Lundy, Sen Kate

Senator LUNDY (Australian Capital Territory—Minister Assisting for Industry and Innovation, Minister for Multicultural Affairs and Minister for Sport) (15:51): I present five government responses to committee reports as listed on today’s Order of Business, as well as the government's response to the report of the Environment and Communications References Committee on its inquiry into the operation of the South Australian and Northern Territory container deposit scheme. In accordance with the usual practice, I seek leave to incorporate the documents in Hansard. Leave granted. The documents read as follows— JOINT COMMITTEE ON THE NATIONAL BROADBAND NETWORK Review of the Rollout of the National Broadband Network Fourth Report Australian Government Response to the Committee's Fourth Report of 28 February 2013 May 2013 INTRODUCTION In March 2011, the Parliament established the Joint Committee on the National Broadband Network (the Committee) to enable the ongoing parliamentary scrutiny of all aspects relating to the rollout of the National Broadband Network (NBN). The Committee is required to report to the Parliament on the rollout of the NBN on a six monthly basis until the completion of the project. The Committee has been asked to provide progress reports on: the rollout of the NBN; the achievement of take-up targets as set out in NBN Co Limited's (NBN Co) Corporate Plan; network rollout performance including service levels and faults; the effectiveness of NBN Co in meeting its obligations as set out in its Stakeholder Charter; NBN Co's strategy for engaging with consumers and handling complaints; NBN Co's risk management processes; and any other matter pertaining to the NBN rollout that the Committee considers relevant. The Committee tabled its first report on the Review of the Rollout of the National Broadband Network on 31 August 2011, its second report on 24 November 2011 and its third report on 25 June 2012. The government's responses to the Committee's first, second and third reports were tabled in the Parliament on 1 March 2012, 16 April 2012 and 9 October 2012 respectively. On 28 February 2013, the Committee tabled its fourth report, entitled Review of the Rollout of the National Broadband Network: Fourth Report. The Committee's fourth report was informed by public hearings and public consultation which attracted 28 submissions and three exhibits. The report made eight recommendations ranging across: the provision of information on the NBN including key performance data on forecasts and actual results; reporting arrangements that facilitate earlier submission of the government's six monthly performance report on the progress of the NBN rollout and the inclusion of audited financial statements; the potential of NBN Co's fixed wireless network to improve mobile telecommunications, especially for regional and remote Australia; initiatives to address the operation of medical alarms over the NBN; private equity funding and Telstra workforce issues. BACKGROUND The NBN is a telecommunications network that will provide access to high-speed broadband to 100 per cent of Australian premises using a combination of fibre to the premises, fixed-wireless and satellite technologies. NBN Co's objective is to provide 93 per cent of premises with access to a high-speed fibre network capable of providing broadband speeds of up to one gigabit per second (Gbps) download and 400 megabits per second (Mbps) upload. Seven per cent of premises will be served by a combination of next-generation fixed-wireless and satellite technologies providing peak speeds of up to 25 Mbps download and 5 Mbps upload. The NBN will be Australia's first national wholesale, open access broadband network offering equivalent terms and conditions to all access seekers or service providers. The Australian Government has established NBN Co to design, build and operate the new high-speed NBN. NBN Co will roll out the network and sell wholesale services to internet and telephone service providers. In turn service providers will offer retail services to consumers. This is a significant structural change to Australia's telecommunications industry, aimed at encouraging vibrant retail competition. On 7 March 2012, the Definitive Agreements between NBN Co and Telstra came into force. The Agreements pave the way for a faster, cheaper and more efficient rollout of the NBN. They include the reuse of suitable Telstra infrastructure, avoiding infrastructure duplication and for Telstra to progressively structurally separate by decommissioning its copper network during the NBN rollout. The Definitive Agreements will mean less disruption to communities, less use of overhead cables and faster access to the NBN for Australians. Planning and construction of the NBN is well underway. On 11 January 2013, NBN Co announced that it had exceeded its target to have construction commenced or completed in areas covering 758,000 premises before the end of 2012. The total number of premises in areas where construction had commenced or completed was 784,592 by year end. On 21 March 2013, NBN Co reported that it has updated its short-term fibre rollout timeline expecting to pass 341,000 premises with fibre about three months later than the June 2013 target, with between 190,000 and 220,000 premises now forecast to be passed by fibre by end June 2013. NBN Co will also assume direct responsibility for the Northern Territory fibre rollout. NBN Co has advised that this short-term issue will not affect the long-term delivery of the NBN or the overall cost of the project. NBN Co remains on track to deliver fast, affordable and reliable broadband to every Australian by 2021 as set out in NBN Co's 2012-15 Corporate Plan. On 5 May 2013 NBN Co released an update to its indicative three year fibre rollout plan, which will see NBN construction either commence or be completed by mid-2016 for more than 4.8 million homes, businesses, schools and hospitals across Australia. The three year rollout plan will be updated each year. By 30 June 2016, the numbers of homes, businesses, schools and hospitals that will see construction commence or be complete include: An additional 406,100 premises in New South Wales, bringing the total number of premises with construction commenced or complete to more than 1,416,800; An additional 303,000 premises in Victoria, bringing the total number of premises with construction commenced or complete to more than 994,600; An additional 255,700 premises in Queensland, bringing the total number of premises with construction commenced or complete to more than 934,300; An additional 181,500 premises in Western Australia, bringing the total number of premises with construction commenced or complete to more than 610,700; An additional 117,700 premises in South Australia, bringing the total number of premises with construction commenced or complete to more than 445,000; An additional 45,000 premises in the Australian Capital Territory, bringing the total number of premises with construction commenced or complete to more than 180,300; In the Northern Territory, the rollout of the NBN will be complete for more than 65,400 premises by the end of 2015; In Tasmania, the rollout of the NBN will be complete for more than 208,400 homes and businesses by the end of 2015; and More than 7,303 schools, 663 hospitals, 120 university campuses and 1,415 aged care facilities across the country. Construction of the national fibre network rollout will begin between 1 April 2013 and 30 June 2016 in these locations, under NBN Co's three year rollout plan. AUSTRALIAN GOVERNMENT RESPONSE The government has considered the Committee's Fourth Report and provides the following response to the recommendations. Performance Reporting Recommendation 1 The Committee recommends that the key performance indicator information presented in the Shareholder Ministers' six-monthly National Broadband Network (NBN) performance report list and detail: (1) established Business Plan targets and (2) actual results which track the progress of the NBN rollout over each six month period as well as yearly, to enable the comparison of actual physical NBN rollout results with published NBN Co Corporate Plan targets. The government supports this recommendation. The government and NBN Co are committed to publishing as much information as possible on the NBN rollout. Six monthly results and Corporate Plan targets have been included in the past government reports to the Committee and now that NBN Co has reached volume rollout, NBN Co is considering what additional information can be provided on an ongoing basis. The government's six-monthly report to the Committee is based on information from NBN Co and provides: a summary of the key milestones achieved by the company, including details around awarded contracts and their value; year to date financial reports, comprising profit and loss statements, balance sheets and a consolidated statement of cash flows; and measurement against agreed key performance indicators for the Company, including, actual results for construction commenced or completed, premises passed/covered, and premises activated for brownfields, new developments and satellite/fixed wireless. Key Performance Indicators (KPIs) to date have provided detail on the actual results for the six months to June and December and have been presented in tables and graphs to facilitate comparability of information over time. The KPI reporting framework has been broadly consistent across each of the three progress reports provided to the Committee. NBN Co's 2012-15 Corporate Plan, released on 8 August 2012, includes NBN rollout targets for premises passed and premises activated for brownfields, new developments and satellite/fixed wireless. The 2012-15 Corporate Plan targets are published on financial year basis and were included in the government's third progress report on the NBN rollout reflecting NBN Co's performance up to 30 June 2012. These targets are under review in the 2013‑16 Corporate Plan and will be included in the next six-monthly report to the Committee for the reporting period up to 30 June 2013. As reported at the Committee's 19 April 2013 hearing, NBN Co's underlying business case around the NBN rollout remains fundamentally unchanged from that outlined in the 2012-15 Corporate Plan. The government supports the provision of quality information to the Committee to inform its review of the NBN rollout. In addition to the data contained in the government's reports to the Committee, NBN Co provides updated deployment metrics on its website and through other parliamentary reporting processes. Further information on the progress of the rollout, for example the number of premises expected to be ready for service in certain areas, can be found on NBN Co's website at www.nbnco.com.au Recommendation 2 The committee recommends that the Shareholder Ministers' six monthly performance report on the progress of the National Broadband Network rollout include audited financial statements with accompanying explanatory notes, and where it is not possible to provide these in the first instance, that they be forwarded to the Joint Committee on the National Broadband Network when prepared, as an addendum to the Performance Report. The government notes this recommendation. As a publicly-owned entity, NBN Co maintains regular reporting to the Parliament through Parliamentary Committees including the Joint Committee on the National Broadband Network, Senate Committees and audit by the Auditor General. Separately, it reports regularly to Shareholder Ministers. The government has undertaken to provide the Committee with an update on the status of the NBN rollout based on information provided by NBN Co covering the six months to the end of June and the end of December. These reports contain unaudited financial statements. Undertaking an audit as requested by the Committee, would be a departure from both Australian commercial practice and from the long-standing reporting requirements that successive governments have established for Government Business Enterprises under the existing frameworks. As part of the annual report process, NBN Co prepares financial statements and explanatory notes that are audited, or reported on, by the Auditor-General. The NBN Co annual report is tabled in the Parliament each year. Where the audited financial statements are not available to be appended to the government's six-monthly report for June, they will be forwarded to the Committee as requested. NBN Co will undertake reviews of half yearly financial statements consistent with Australian corporate and commercial practice. Recommendation 3 The committee recommends that subsequent Shareholder Ministers' six monthly performance report on the progress of the National Broadband Network rollout be provided to the committee no less than one month before the scheduled biannual hearing with the Joint Committee on the National Broadband Network. The government supports this recommendation in part. The government's response to the Committee's first report supported the recommendation for NBN Co and the Department of Broadband, Communications and the Digital Economy (the department) to provide a six-monthly report on the progress of the rollout of the NBN using established KPI and performance measures, no later than three months before the Committee is due to report to the Parliament i.e. end March and end September. Shareholder Ministers recognise the importance of providing quality information to the Committee to inform its review of the NBN rollout and that is why the government, in consultation with NBN Co and the Committee, has established a reporting framework which provides for the development of six monthly progress reports on the NBN and the necessary due diligence processes of NBN Co and the government. The Committee's first report on the Review of the NBN rollout included advice on reporting intervals and key performance measures and indicators. In terms of the timing of receiving NBN rollout performance information and KPIs, the Committee implemented an amendment to its original resolution of appointment to allow it to report to the Parliament biannually in June and December. This has allowed for NBN Co and shareholder departments to prepare reports for the Committee in line with more streamlined reporting timeframes and following appropriate review and analysis by government. The government is unable to determine the practical effect of this recommendation at this stage as no hearing date has been set for future hearings of the Committee. The government will endeavour to meet the Committee's requested timeframe for the submission of the six monthly progress reports on the NBN subject to meeting due diligence requirements. Regional and Remote Issues Recommendation 4 The committee recommends that the Government support the NBN Co to continue to: explore the synergies between fixed and mobile telecommunications networks with a view to using the National Broadband Network to