through the newly published National Gas Rules (NGR) and the proposed NER (see especially Ch 7 and mark-up revisions AEMC website) I cannot find reference to water meters or infrastructure in any of the existing or national provisions as instruments through which gas consumption may be measured.

Water infrastructure is being inappropriately and unnecessarily used to calculate alleged gas usage by those who do not receive gas at all (recipients water reticulated in water pipes only after being centrally heated by a single gas meter – multi-tenanted dwellings (or for that matter shopping centres).

Incidentally, at the second day Queensland Parliamentary Debate on Restructuring of energy assets (October 11 and 122 2006 Hansard), the question of water rebates arose as a separate issue.