improve mobile telecommunications; and facilitate private providers use of NBN Co infrastructure to provide and improve mobile telephone services and coverage across Australia, particularly in regional and remote areas. The government supports this recommendation and notes that progress has already been made to leverage NBN Co wireless infrastructure to improve mobile coverage in regional areas. The government understands the importance of mobile telephony to Australians. More than ever, people are using mobile telephony to communicate and participate in the digital economy. Since the privatisation of Telstra, the government does not own a mobile carrier and therefore is not able to direct where Australia's mobile phone network should be extended. These are commercial decisions made by private companies, responsible to their shareholders. The government and NBN Co however are working with the carriers to encourage them to expand the quality and extent of their coverage. The 2011-12 Regional Telecommunications Independent Review Committee found that regional stakeholders see the NBN as the most significant government commitment to improving telecommunications in regional Australia. The NBN will see fibre-to-the premises technology rolled out to more than 70 per cent of homes and businesses in non‑metropolitan Australia, and a combination of next generation fixed-wireless and satellite technologies to the remaining premises. The government supported the launch of NBN Co's Interim Satellite Service in July 2011 to provide eligible rural and regional Australians with immediate access to enhanced broadband services ahead of NBN Co's long-term satellite service in 2015. Over 30 000 customers have already taken up this service; a clear indication of the strong unmet demand for affordable and reliable broadband services in regional Australia. The rollout of the NBN will see the construction of new fixed wireless towers that are designed to provide broadband services to certain locations across less populated areas of Australia. The construction of the NBN fixed wireless tower network provides mobile carriers with an opportunity to negotiate access to these towers and improve their mobile phone coverage in locations where NBN Co is delivering fixed wireless services. Decisions about whether to seek access to NBN Co's fixed-wireless tower network infrastructure are ultimately commercial decisions for mobile phone carriers. NBN Co has recently entered into agreements with Optus and Telstra to share tower infrastructure. This is a positive development towards improved mobile coverage in regional and rural Australia. In addition, NBN Co has negotiated with carriers to secure further mutually beneficial arrangements which involve NBN Co accessing or constructing towers on sites that have been set aside for future development. This would apply when a carrier has a site for which it has all or some of the necessary approvals, but are not planning to build a tower in the near future. If such a site is considered appropriate for the fixed wireless network, NBN Co will initiate the construction process. This has the potential of seeing the networks expand at a quicker rate than they otherwise would. Additional Issues Recommendation 5 The committee recommends that the Department of Broadband, Communications and the Digital Economy (DBCDE) and NBN Co continue to work with the Personal Emergency Response Services Association, the Communications Alliance and retail service providers to implement a range of initiatives to address concerns with the operation of medical alarms for aged and at-risk persons under the National Broadband Network rollout. This process should be in consultation with the Australian Communications and Media Authority, with the DBCDE to report back to the committee on specific progress in this area. The government supports this recommendation. During 2011 NBN Co held complex services workshops with relevant industry stakeholders, including the Personal Emergency Response Services Association (PERSA) and Tunstall Healthcare, to assist in the design and development of the User Network Interface Voice (UNI-V) product so that it is fit for purpose to support a range of legacy services, including medical alarms. NBN Co met with PERSA in September 2012 to discuss how medical alarms will be supported over the NBN. Analogue medical alarms will be fully supported on the NBN via the UNI-V port, which is in turn supported by a battery backup. Many Australians are already using medical alarms and other personal response services over the NBN. For example, the Peninsula Grange aged care facility in Victoria is connected to the NBN and has a fully functional medical alarm system through the UNI-V port. In addition to supporting legacy alarms, Internet Protocol (IP) based medical alarms will also be supported over the UNI-D port. NBN Co is currently developing battery backup functionality for the UNI-D and once this is implemented, IP-based alarms will be fully functional over the NBN. NBN Co is also working to extend the run time of the battery for both the UNI-V and UNI-D ports. Both ports have Traffic Class 1 functionality, meaning that the highest traffic priority over the network is available for medical alarms. The department continues to engage with the Communications Alliance and PERSA, NBN Co, retail service providers and other stakeholders to ensure a smooth transition of medical alarms to the NBN. The department has encouraged Communications Alliance and its members to work closely with NBN Co to ensure legacy services continue to be supported on the NBN and for Communications Alliance members to provide necessary assistance to end users to enable them to make accurate and informed decisions regarding their telecommunications needs. In December 2012 a workshop was held with the department, Communications Alliance, PERSA, retail service providers, the Australian Communications and Media Authority, NBN Co and other key stakeholders, including the Department of Veterans' Affairs. It was agreed at the workshop that a working group be established to closely examine the implications of the transition of 'over-the-top' (OTT) services (such as security alarm services, visual monitoring services and energy management services) that currently operate on the copper telephone network to the NBN fibre-based network. The NBN OTT Services Transition (NOST) working group met for the first time in February 2013 and agreed to establish a sub-committee focussing on developing a communications plan around the transition of medical alarms to the NBN. The sub‑committee met for the first time in early April 2013. The NOST working group has a number of items in progress, including the development and implementation of a responsibilities matrix. This identifies the parties responsible for key tasks such as developing device discovery and network testing capabilities, and producing installation standards to ensure that the wiring in end user premises can continue to support medical alarms and other personal emergency response services. Similarly, members of the sub-group have developed a project plan that will support end user education. This plan identifies the main stakeholder groups, anticipates their key information needs and questions, and outlines the necessary documentation that should be distributed. Both the working group and communications sub-group will continue to meet on a monthly basis to ensure the needs of medical alarm users are met and facilitate a smooth transition of these services from the copper to fibre networks. The department will update the Committee on progress at future hearings. Private Equity Engagement and Workforce Issues Recommendation 6 The committee recommends that the Government: seek to gauge investor interest in the National Broadband Network; and investigate the optimum capital structure for the NBN Co. The government does not support this recommendation at this stage. The existing policy framework provides for a capital structure that supports engagement with the private sector when NBN Co's cash flows are sufficient to support private sector debt without explicit government support. Prior to this, as set out in the Statement of Expectations, NBN Co will be funded with government equity. The government notes that the NBN Co 2012-15 Corporate Plan contains an assumption of debt-raising. It is assumed that peak debt funding equivalent to 31 per cent of total funding required over the period FY2011 to FY2021 would be raised. NBN Co assumes it will commence raising debt from FY2015 onwards1. Peak debt funding is forecast at $13.7 billion in FY2021, with initial debt-raising assumed in FY2015. Average issuance per annum would amount to $2 billion over the 7 year period (FY2015 to FY2021 inclusive)2. Private equity funding prior to the completion of the NBN rollout was explicitly advised against in the NBN Implementation Study3. This is for a number of reasons. The government has a 100 per cent coverage objective for NBN Co, which includes supplying regional and remote areas on the basis of uniform national wholesale pricing. The government is also committed to the affordability of NBN services for all Australians. This means that the government is prepared to accept a lower rate of return than private equity may be satisfied with—approximately 7 per cent, sufficient to cover the finance costs with a small risk premium. In such circumstances, a mixture of public and private ownership prior to the completion of the NBN rollout in June 2021 may create conflict that would impose restrictions on the government's flexibility to achieve these policy goals. In seeking to reduce risk, private sector investors may pressure the government to lock in policy choices that could be more advantageously made in the future. As former DBCDE Secretary, Peter Harris, noted at the 26 June 2012 hearing of the Joint Committee: " The government clearly has a policy objective in mind with the NBN. It has a detailed set of instructions that accompany the statement of expectations and a series of policy decisions and the parliament has a set of instructions for the company, with legislation. If a private investor convinced itself that it was prepared to take the risk and accept what is impliedly a low rate of return for long-term strategic gain purposes and did want to make an investment then the company, first, and then the government as 100 per cent owner, second, would both need to satisfy themselves that this owner would not get in the way of, if you like, the statement of expectations and parliament ' s own intentions as expressed in legislation. " 4 For these reasons, at this stage, the government is the most natural owner of the risk versus return trade-off prior to the completion of the NBN rollout5.The government remains committed to the sale of NBN Co at an appropriate time. The existing NBN Co legislative framework sets out the preconditions in which the Commonwealth can dispose of or transfer shares in NBN Co. Separately, there are provisions placing restrictions on the nature of capital that can be applied in NBN Co. By the end of the rollout in June 2021, NBN Co will have demonstrated a strong track record in the delivery of its key objectives and established investor confidence in both the rollout and take up of this critical infrastructure. Once fully established, NBN Co will be a profitable and attractive business that could benefit from private sector ownership. Following completion of the rollout the government will consider the optimum capital structure for the Company. The benefits of sale will be fully explored before a sale takes place. Recommendation 7 The committee recommends that, in providing an annual statement to the committee on the progress of the Telstra Retraining Funding Deed (RFD), the Department of Broadband, Communications and the Digital Economy (DBCDE) include in this information an update on: ongoing company retention rates for employees in the Automatically Eligible Workgroup, retrained under the RFD; the current numbers and roles of employees in the other eligible workgroup under the RFD and an overview of the current reasons for eligibility or exclusion in terms of this group. The government supports this recommendation in part. In response to the Committee's third report on the Review of the Rollout of the NBN, the government agreed to include information about the progress of the Telstra Retraining Funding Deed in an annual report. While information will be sought from Telstra with respect to training opportunities for potentially eligible employees, it is expected that the report will focus on training outcomes achieved and direct and indirect employment benefits of the NBN. The government notes that data on retention rates may prove misleading as a proxy indicator of the effectiveness of Telstra's Retraining Funding Deed, given one of its objectives is to train workers to assist in the delivery of the NBN. Accordingly, a retrained staff member who subsequently leaves Telstra for employment with one of NBN Co's construction partners would be in line with the Deed's objectives, but would negatively impact on retention rates. The government will consider alternative indicators that could measure the effectiveness of Telstra's Retraining Funding Deed and provide updates on an annual basis. Recommendation 8 The committee recommends that, in providing an annual statement to the committee outlining the major areas of emerging National Broadband Network (NBN) workforce demand and training need, the Department of Broadband, Communications and the Digital Economy (DBCDE) include in this information a more detailed report on: the workforce development strategy supporting the NBN rollout, including current workforce modelling and outcomes from work with training organisations and industry skills boards, to identify skills gaps in this area and develop training programs; how the development and implementation of this overall workforce strategy is being coordinated. The government supports this recommendation. As outlined in the government's response to the Committee's third report on the Review of the Rollout of the NBN, NBN Co has developed and is implementing an overall workforce development strategy that involves: identifying the gap between supply and demand of appropriately skilled resources; determining relevant training programs and qualifications, providers, and funding to support skills development; and a skills assurance program to confirm workers have the necessary regulated and required skills to perform work. The workforce development strategy also recognises the dispersed nature of the rollout which will enable it to leverage workers from both regional and metropolitan areas. In providing an annual statement to the Committee, the department will provide an overview of this workforce development strategy and how the strategy is being implemented. In the interim, information can be found at NBN Co's website (www.nbnco.com.au) which provides an outline of the workforce development strategy activities. ______________ 1 NBN Co 2012-15 Corporate Plan, page 16 2 NBN Co 2012-15 Corporate Plan, page 80 3 National Broadband Network Implementation Study, 2010, page 41 4 Joint Committee on the National Broadband Network, Hansard 26 June 2012, page 10 5 National Broadband Network Implementation Study, 2010, page 42 SENATE COMMITTEE ON L EGAL AND CONSTITUTIONAL AFFAIRS Inquiry in to the Regulatory Powers (Standard Provisions) Bill 2012 Government Response Recommendation 1 2.36 The Committee recommends that the Bill be amended to remove the power to trigger the provisions of the Bill by regulation Government response: Accepted The Government proposes to accept the Committee's recommendation. The purpose of this recommendation is intended to enhance Parliamentary scrutiny of proposed legislation triggering the model regulatory powers by removing the ability to activate those provisions by regulation and should be supported. Recommendation 2 2.37 That the Explanatory Memorandum to the Bill be revised and reissued to stipulate that each time a bill is introduced into the Parliament that provides for the triggering of the Bill's provisions, this must be explicitly articulated and explained in the Explanatory Memorandum to the relevant bill Government response: Accepted in principle The Government expects that departments will set out clearly in Explanatory Memoranda the contents of a Bill and its intended effects. Recommendation 3 2.38 That, in the future, each time a bill is introduced into the Parliament which seeks to trigger the provisions of the Bill, the Explanatory Memorandum to that bill must clearly set out the relevant agency's current regulatory powers, a comparison with the powers in the Bill that will be triggered, and, in the case of any expansion of the agency's powers, a detailed explanation of the reasons for the expansion of powers Accepted in principle The Government expects that departments will set out clearly in Explanatory Memoranda the contents of a Bill and its intended effects. Recommendation 4 2.39 That the three bills currently before the parliament and the 15 Acts passed by the parliament, identified by the Attorney-General's Department in its answers to questions on notice to the inquiry, be reviewed. Where the legislation contains scope for regulations to provide regulatory powers to an agency which are analogous to those in the Regulatory Powers (Standard Provisions) Bill 2012, the committee recommends that the legislation be amended so that the provisions are contained in the principal Act. Government response: Accept in principle The Office of Parliamentary Counsel has advised my Department that the enforcement powers in bills presently before the Parliament will not take effect until enactment and commencement of the Regulatory Powers (Standard Provisions) Bill. In respect of Acts passed by the Parliament that have been drafted using precedents based on the Bill, these have been reviewed and one only has a regulation making power trigger the Bill. The Government response amends the Bill to remove the ability to trigger its provisions by regulation, rendering such a provision ineffective. Recommendation 5 2.40 That the Bill be passed subject to Recommendations 1 and 2. Government response: Noted AUSTRALIAN GOVERNMENT RESPONSE TO THE SENATE SELECT COMMITTEE ON ELECTRICITY PRICES Report: Reducing energy bills and improving efficiency Government Response to Senate Select Committee on Electricity Prices INTRODUCTION The Senate Select Committee on Electricity Prices presented its report 'Reducing energy bills and improving efficiency' on 1 November 2012 which contained 15 recommendations. In addition to the Committee's recommendations, the Coalition, the Greens and Senator Xenophon have made separate recommendations in the report. The Government has prepared a response to each of the recommendations in the report. In April 2012, the Council of Australian Governments (COAG) identified energy market reform as one of its six priority areas for major reform, identifying concerns over rising electricity costs and the increasing pressures placed on households and business. On 7 December 2012, COAG endorsed a comprehensive energy market reform package aimed at ensuring energy markets and regulations are operating in the long term interests of consumers. The package builds on the existing cooperative reform agenda and was developed through COAG's Standing Council on Energy and Resources (SCER), which has policy responsibility for energy market reform. This reform agenda addresses many of the issues raised in the Committee's recommendations and is referenced in the responses below. The Australian Government's official response to each of the Committee's recommendations is provided below. RESPONSES TO RECOMMENDATIONS Recommendation 1 The committee recommends that the AER provide an annual report including detailed quantitative analysis of the components of and contributors to electricity prices. Australian Government Response The Australian Government notes this recommendation and considers that the existing reporting processes are adequate. The Australian Energy Market Commission (AEMC) already fulfils this role through its annual reporting on household electricity prices, as directed by the Standing Council on Energy and Resources (SCER). This reporting provides detailed and comprehensive analysis of movements in electricity prices and associated cost components across jurisdictions and nationally. The Australian Energy Regulator (AER) also reports annually through its 'State of the Energy Market' publications. These reports provide some information on retail electricity prices across jurisdictions within the National Electricity Market (NEM), although not to the same level of analysis as the AEMC's reporting. Recommendation 2 The committee recommends that ongoing arrangements be put in place to more effectively scrutinise prices in the overall electricity system, and ensure that price setting for individual components and factors is done in the context of keeping overall electricity prices at a more acceptable level. Australian Government Response The Australian Government notes this recommendation and considers that it will be addressed by the implementation of COAG's energy market reform. The electricity supply system has a number of interrelated components that can impact on the overall prices paid by electricity consumers. The Australian Government, through SCER, is committed to ensuring that consumers are not paying more than necessary through the introduction of competition in non-monopoly sectors (retail and generation) and through incentives to minimise costs where competition is not possible (transmission and distribution). Electricity prices, and the underlying cost components, are determined through a combination of regulatory and market processes. The ongoing energy market reform agenda, including SCER's reform package endorsed by COAG on 7 December 2012, is based around ensuring that these energy market and regulatory frameworks are operating efficiently to avoid unnecessary cost pressures for consumers. The extensive package of reforms endorsed by COAG is available at: www.coag.gov.au/node/481. The Australian Government notes that with respect to the particular issue of retail "price setting" or regulation, COAG has endorsed SCER tasking the AEMC to develop a consistent methodology for determining retail prices, with particular regard to time varying network tariffs and wholesale electricity costs whilst maintaining reliable supply. This work is due to be completed by September 2013. Recommendation 3 The committee recommends that: • rates of return for network service providers are estimated using a robust process based on guidelines developed and reviewed every three years in consultation with stakeholders; • the proposed amendments in the Australian Energy Market Commission (AEMC) Economic Regulation of Network Service providers rule change regarding methods for forecasting return on capital, return on debt, opex and capex are implemented as part of that rule change process; • the AER should also be required to consider forecast total expenditure (totex) when making network determinations; and • SCER direct the AEMC to examine arrangements for AEMO to be the single planning agency for the National Electricity Market (NEM) with responsibility for forecasting, network planning, national reliability standards and operating Australian Government Response The Australian Government notes these recommendations and considers that they are being addressed by a number of reforms underway. On 29 November 2012, the AEMC, as independent Rule maker for energy markets, published the final Rules relating to the economic regulation of network service providers. The new Rules provide greater scope to the AER to adapt its approaches to the nature of the business it is regulating, clarify the powers of the regulator to benchmark and publish information on the relative efficiency of electricity network businesses, and change how the rate of return on capital is set. SCER is currently addressing barriers in the national energy laws to the AER undertaking its new functions resulting from the rule changes, specifically around the requirement to publish an annual benchmarking report. In determining the rate of return under the new Rules, a common framework will apply to transmission, distribution and gas determinations that will require the regulator to take into account market circumstances, estimation methods, financial models and other relevant information to tailor specific decisions to a particular network business. A key aspect of this reform is the development by the AER of a rate of return guideline to promote transparency around decisions. The regulator is required to undertake an open and consultative process at least every three years to develop and update this guideline. With regards to total expenditure, a consequence of these changes to the Rules is that the AER now has a range of new tools to incentivise Network Service Providers to invest more efficiently, with the overriding objective of ensuring that only capital expenditure which has been assessed as efficient by the regulator will form part of the regulated asset base, which in part drives network tariffs. These include the use of capital expenditure sharing schemes and efficiency reviews of past capital expenditure. The AER will be able to apply the tools as it considers appropriate to each network business. The Australian Government supports the introduction of the new Rules to the fullest extent possible in advance of the next round of the network regulatory determinations beginning in mid-2014, so that potential benefits can flow to consumers within that determination period. The Government also notes the December 2012 SCER commitment to remove any barriers in the national energy laws for these new rules to have full effect. SCER aims to identify and address any barriers to the AER benchmarking network businesses by the end of 2013. SCER has also agreed to accelerate improvements in the appeals process for revenue and price decisions made by the AER for network businesses, to ensure this process is focused on delivering overall outcomes that are beneficial for consumers. A consultation process on options to improve the regime commenced on 14 December 2012 through the release of a consultation Regulation Impact Statement, with SCER intending to decide on the structure of the new regime by mid-2013. A revised regime is expected to be in place by 2014. The Australian Government notes that the Australian Energy Market Operator (AEMO) undertakes a National Transmission Planner role for the NEM. Issues around planning have been considered by the AEMC in its Transmission Frameworks Review. In relation to reliability standards, SCER has agreed to task the AEMC with developing a nationally consistent framework for expressing, delivering and reporting on distribution and transmission reliability outcomes. In doing so, the AEMC will ensure that the approach taken to meet reliability standards by network businesses reflects economically efficient outcomes that reflect consumers' willingness to pay. Accordingly, COAG agreed in-principle to transfer the application of this framework, following due consideration of the AEMC's advice, to the AER. Jurisdictions will report to SCER by the end of 2013 on their decisions on the transfer of this responsibility. Recommendation 4 The committee recommends that: • the AEMC implement the rule change proposed in the Power of Choice draft report to amend the pricing principles of Chapter 6 of the NER so that greater guidance is provided on how network businesses should set their tariffs to reflect costs; and • the AER implement measures to decouple network revenues and energy volumes. Australian Government Response The Australian Government supports this recommendation in principle, and will work with SCER to initiate appropriate rule change proposals based on the AEMC's final (rather than draft) report. At the SCER meeting on 14 December 2012, Ministers agreed to progress work on the final recommendations of the AEMC Power of Choice review, including that officials should prepare Rule change proposals for consideration by the AEMC. In March 2013, SCER provided its formal response to the recommendations in the Power of Choice review, reiterating this agreement. Two of these rule change proposals will address the intent of the committee's recommendations, namely: Reform of the distribution pricing principles to provide better guidance for setting cost reflective distribution network charges; and Reform of the demand management and embedded generation connection incentive scheme available to distribution businesses. In the Power of Choice Review final report, the AEMC explained that these measures together will contribute to decoupling network revenues and energy volumes as follows: Where network charges better reflect the cost of delivering electricity, lower sales revenue would also reflect lower costs to the business and therefore would not affect its profits. Since there are practical limitations to applying fully cost reflective network charges, the demand management incentive scheme should remove any remaining disincentives to develop cost-effective initiatives that result in lower volumes, by allowing network businesses to recover lost profits resulting from these projects. Businesses would continue to recover their allowed revenue in each regulatory period, with the benefits of lower network investment returned to customers in the next period. The AEMC is the final decision maker on implementing the rule changes. The AER is then responsible for implementing measures in accordance with the new rules. Recommendation 5 The committee recommends that the AEMC set and AEMO implement national reliability standards that take into account consumers' perceived value of reliability and in a way that is independent of businesses that derive income from network infrastructure. Australian Government Response The Australian Government notes this recommendation in the context that SCER has work underway which will inform the detail of decisions on how to set and implement improvements in delivering reliability outcomes. At its December 2012 meeting, SCER noted that consumers, large or small, place a high value on being confident of a reliable supply of electricity and that providing this reliability requires investment in network infrastructure. The costs associated with this investment get passed on to consumers through their electricity bills. As a result, it is important that the level of reliability that networks provide reflects the price that consumers are willing to pay. As reflected in response to recommendation 3, SCER has agreed to task the AEMC with developing a nationally consistent framework for expressing, delivering and reporting on distribution and transmission reliability outcomes. COAG has subsequently agreed in-principle to transfer the application of this new framework once developed to the AER (rather than AEMO as proposed by the committee). Jurisdictions will report to SCER by the end of 2013 on their decisions on the transfer of this responsibility. Recommendation 6 The committee recommends that the proposal in the AEMC Economic Regulation of Network Service Providers rule change to give the AER ex post scrutiny powers is implemented as part of that rule change process. Australian Government Response The Australian Government does not support this recommendation. As outlined in response to Recommendation 3, on 15 November 2012 the AEMC released its final determination on the rules governing the economic regulation of network businesses. The Government notes that the new rules introduce regulatory tools so the AER can incentivise network service providers to invest capital efficiently. This includes the ability of the AER to review the efficiency of past capital expenditure when assessing expenditure proposals from network businesses and setting future expenditure allowances and preclude inefficiently incurred expenditure from being rolled into the regulatory asset base (RAB). It is important to recognise that this only affects the capital expenditure, which is one of several components of network revenues, with the return on the regulated asset base and the operating expenditure also contributing to network revenues. Under this approach, the AER's ability to preclude expenditure being rolled into the RAB is limited to capital overspends incurred during a regulatory period and does not extend to the whole revenue determination. The Government considers that the application of ex post reviews to the entire revenue determination is not consistent with best practice regulation, as it would undermine the certainty in regulatory outcomes needed to support prudent investment in long-lived assets. Limiting ex post review to capital overspends, as specified in the AEMC's final determination, introduces an incentive for network businesses to only undertake efficient investment, thereby ensuring consumers are not paying more than is necessary to support their long term interests. Recommendation 7 The committee recommends that the AER receive additional funding, expertise and accountability including that in recommendations of the Limited Merits Review Regime Stage Two Report in relation to appeals processes. Australian Government Response The Australian Government supports this recommendation. The Australian Government has committed to additional funding of $23.2 million (over four years) to the AER to deliver a stronger, better resourced and more accountable regulator. The extra resources will allow the AER to access greater expertise when undertaking a determination and clear powers to collect and publish information. This will help the AER to benchmark network businesses and improve network efficiency. At its December 2012 meeting, COAG welcomed a proposed independent review of the AER and its operational requirements by the Commonwealth in 18 months' time. The review will ensure that the AER's resourcing is adequate, and its operational arrangements are effective, to meet the demands of the new regulatory regime. At its December 2012 meeting, SCER agreed to accelerate improvements in the appeals process for revenue and price decisions made by the AER, to ensure this process is focused on delivering overall outcomes that are beneficial for consumers while providing an effective back-stop for network businesses. SCER is currently testing the options for changes to the limited merits review regime as recommended by the Expert Panel through a consultation process (see response to recommendation 3). Recommendation 8 The committee recommends that the AEMC consider how broader environmental considerations could better align with the operation and regulation of the NEM. Australian Government Response The Australian Government does not support this recommendation. This issue has previously been the subject of detailed analysis by the AEMC in conjunction with the other energy market institutions. In 2009 the AEMC undertook a Review of Energy Market Frameworks in light of Climate Change Policies and concluded that there was no cause for fundamental reform of the NEM. The AEMC's functions relate to market development and rule change in the NEM. It does not assess environmental policies themselves. Judgements on the relative value of the environment as against other social and economic factors are appropriately made by parliaments. The National Electricity Objective is already flexible to take account of judgements about the economic value of environmental objectives, where made by the appropriate institutions. For example, with respect to the environmental impacts of climate change, the Australian Government has developed a Clean Energy Future plan that includes a mechanism to price carbon emissions. Electricity market institutions will take the carbon price into account in their judgement about what would promote efficient investment and use of electricity services. The Australian Government's policies, as articulated in the Clean Energy Future plan and the Energy White Paper, including the carbon pricing mechanism and the Renewable Energy Target, will drive the transformation of the sector to cleaner electricity. While the Government does not support initiating another broad review by the AEMC on these issues, the AEMC will take the effect of these policies into account in its ongoing Rule change and market development work. Recommendation 9 The committee recommends that SCER agree to introduce cost reflective pricing for electricity in conjunction with smart meters in all jurisdictions in the NEM: • based on the model proposed in the Power of Choice draft report comprising three consumption bands for large (band 1), medium to large (band 2) and small to medium (band 3) consumers; • where smart meters are mandated for consumption band 1, opt-out for band 2 and opt-in for band 3; and • accompanied by a comprehensive consumer information and education campaign funded by the Commonwealth, state and territory governments during both the planning and implementation phases. Australian Government Response The Australian Government supports the recommendations on pricing reform in principle, and will work with SCER to initiate appropriate models for implementation based on the AEMC's final (rather than draft) report. COAG's new energy market reform agenda includes agreement that a transition to more cost reflective pricing structures is likely to be an important enabler of demand side participation. At the December 2012 SCER meeting, Ministers agreed to develop the market settings to allow for jurisdictions to provide customers with the option to move to time-varying pricing and, in states without an existing widespread roll-out, an opt-in policy for the supporting metering infrastructure. The new energy market reform agenda also includes agreement to develop arrangements necessary to encourage the market-driven (business-led) competitive roll-out of smart meters and other advanced metering, while accommodating arrangements in jurisdictions where a widespread roll-out is underway. This means that businesses will be able to compete to provide meters that support the products and services chosen by customers. At the December 2012 SCER meeting, Ministers agreed that officials should prepare a Rule change proposal for consideration by the AEMC which reflects this agreement. The Australian Government notes the importance of consumer education and information on any such reforms, however considers the form and resourcing of any campaign is a matter for consideration once the detail of policy is progressed. Recommendation 10 The committee recommends that SCER examine incorporating the accreditation and regulation of third parties offering demand management services in the National Energy Customer Framework (NECF). Australian Government Response The Australian Government supports this recommendation. The Energy Market Reform Working Group of SCER officials has established a sub-group which is examining a range of issues arising from the National Smart Meter Consumer Protection and Safety Review Officials' Report, including the scope of any energy-specific regulation of third party service providers. This group will take in to account the recommendation from the AEMC's Power of Choice review that the regulatory treatment of third party providers of demand side participation energy services be clarified. SCER is due to report to COAG on the implementation and forward plan for a comprehensive demand side participation package, based on the recommendations of the AEMC's Power of Choice review, by June 2013. Recommendation 11 The committee recommends that SCER: • examine current barriers to embedded generation, particularly those related to network design, connection and costs, as well as Feed in Tariff (FiT) payments; • empower relevant state and territory ombudsmen and / or tribunals to intervene where embedded generators and NSPs are unable to resolve disputes; • standardise connection processes for embedded generation in the NEM and include a requirement for a standard connection protocol and licencing regime for embedded generation within the NEM; • direct the AEMC to develop a rule change requiring the release of annual maps of network constraints and their value by network businesses; and • direct the AEMC to develop a rule change to establish a default system of location-specific network support payments for embedded generation. Australian Government Response The Australian Government notes this recommendation. The headings underlined address each of these recommendations in turn. Examine barriers to embedded generation The AEMC considered the development of the distributed generation sector (also known as embedded generation) as part of the Power of Choice review; the final report of the review was published on 30 November 2012. The Australian Government does not consider there is a need for an additional review at this point while these rule change processes and reviews are being implemented. In the Power of Choice review, the AEMC found that issues faced by the distributed generation sector in the National Electricity Market can be addressed through existing processes, including the option of Rule change proposals. The Australian Government agrees with this view, and notes that a number of reforms are in place or underway to support distributed generation, as noted below. Through SCER, the Australian Government has advocated that payment for electricity exported to the grid from embedded micro-generation should more accurately reflect the true value of that electricity, regardless of the form of micro-generation technology deployed. Several jurisdictions have completed or are in the process of reviewing feed-in tariff arrangements for micro generators with the view to determining fair and reasonable value of exported energy and eliminating cross subsidisation by other electricity consumers. COAG agreed that the National Principles for Feed-in Tariff Schemes be amended to state that all forms of micro generation technologies should be offered a fair and reasonable tariff and to close premium schemes to new participants by 2014. Empower ombudsmen or tribunals to intervene to resolve disputes The Ministerial Council on Energy (now SCER) has developed a new national framework for distribution network connections for retail customers, including those with distributed generation. The framework includes provisions for dispute resolution by the AER. The framework will form a new Chapter 5A of the National Electricity Rules (NER), which will be adopted in each jurisdiction at the same time as it adopts the National Energy Customer Framework. To date, the NECF has been adopted by Tasmania, the Australian Capital Territory and South Australia. New South Wales is expected to implement the NECF on 1 July 2013 and Victoria on 1 January 2014. Queensland is considering its position on the matter. Standardise connection processes for embedded generation in the NEM Chapter 5A will also establish a consistent connections framework for retail customers with embedded generation. Distribution Network Service Providers (DNSPs) will be required to provide a model standing offer to connect customers with micro-embedded generation such as domestic photovoltaic systems, and have the option of developing standard offers for other classes of connections, such as larger embedded generation systems. The framework also streamlines processes for negotiated connections. The AEMC is also considering a Rule change proposal from stakeholders intended to improve the connection process, technical requirements and charging regime for embedded generation connections. A Rule change requiring the release of annual maps of network constraints and their value by network businesses New, nationally consistent network planning and expansion Rule changes commenced on 1 January 2013 that require DNSPs to publish annual planning reports, including information on network constraints, which will help identify opportunities or limitations for embedded generator connections. A rule change to establish a default system of location-specific network support payments for embedded generation As part of their demand management practices, DNSPs currently have the option of contracting with an embedded generator to provide network support in order to avoid or defer the need for network investments. These are commercial arrangements that take advantage of specific opportunities for avoided or deferred network investment. Through SCER, the Government is working to develop market frameworks that create appropriate incentives for DNSPs to identify and invest in demand side projects, including embedded generation, where this is the most efficient option. This includes the network planning and expansion Rule changes noted above, which will provide more information to project developers on the opportunities for embedded generation to address network constraints. These Rule changes also include a new Regulatory Investment Test for Distribution, which will require DNSPs to assess the costs and benefits of each credible option, including non-network solutions, to address a specific network problem. DNSPs will also be required to develop a demand side engagement strategy setting out their processes and procedures for assessing non-network options and interacting with non-network providers. The Australian Government considers that this framework will enhance opportunities for efficient investments in embedded generation and is not considering new market arrangements to pay embedded generation for network support at present. Recommendation 12 The committee recommends that SCER direct the AEMC to: • review the NER so that network charges for embedded generators reflect the cost of using only the relevant section of the network; and • implement changes to the regulatory framework in order to provide incentives for generators to build in locations where the costs associated with transmission are reduced. Australian Government Response The Australian Government notes this recommendation. The headings underlined address each of these recommendations in turn. Network charges for embedded generators Under the National Electricity Rules, embedded generators do not face a charge for exporting electricity to the grid. The Standing Council on Energy and Resources is not presently considering arrangements which would allow embedded generators to export electricity to private customers over the public grid. Incentives for generators to build in locations where the costs associated with transmission are reduced Issues around generator location decisions have been considered by the AEMC in its Transmission Frameworks Review, which was publicly released on 11 April 2013 and is now being considered by SCER. The National Electricity Rules require that distribution networks pay embedded generators for transmission costs which the distribution network can avoid because the generator is present. This provides embedded generators with a signal about the impact of their location decisions on transmission costs. Transmission costs are generally paid by distribution networks, and include a component that signals the cost of connecting to the transmission network at a particular location. When an embedded generator connects to a distribution network and is operated appropriately, the distribution network may draw less power from the transmission network upstream, resulting in lower costs for using the transmission network. The distribution network is required to pass any such lower costs back to the embedded generator. Recommendation 13 The committee recommends that the AEMC investigate ways in which greater transparency can be introduced in negotiations between transmission businesses and generators. Australian Government Response The Australian Government notes this recommendation. Issues around negotiations between generators and network businesses have been considered by the AEMC in its Transmission Frameworks Review, which was publicly released on 11 April 2013 and is now being considered by SCER. The Australian Government will examine what additional work is required on this issue in light as part of these considerations by SCER. Recommendation 14 The committee recommends that National Energy Customer Framework (NECF) is implemented in all states and territories in the NEM in a way that does not diminish from existing consumer protections and to take effect on or before 1 July 2013. Australian Government Response The Australian Government supports this recommendation in principle. The Australian Government agrees it is important to commence the NECF consistently, and as early as possible, in keeping with previous commitments. However, it notes the timing of the commencement of the NECF in a state or territory is a matter for the participating jurisdiction to determine. On 14 December 2012, SCER reiterated COAG's commitment to ensure that remaining jurisdictions implement the NECF by no later than 1 January 2014, subject to the resolution of any outstanding issues. Tasmania and the ACT implemented the NECF from 1 July 2012. South Australia implemented the NECF on 1 February 2013. NSW aims to implement the NECF from 1 July 2013. Victoria aims to implement the NECF from 1 January 2014 subject to the resolution of outstanding issues around smart meters and related consumer protections. The Queensland Government is considering its position on NECF implementation through its Inter-Departmental Committee on Electricity Sector Reform (IDC). Recommendation 15 The committee recommends that SCER consider establishing a national consumer advocacy body to represent and support consumers in the NEM. Australian Government Response The Australian Government supports this recommendation. SCER is currently examining options to increase consumer engagement across the energy sector generally, in the NEM and Western Australia (WA) and the Northern Territory (NT). In recognition of the need for a more efficient approach to national advocacy for energy consumers, SCER has requested advice on an implementation model for a national energy advocacy body. On 22 January 2013, the SCER Energy Market Reform Working Group appointed two expert advisors—Dr John Tamblyn and Mr John Ryan—to provide a written report on an implementation model for a national energy consumer advocacy body for consideration by SCER by mid-2013. In addition, the Australian Government has established a Consumer Challenge Panel to provide expert advice to the AER in relation to specific network business determinations. AER aims to establish the panel by July 2013. Under the COAG energy market reform agenda as agreed on 7 December 2012, the Australian Government is working with SCER to amend the criteria for Consumer Advocacy Panel (CAP) grant allocation within the AEMC Establishment Act regulations. The aim is to ensure that the allocation of consumer grants is done in a manner which most benefits energy consumers generally. COALITION RECOMMENDATIONS Recommendation 1 That the government act immediately to reduce the upward pressure on electricity prices on consumers and business by repealing the carbon tax. Australian Government Response The Australian Government does not support this recommendation. The Government is committed to reducing Australia's greenhouse gas emissions. The most environmentally and cost effective way to achieve this is through a carbon price. A market based approach allows businesses to make decisions on how best to manage their emissions—including by investments in low emissions technologies or energy efficiency measures—while still supporting Australia's economic growth. The Government's Clean Energy Future plan provides an economically responsible pathway to achieve this balance. The Government, through its Household Assistance Package, will ensure that those Australians that need help the most, particularly pensioners and low and middle income households, will get assistance to help manage increases in the cost of living from the carbon price. The $23 per tonne carbon price has added around 10 per cent to household electricity prices in 2012-13, increasing household expenditure on electricity by around $3.30 per week on average. Households will see overall cost increases of $9.90 per week, on average, while the average assistance will be $10.10 per week. Over half of the revenue from the carbon price will be used by the Government to cut taxes and increase payments for millions of Australians. The rest will be used to support jobs and competitiveness and build a new clean energy future. This will assist households in managing increases in the cost of living from the carbon price, and help industries transitioning to a clean energy future. Recommendation 2 That the government act immediately to reduce the upward pressure on electricity prices on consumers and business by repealing the carbon tax. Australian Government Response As per the response to the above recommendation. GREENS RECOMMENDATIONS Recommendation G1 That the National Electricity Objective be re-written to include an environmental objective and an Objective there are no regulatory barriers to demand management, energy efficiency and distributed generation. Australian Government Response The Australian Government does not support this recommendation. The National Electricity Market Objective—the aim of which is the promotion of the long-term interests of energy consumers, with regard to price, quality and reliability of electricity and gas services, as contained within the National Electricity Law, the National Gas Law and the National Energy Retail Law, remains appropriate to the operation of Australia's National Electricity Market. The Australian Government's Energy White Paper (released October 2012) noted that the Objective and its underlying principles, "as currently defined, remain appropriate to current and future energy policy needs and that they provide a robust basis for market regulation and development." The White Paper also stated that "[g]iven that no regulatory or market failure associated with the overall objectives in the Australian Energy Market Agreement has been identified, making such changes would risk introducing unnecessary complexity and potential confusion for market operators, regulators and participants. It is also unclear how non-energy policy goals, which differ across jurisdictions, could be coherently reflected in a single set of national market rules. These issues are best dealt with outside the market settings through direct and targeted policy, as this allows for properly targeted, efficient and effective outcomes." Recommendation G2 That the Standing Council on Energy and Resources, in consultation with the AEMC and AEMO, develop reforms and rule-changes to establish AEMO as a single NEM-wide planning agency. Australian Government Response The Australian Government notes this recommendation. See response to Recommendation 3. This matter has been considered more broadly as part of the AEMC's Transmission Frameworks Review, which was publicly released on 11 April 2013 and is now being considered by SCER. Recommendation G3 That the AER implement revenue caps for all Distribution networks to de-couple network revenue and energy consumption. Australian Government Response The Australian Government does not support this recommendation. Reviewing network frameworks in light of changes in demand is being considered by SCER as part of its energy market reform program. In December 2012, SCER committed to assess whether the forecasting and investment frameworks within the current regulatory regime are sufficiently flexible and dynamic to adjust to changing demand conditions. This commitment is designed to ensure that any benefits associated with reducing demand can be shared between network businesses and consumers. In the Power of Choice Review, the AEMC considered the incentives for distribution businesses under revenue and price caps to undertake demand side participation projects. Under a revenue cap, a distribution business is certain of the revenue it will recover and so will be indifferent if a demand side project lowers its volume of sales. However, the AEMC considered that a distribution business under a revenue cap has very little incentive to set efficient prices that will signal costs of supplying electricity, because consumer responses to its prices have no impact on the revenue it earns. The AEMC considers that efficient prices are a key driver of demand side participation. The Productivity Commission adopted a similar position in the draft report of its review of network regulation. In the Power of Choice Review, the AEMC has proposed options to compensate distribution business for lower sales from specific demand side projects through the Demand Management and Embedded Generation Connection Incentive Scheme. Recommendation G4 That the Department of Climate Change and Energy Efficiency and the Department of Resources, Energy and Tourism, in partnership with the Australian Energy Regulator, commission an independent study into the costs and benefits of a peak demand target and design options. Australian Government Response The Australian Government does not support this recommendation. The AEMC considered the issue of demand side participation targets or peak demand reduction targets for distribution businesses as part of the Power of Choice Review. The AEMC did not support this option, since it is difficult to identify the optimal level of the target and avoid overinvestment in demand side peak reduction simply to meet the target. The AEMC has proposed an alternative option which provides distribution businesses with an appropriate return for their demand side projects which deliver a net cost saving to customers across the supply chain. At the December 2012 meeting, SCER agreed that officials should prepare a Rule change proposal which gives effect to this recommendation. As part of the Energy Savings Initiative (ESI) investigation, a report was commissioned which considered a number of options for addressing peak demand through an energy efficiency scheme. One of these options was peak demand targets for supply-side entities. For the purposes of assessing the merits of a possible national ESI, the ESI Working Group decided not to further investigate peak demand targets. Instead, for the purpose of their investigation, the Working Group considered that a practical approach to address peak demand through a possible national Energy Savings Initiative could be to weight activity value to reflect the likely impact of each activity on peak demand and network productivity. Recommendation G5 That the SCER directs the AEMC to review the costs and benefits of introducing a capacity-market, or capacity-elements, into the NEM to facilitate higher levels of demand-side participation. Australian Government Response The Australian Government does not support this recommendation. The AEMC considered the introduction of a capacity market as part of its Review into Energy Market Frameworks in light of Climate Change Policies and concluded that there was no cause for fundamental reform of the NEM. In addition, evidence from WA indicates that having a capacity market in addition to an energy market can result in inefficient costs for consumers, where they are faced with paying for costs associated with capacity that is not fully utilised. In the Power of Choice review of demand side participation in the National Electricity Market, the AEMC recommended an additional option for demand side resources to participate directly in the wholesale market and receive the spot price for energy not consumed, measured against a baseline of normal consumption. At the December 2012 SCER meeting, Ministers agreed that AEMO should begin work to further develop this option. Recommendation G6 That a standard connection, fair pricing and licencing regime for distributed generation be established, supported by a distributed generation ombudsman within the Australian Energy Regulator. Australian Government Response The Australian Government notes this recommendation. The Australian Government is pursuing reforms to the regulatory regime for distributed generation, including on connection and fair pricing, as outlined in the response to Recommendation 11. This includes a role for ombudsmen and the AER in resolving disputes. While there is no requirement for distributed generators to be licenced as such, recent rule-changes establish new registration arrangements for those distributed generators that participate in the wholesale market. The Australian Government considers these reforms meet the intent of recommendation G6. Recommendation G7 That the Federal Government implement a national energy intensity target and the National Energy Savings Initiative. Australian Government Response The Australian Government supports this recommendation in part. An aspirational national energy intensity target and a national Energy Savings Initiate (ESI) were recommended in the October 2010 report of the Prime Minister's Task Group on Energy Efficiency (PMTGEE). In July 2011, the Government responded to the PMTGEE report in the 'Clean Energy Plan' and decided not to support proceeding with an aspirational national target. The Government has decided to investigate the merits of a possible national ESI. Subject to economic modelling and analysis of potential regulatory impacts, which is expected to be finalised by mid-year, the Government will make a decision on whether to seek to negotiate the adoption of a national ESI with COAG. A national scheme would be conditional on the endorsement of COAG and agreement that existing and planned state schemes are folded into any national scheme. SENATOR XENOPHON RECOMMENDATION Recommendation The AEMC conduct a thorough investigation into the impact renewable energy schemes, both federal and state-based, have had on electricity prices since 2008, with a view to maximising the environmental benefits at the lowest cost to consumers. Further, such a review should investigate the long-term benefits of encouraging investment in baseload renewables. Australian Government Response The Australian Government notes this recommendation. During 2011 the AEMC undertook a review entitled: Impact of the enhanced Renewable Energy Target on energy markets. Analysis included the cost impacts and abatement benefits of the Large-scale Renewable Energy Target, the Small-scale Renewable Energy Scheme and also considered state and territory based premium feed-in tariff arrangements (see www.aemc.gov.au/market-reviews/completed/impact-of-the-enhanced-renewable-energy-target-on-energy-markets.html). Modelling undertaken in the review estimated the total compliance costs of the enhanced RET would decrease from 0.93 c/kWh in 2011/12 to 0.64 c/kWh in 2015/16 and then increase slowly to 0.77 c/kWh in 2019/20 in the presence of the carbon price. Compliance costs for the enhanced RET are substantially lower with a price on carbon compared to no carbon price. In the second half of 2012, the independent Climate Change Authority completed a statutory review of the RET scheme. The modelling conducted for the review showed the impact of the RET scheme on retail electricity prices to be modest, particularly as wholesale electricity prices are suppressed by the additional supply of renewable energy. This downward pressure on wholesale electricity prices at least partially offsets the RET certificate costs and therefore the costs of complying with the RET. The modelling estimates that over the period 2012/13 to 2030/31 the impact of the RET scheme on the average household bill (assumed to be consuming 7 MWh per year) would be less than 1 per cent (or $15 per year). State and Territory Governments have largely closed their premium feed-in tariff (FiT) schemes to new customers such that FiT payments to new participants will avoid cross subsidisation by other electricity users. Several jurisdictions have recently reviewed FiT arrangements with the aim of determining fair and reasonable value (cross-subsidy free) for micro generated energy, further analysis is considered unnecessary at this time. In December 2012 COAG endorsed the amendment of the National Principles for Feed-in Tariff Schemes which includes the phasing out of premium schemes by 2014. It is acknowledged that there will be legacy costs for some premium schemes into the future as existing premium FiT scheme participant's contracts are honoured and these costs will generally be met by all consumers in the respective jurisdiction. In 2012, COAG committed to developing a national approach to assessing the complementarity of existing and future climate change measures with the carbon price mechanism, as well as to fast track and rationalise policies and programs that are not complementary to a carbon price, or are ineffective, inefficient or impose duplicative reporting requirements on business. In early 2013, the Select Council on Climate Change (SCCC) provided a report to COAG prepared by the Complementary Measures Working Group providing outcomes of reviews undertaken by the Commonwealth, States and Territories of carbon reduction and energy efficiency measures for their complementarity with a carbon price. Jurisdictions reported that 5 measures will be, or have been, rationalised and 18 measures will be discontinued, resulting in reduced compliance costs for business, including for the electricity supply sector, which may flow through to electricity prices. In addition to this review activity, in 2012 COAG agreed that the Business Advisory Forum Taskforce, established following the Business Advisory Forum held in April 2012, would provide advice to COAG on the overall review outcomes of the SCCC process and whether any further reform action is required. In April 2013, the Taskforce advised COAG that based on advice provided by jurisdictions, the COAG agreed reform outcome appears to have been met for all measures reviewed by the SCCC. In terms of measures not considered by the SCCC process, the BAF Taskforce advised that the majority of identified remaining measures do not appear to impose mandatory or regulatory obligations on business or, where regulatory obligations are imposed, these do not appear to be significant and that few of these remaining measures appear to be non-complementary to the national carbon price. AUSTRALIAN GOVERNMENT RESPONSE TO THE SENATE COMMUNIT Y AFFAIRS LEGISLATION COMMITTEE Report on the: Aged Care (Living Longer Living Better) Bill 2013 [Provisions] and related bills Introduction On 14 March 2013, the Senate referred the Living Longer Living Better reform bills to the Senate Community Affairs Legislation Committee (the Committee). The Committee sought submissions from and undertook hearings with stakeholders. Some 112 submissions were received by the Committee and published on its website from a wide range of stakeholders. The Committee published its report on the Aged Care (Living Longer Living Better) Bill 2013 [Provisions] and related bills on its website on 31 May 2013, making 13 recommendations. The Australian Government welcomes the Committee ' s report and thanks the Committee for its considered approach to the recommendations made in the report. In developing this response the Government has also considered the comments and recommendations from the Australian Greens ' and Coalition Senators who were members of the Committee. Currently, over one million older Australians receive aged care services subsidised by the Australian Government. By 2050, over 3.5 million Australians are expected to use aged care services each year. Australia's ageing population is placing significant pressures on the aged care sector. With an increase in demand for aged care services, older Australians are also seeking greater flexibility in aged care, including independent living arrangements and increased choice. Additionally, there is a greater expectation regarding the quality of services being provided. The Living Longer Living Better aged care reform package was announced on 20 April 2012. It provides $3.7 billion over five years to build a better, fairer and more nationally consistent aged care system. The Living Longer Living Better reform package was developed based on the work of the Productivity Commission and the National Aged Care Alliance's Blueprint. It represents a 10 year plan, with a major five year review point to ensure Australia's aged care system meets the changing needs of an ageing population. The reforms being pursued in the first five years deliver important benefits for older people and the aged care sector, while also laying the foundation for longer term, sustainable reform of the system. Government Response to Recommendations Recommendation 1 3.55The committee recommends that, as part of the arrangements for ACFA monitoring of the reforms that are recommended by the committee in chapter 4, evidence be sought on any impacts of the design of the fee scales on care recipient welfare. Recommendation 3 4.65The committee recommends that the Minister direct the ACFA to report regularly to the Minister on the impact of the reforms on providers (for example, the number and distribution of care recipients choosing DAPs and RADs). ACFA's brief should include specific consideration of the impacts on different types of providers (e.g. current low-care-only providers, small providers, and rural providers). Response: The Australian Government accepts the above recommendations. The Living Longer Living Better aged care reforms represent a significant change to the aged care sector and can be expected to bring substantial benefits to industry over the long term. As with any significant change, it is important the transition to the new system is managed efficiently and effectively. The Government acknowledges the need for mechanisms to support the sector in transition and to monitor the impacts of the reforms as identified by the Committee. The Aged Care Financing Authority (ACFA) was established on 1 August 2012 to provide independent advice to the Government on pricing and financing issues in aged care. The ACFA has already provided advice to inform the Minister's decisions on the definition of significant refurbishment, and the framework for accommodation payments. The ACFA's Operating Framework currently requires the ACFA to provide advice to the Minister for Mental Health and Ageing on: the impact of the aged care financing arrangements on access to care, sustainability and industry viability, including an analysis of revenue, cost and productivity movements in the aged care sector, to inform the Minister's annual review of pricing policy across the sector; the level, and impact on access to care, sustainability and industry viability, of any Accommodation Payments that are levied by Approved Providers for entry to residential aged care; and the level and impact on access to care, sustainability and industry viability, of any additional amenity fees for additional services that are levied by Approved Providers for aged care services. In response to the above recommendations, the Minister for Mental Health and Ageing has referred the following matters to the ACFA. 1. As part of considering the impact of the aged care financing arrangements on access to care, the ACFA should consider any impacts of the design of the means testing fee scales on care recipient welfare, for both residential care and home care. This will include considering whether there is any evidence that the fee scales are creating barriers to access for some client groups (such as self-rationing), and if so, how these could be addressed. 2. As part of considering the impacts of new Accommodation Payment arrangements, the ACFA should specifically examine the number and distribution of care recipients choosing Daily Accommodation Payments (DAPs) and Refundable Accommodation Deposits (RADs). ACFA has been asked to give specific consideration to the impacts on different types of providers (e.g. current low-care-only providers, small providers, and rural providers). 3. Monitoring the take up of measures to provide support to the sector during the transition, particularly among smaller and regional services. This will include ensuring the early detection of any transitional problems. See response to recommendation 4 for further information on the support and monitoring measures to be introduced. 4. Specifically considering the viability of rural, regional and remote services and providers when monitoring the impact of the range of reforms. This will include contributing to reviewing and reporting on the operation of the viability supplement. The Government notes stakeholder calls for further consideration of Government-backed measures to enable older people to draw upon the equity in their homes as a means of contributing to the costs of aged care. The Consumer Credit Legislation Amendment (Enhancements) Act 2012 introduced new requirements, effective from 1 March 2013, to provide consumers with greater protection in relation to existing private sector home equity release schemes (including the introduction of a no negative equity guarantee). In addition, in the 2013 Budget, the Government announced that it would be investing $112.4 million over four years in a trial program to support Aged Pensioners choosing to downsize their home, without immediately affecting their pension. Seniors who downsize their family home will be able to have up to $200,000 of the sale proceeds quarantined from the means test for the age pension. The outcomes of the trial as well as ongoing monitoring of the impacts of the new fee arrangements by the ACFA will feed into the five year review of the aged care reforms included in the Aged Care (Living Longer Living Better) Bill 2013. The review includes specific consideration of the effectiveness of means testing arrangements for aged care services. Any further consideration of Government-backed equity release options would be best considered in this context. Stakeholders and the Australian Greens also raised concerns regarding the effect on household budgets of taper rates for income tested fees and charges in home care, and recommended that these taper rates be revised. The Government notes these concerns, also noting that to fund such changes to the taper rates would result in a significant drop in the number of home care packages made available over the next decade. ACFA has been tasked by the Minister with considering the effect of fee scales on recipient welfare and take up rates of home care packages. Recommendation 2 3.64 The committee recommends that the government closely monitor the take up of home care packages and any signs of changes to demand for HACC-type packages. Response: The Australian Government accepts this recommendation. Over the first two years of the new Home Care Packages program, the arrangements will be closely monitored and evaluated. This will be undertaken in partnership with key stakeholders to monitor implementation and understand the challenges. The evaluation activities will focus on the impact of the new home care arrangements, including the new supplements, on: consumer experience and outcomes; provider operations; Aged Care Assessment Team processes; the interface between the Home Care Packages Program and other programs, such as the Home and Community Care Program and the National Disability Insurance Scheme (NDIS); and the effectiveness of the new arrangements in delivering a graduated continuum of care. The evaluation will also consider whether Consumer Directed Care (CDC) has supported increased access to digital technology by consumers and providers. Any lessons learned during this time will be used to refine the Home Care Packages program (including the CDC arrangements) prior to all existing Home Care Packages being provided on a CDC basis from 1 July 2015. The evaluation will also contribute to the establishment of the Commonwealth Home Support Program from 1 July 2015. The Commonwealth Home Support Program will deliver basic home support services on a more consistent and equitable basis, including more national consistency in what people contribute to the costs of these services. Recommendation 4 4.66 The committee recommends that the Government immediately put in place arrangements to monitor the impact on low care providers, and prepare to make available transitional support along the lines recommended by the Productivity Commission, including support services for providers seeking assistance in transitioning to the new system. Response: The Australian Government accepts this recommendation in part. To support the sector in transition the Government will make available $6.9 million over three years for: Government subsidised business advisory services for residential aged care providers to assist providers to prepare for and manage the transition to the new accommodation payments system in residential aged care; and independent monitoring and advice to Government, through the Aged Care Financing Authority, on the impacts of the reforms to the accommodation payments system and the changes to means testing in home and residential care on providers and care recipients. Approved providers will also be encouraged to access assistance through existing mechanisms such as the Aged Care Workforce Innovation Network (WIN). The Aged Care WIN has been developed to support the sector in its reform preparations and implementation, at both regional and individual-enterprise level, by providing an opportunity to redesign their business models and skills mix. It is funded through the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education (DIICCSRTE) and undertaken in partnership with Aged and Community Services Australia (ACSA) and Leading Aged Services Australia (LASA). The Government's view is that these mechanisms provide appropriate support to the sector during this period of change. The Government does not consider further strategies to be warranted ahead of evidence of negative sector impacts. Recommendation 5 5.21 The committee recommends that the government consider amending the legislation to create a statutory timeline to make a decision regarding whether industry will be subject to a levy to recoup a loss. Response: The Australian Government does not support this recommendation. The Accommodation Bond Guarantee Scheme (Guarantee Scheme), which included levy arrangements, was supported by industry when introduced in 2006. The arrangements benefit all approved providers by maintaining the public confidence in the aged care sector and the security of more than $13 billion in residents' savings which is essential to maintaining this source of funding. The Government did propose in the original reform package to require aged care providers to privately insure bonds (and refundable deposits) from 1 July 2014. However, after further consideration of the matter, including industry and consumer feedback, the Government decided that neither the sector nor the insurance market were ready for an insurance-based solution at this time. Instead the existing Guarantee Scheme is being continued and expanded to ensure that the lump sums paid by consumers now and in the future continue to be protected, providing certainty for providers and consumers. This decision reflects a number of considerations, including the lack of a private insurance market which could provide cover in the time and of the type required to insure lump sum accommodation payments and potential cost impacts on industry and consumers. Consultation will continue with the industry and consumers in coming years to assess the capacity to move to a privately provided insurance model in the future, with this issue given explicit attention in the five year review of the aged care reforms. The legislation currently provides that the Minister may decide to levy the industry to recover costs incurred by the Commonwealth in refunding accommodation bonds to consumers in the event of a provider default. To date, while the Guarantee Scheme has been triggered on five occasions and the Commonwealth has paid out approximately $24 million, the levy arrangements have not been used. The decision on whether to levy approved providers to recoup the costs of the Guarantee Scheme is a decision for the Government. It is important to note that a liability is only created if a levy is imposed. It would not be appropriate to impose a time limit as this may constrain the Government's capacity to pursue defaulting providers to recover costs of the Guarantee Scheme. It is essential to seek to take action against these approved providers as this reduces the moral hazard impact of the Guarantee Scheme and holds the defaulting provider accountable for their failure to refund bonds. However, this can take time. A time limit would also increase the risk of there being a shortfall which might then be met by the imposition of a levy. Should the Government decide to levy the industry in the future, the legislation provides for flexibility in how and to what extent the levy would be applied. Recommendation 6 6.24 The committee recommends that the dementia supplement be renamed as the Dementia and Behavioural Supplement, in both residential and home care. Response: The Australian Government accepts this recommendation in principle. The Government will move an amendment to change the names of the two dementia supplements to: the Dementia and Cognition Supplement (for home care); and the Dementia and Severe Behaviours Supplement (for residential care). These names better reflect the purpose and targeting of the two supplements as suggested by the Committee. While it is expected that some consumers with a mental health condition will be eligible for these supplements, it is important to note that these supplements are not intended to fund the provision of mental health services. Older people living with mental health issues continue to be eligible for mental health services like anybody else in the community. The Government notes that whether older people in residential aged care have adequate access to mental health services was raised as part of the Inquiry. These issues will be considered further in the review of the reforms provided for in the Aged Care (Living Longer Living Better) Bill 2013. Recommendation 7 6.28 The committee recommends that the bill be amended to include parents separated from their children by former adoption practices. Response: The Australian Government accepts this recommendation. The Government supports the inclusion as a special needs group in the Aged Care Act 1997 of parents separated from their children by forced adoption or removal. Inclusion of this group would recognise the traumatic experiences, health issues and socio-economic disadvantage that parents affected by those adoption practices are disproportionately likely to face. Recommendation 8 6.40 The committee recommends that the government create a Homeless Supplement. Response: The Australian Government supports this recommendation. In the 2011-12 Budget, the Australian Government introduced changes to the Viability Supplement. This change included additional funding for providers that specialise in homelessness following a finding from the Aged Care Funding Instrument (ACFI) review. Recent monitoring of the changes suggests that additional assistance above that already provided is required to support the ongoing viability of these services. In recognition of the additional costs of caring for people with a history of, or at risk of, homelessness, the Australian Government supports the introduction of a new supplement that provides additional funding for those providers who specialise in caring for people with a history of, or at risk of, homelessness. Recommendation 9 6.53 The committee recommends that the Senate amend the bill in the terms described in the government's tabled amendment. Response: The Australian Government accepts this recommendation. From 1 July 2012 lesbian, gay, bisexual, transgender and intersex people were specified as people with special needs for the purposes of the Aged Care Act 1997 by amendments to subordinate legislation. The Aged Care (Living Longer Living Better) Bill 2013 incorporates these amendments in the Act from 1 July 2013. In December 2012, the Government launched the National Lesbian, Gay, Bisexual, Transgender and Intersex (LGBTI) Ageing and Aged Care Strategy. The Strategy will help inform the way Government responds to the needs of older LGBTI people and better support the aged care sector to deliver care that is sensitive and appropriate. The Australian Government accepts the committee's recommendation that the Sex Discrimination Amendment (Sexual Orientation, Gender Identity and Intersex Status) Bill 2013 be amended in the terms described in the Government's tabled amendment AG264. The amendment provides that the exemption for bodies established for religious purposes from the prohibition of discrimination on the basis of protected attributes, including sexual orientation and gender identity, will not apply to an act or practice connected with the provision of Commonwealth-funded aged care unless the act or practice is connected with the employment of persons to provide that aged care. The amendment strikes an appropriate balance between the rights to freedom of religion and freedom from discrimination. The amendment will reinforce the rights of care recipients as set out in the Charters of Rights and Responsibilities under the Aged Care Act 1997. In accordance with the Charters, approved providers are required to treat each care recipient with dignity and respect and to accept each person as an individual, with the right to select and maintain social and personal relationships with anyone else without fear, criticism or restriction. Recommendation 10 6.67 The committee recommends that the ministers responsible for Disability Care Australia and the aged care reforms acknowledge the issue identified in the both Senate committee inquiries into these reforms, and urges ministers to continue their work to ensure that the two systems meet the needs of all people ageing with disability. Response: The Australian Government accepts this recommendation. Both the Minister for Mental Health and Ageing and Minister for Disability Reform have made a commitment to stakeholders that they will continue to consult and work with their colleagues to monitor the implementation and interface of the aged care reforms and disability systems. Both Ministers agreed to closely monitor the DisabilityCare Australia launch sites in Barwon and the Hunter, including the impact of aged care reforms such as new CDC Home Care Packages, to ensure interface issues are understood. The Government is ensuring that relevant departments are also working closely with DisabilityCare Australia, particularly on the issues relating to the interfaces between the scheme and health, mental health and aged care systems to ensure that people's care needs are supported in the most appropriate care setting, regardless of their age. People aged over 65 years will be able to access existing supports through the health and aged care system. For example, existing services for older Australians such as hearing and vision services will continue to provide supports to people who develop a disability after age 65. The NDIS Act 2013 is also scheduled for an independent review after two years of operation. It would be appropriate for the interface of the Aged Care (Living Longer Living Better) Bill 2013 and the NDIS Act 2013 to be considered as part of this review. It will be important that the interface between these two systems be reviewed as they evolve to reflect reforms occurring in both systems. Recommendation 11 7.31 The committee recommends that the government examine whether it may be appropriate to revise the Supplement Guidelines to permit in some circumstances the use of the workforce supplement in meeting employee entitlements. Response: The Australian Government accepts this recommendation. The Government will amend the Workforce Supplement Guidelines to provide that excess supplement funding after the provider pays a 1 per cent wage increase to their employees must be used to provide further wage increases, or to support the additional workforce commitments of the Addressing Workforce Pressures Initiative. This may include contributing towards the costs to the employer of implementing the supplement. Recommendation 12 7.55 The committee recommends that references to the workforce supplement be retained as they appear in the proposed legislation. Response: The Australian Government accepts this recommendation. Recommendation 13 8.25 It is recommended that ACFA be established by the Minister for Mental Health and Ageing as a committee under section 96-3 of the Aged Care Act 1997. Response: The Australian Government supports this recommendation. The Aged Care Act 1997 provides for the creation of statutory committees via subordinate legislation. The Aged Care Financing Authority will be established as a statutory committee utilising these provisions. AUSTRALIAN GOVERNMENT RESPONSE TO THE JOINT STANDING COMMITTEE ON FOR EIGN AFFAIRS, DEFENCE AND TRADE R eport: More than just talk: Australia's Human Rights Dialogues with China and Vietnam MAY 2013 Government Response to the Report of the Joint Standing Committee on Foreign Affairs, Defence and Trade ' s Inquiry, " More than just talk: Australia ' s Human Rights Dialogues with China and Vietnam " Australia ' s Human Rights Dialogues Recommendation 1 The Committee recommends that the Australian Government continue to support the human rights dialogue process. The Government agrees with the recommendation of the Committee. Australia's bilateral human rights dialogues are an important mechanism for conveying Australia's human rights concerns in a regular and systematic manner, and as a means of enabling frank discussions on sensitive issues. These dialogues are one of a number of tools the Government uses in its human rights advocacy. Other measures include bilateral representations, statements and resolutions in multilateral fora, including the United Nations (UN), and support for the work of non-governmental organisations (NGOs) and national human rights institutions. The dialogues also provide other states with an opportunity to constructively discuss Australia's domestic human rights policy, giving the Government an opportunity to not only promote policy in an international context, but also inform future domestic reforms. Recommendation 2 The Committee recommends that the Australian Government consider re-establishing its bilateral human rights dialogue with Iran. The Government notes the recommendation of the Committee. As the Committee itself emphasised, a key component of human rights advocacy is government-to-government dialogue aimed at genuinely cooperative efforts to improve human rights. At this stage, we do not believe that Iran would engage in a dialogue aimed at genuinely cooperative efforts to improve human rights. The Australian Government supports multilateral efforts to highlight human rights abuses and to encourage reform in Iran, including the work of the UN Secretary-General, the UN Special Rapporteur on the human rights situation in Iran and through resolutions of the UN Human Rights Council and UN General Assembly. The Australian Government also raises human rights concerns, including on individual cases, directly with the Iranian Government through the Australian Embassy in Tehran and the Iranian Embassy in Canberra, as well as in the course of other bilateral contacts. Recommendation 3 The Committee recommends that the Department of Foreign Affairs and Trade and the Attorney General ' s Department ensure that all relevant staff receive human rights education and training. The Department of Foreign Affairs and Trade should also ensure that human rights monitoring is an integral part of the duty statement for its diplomatic staff. The Government agrees with the Committee that ensuring relevant staff have exposure to human rights education and training is important. Developing a human rights culture within the public service helps ensure rights are protected and promoted through policy, legislation and service delivery. The Department of Foreign Affairs and Trade already provides human rights training and briefings for graduate trainees joining the Department, and briefings for staff proceeding to certain overseas postings. Monitoring of and advocacy on human rights issues is an existing function of all bilateral posts and therefore forms part of the duty statements of diplomatic staff. The Department will continue to identify and provide additional training opportunities, subject to available resources. The Attorney-General's Department undertakes a range of human rights education and training activities for public sector officials—one of the key education initiatives under Australia's Human Rights Framework. The Public Sector Human Rights Education Program, launched on 7 September 2011, aims to: assist public sector officials to understand human rights obligations; strengthen the capacity of legal and policy officers to develop policies, programs and legislation that are consistent with human rights; and provide guidance to administrative decision-makers on relevant human rights considerations to take into account. Measures to achieve these aims include general human rights awareness training, Statements of Compatibility training, an e-learning package, and a range of materials to support these training packages. Parliamentary participation and oversight Recommendation 4 The Committee recommends that the Chair and Deputy Chair of the Human Rights Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade, or their nominees, participate in the Human Rights Dialogues as members of Australia ' s delegations. Participation must be properly funded and facilitated. The Government agrees with the Committee on the importance of parliamentary participation in Australia's human rights dialogues. The Government supports the participation of the Chair and Deputy Chair of the Human Rights Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT), or their nominees, in Australia's human rights dialogues with China, Laos and Vietnam. The Government issues invitations to the Chair and Deputy Chair or their nominees to participate in the dialogues, noting that the request for participation is considered in the context of the overall parliamentary delegation program for that year. The Government notes, however, that the participation of the Chair and Deputy Chair or their nominees in Human Rights Dialogues overseas remains subject to the agreement of the relevant foreign government. Costs associated with participation by Parliamentarians in Human Rights Dialogues in Australia or overseas are a matter for Parliamentarians. Recommendation 5 The Committee recommends that the Department of Foreign Affairs and Trade and the Attorney General ' s Department provide a briefing to the Human Rights Sub-Committee, of the Joint Standing Committee on Foreign Affairs, Defence and Trade, as soon as practicable prior to and after each human rights dialogue. The Government agrees with the recommendation of the Committee. The Government provides briefings to the Human Rights Sub-Committee of the JSCFADT as soon as practicable after each human rights dialogue with China, Laos and Vietnam. The Department of Foreign Affairs and Trade will also undertake to brief the Human Rights Sub-Committee prior to each human rights dialogue. As noted in response to Recommendation 4, the Chair and Deputy Chair of the Human Rights Sub-Committee of the JSCFADT or their nominees are also invited to participate in the dialogues. Involvement of non-government organisations Recommendation 6 The Committee recommends that the Australian Government establish a human rights web portal that provides a central access point for all human rights matters for the Australian Government, non-government organisations, civil society, the diaspora communities in Australia, and concerned individuals. The Government notes the recommendation of the Committee. A substantial amount of information is available on human rights matters with respect to Australia on the websites of the Department of Foreign Affairs and Trade1, the Attorney-General's Department,2 the Australian Permanent Mission to the UN in New York3 and the Australian Permanent Mission to the UN in Geneva4. This includes information on: Australia's Human Rights Framework the human rights grants scheme the human rights dialogues national human rights institutions and regional bodies the UN Human Rights Council the Universal Periodic Review the Third Committee of the UN General Assembly reports to United Nations bodies and treaty bodies' lists of issues and concluding observations human rights communications human rights publications human rights and education for the public sector, and United Nations Human Rights Recommendations Database. The Department of Foreign Affairs and Trade and the Attorney-General's Department administer email addresses for general inquiries and the provision of information by Australian public and civil society groups on international and domestic human rights matters respectively, which are monitored regularly.5 Both departments will identify opportunities to publicise further the existence of this email address. The Australian Human Rights Commission also maintains a website with extensive information about human rights issues in Australia.6 Resources do not currently permit government departments to establish a separate, comprehensive web portal on all human rights matters. The departments will progressively add information on human rights matters to their existing websites with a view to further facilitating and enhancing public access to such information. Recommendation 7 The Committee recommends that the Australian Government establish a biennial meeting, to be held alternately in Melbourne, Sydney, and Brisbane, with non-government organisations, civil society, the Diaspora communities in Australia, and concerned individuals to discuss Australia ' s human rights dialogues. The Government notes the Committee's recommendation. Existing consultation mechanisms provide appropriate forums to discuss Australia's human rights dialogues with non-government organisations and civil society. Government departments consult with non-government organisations, civil society and the diaspora communities in Australia prior to and after each human rights dialogue. The Department of Foreign Affairs and Trade and Attorney-General's Department hold an annual forum with non-government organisations to discuss human rights issues more generally. The Department of Foreign Affairs and Trade also meets with non-government organisations and Diaspora communities in Australia on request. The departments will continue to explore opportunities to consider a broader range of venues for those consultations, subject to resources. Reporting requirements and mechanisms Recommendation 8 The Committee recommends that the Department of Foreign Affairs and Trade enhance its reporting of Australia ' s human rights dialogues in its Annual Report. At the very minimum the report should include: a list of dialogue participants; a list of issues raised at the dialogues about each country; and a note of the key outcomes or achievements. The Government notes the Committee's recommendation. The annual report of the Department of Foreign Affairs and Trade includes information on the human rights dialogues held the preceding year, including topics raised and discussed with the partner country. The Department will include in the Annual Report a list of organisations that participated in each of its human rights dialogues and will consider what additional information can be included in the annual report, bearing in mind the need to keep the reports concise. Monitoring and evaluation of outcomes Recommendation 9 The Committee recommends that the Department of Foreign Affairs and Trade convene a panel of experts to produce a report that outlines a clear set of principles, aims and benchmarks for each of Australia ' s human rights dialogues. The panel should conduct an overall review of the effectiveness of the dialogues every three years. The Government notes the Committee's recommendation. Changes to human rights situations on the ground are often incremental and cannot be attributed to any single factor. The Government judges the success of these dialogues through qualitative, rather than quantitative, measures, such as the frankness of the dialogue, and our ability to raise and pursue all issues of concern, including individual cases of human rights violations. The key benefits of the human rights dialogues are to raise human rights issues in a regular manner, and to exchange information, technical assistance, capacity-building and awareness raising with receptive governments. Overall, we consider that it is the cumulative impact of the dialogues, along with multilateral and bilateral representations, that produce beneficial outcomes for human rights. It would therefore be difficult to create aims and benchmarks by which the effectiveness of the dialogues could be measured. Government departments routinely meet with non-government organisations, civil society and the diaspora communities in Australia prior to and after each human rights dialogue and seek written submissions in advance of each dialogue. The Department of Foreign Affairs and Trade and Attorney-General's Department hold an annual forum with non-government organisations to discuss human rights issues more generally. These meetings provide an opportunity for non-government organisations and civil society to propose objectives and identify issues which could be addressed in each human rights dialogue. The Government notes the important role of the Australian Human Rights Commission, including as a regular participant, in the human rights dialogues. In this context, the Government will seek the Commission's views on how the dialogue process can be enhanced. Adopting a bilateral human rights dialogue with other countries Recommendation 10 The Committee recommends that the Australian Government should make representations to the Sri Lankan Government to open a formal human rights dialogue. A human rights technical cooperation program should also be established in conjunction with the dialogue. The Government notes the recommendation of the Committee. The Government does not consider that holding a formal human rights dialogue would add value in addressing human rights challenges with Sri Lanka. Australia already has robust and regular discussions on human rights with Sri Lanka at the highest level, and has regularly raised its concerns about the numbers of civilian casualties during the final stages of the conflict there. The Government closely monitored Sri Lanka's Lessons Learnt and Reconciliation Commission (LLRC) process and is following carefully implementation by Sri Lanka of the LLRC recommendations and the National Action Plan for the Protection and Promotion of Human Rights. The Australian Government consistently funds programs to promote and protect human rights in Sri Lanka, including through the Human Rights Grants Scheme. Complementary human rights advocacy Recommendation 11 The Committee recommends that the Australian Government assist interested Asia-Pacific countries in the establishment and development of a National Human Rights Institution within their respective country. The Government agrees with the recommendation of the Committee. Australia has already engaged with interested Asia-Pacific countries to begin development of National Human Rights Institutions. With Australian support, the Asia-Pacific Forum for National Human Rights Institutions has provided advice and expertise to assist with the establishment of national human rights commissions in the region. This has contributed to the growth of the number of internationally accredited national human rights institutions in the Asia Pacific from four to seventeen since 1996. ______________ 1 http://www.dfat.gov.au/issues/human-rights/index.html 2 http://www.ag.gov.au/Humanrightsandantidiscrimination/Pages/default.aspx 3 http://www.unny.mission.gov.au/unny/home.html 4 http://www.geneva.mission.gov.au/gene/un.html 5 Humanrights@dfat.gov.au and humanrights@ag.gov.au 6 http://www.hreoc.gov.au/human_rights/index.html AUSTRALIAN GOVERNMENT RESPONSE TO THE SENATE ENVIRONMENT AND COMM UNICATIONS REFERENCES COMMITTEE R eport: Operation of the South Australian and Northern Territory container deposit schemes June 2013 CONTEXT On 11 October 2012 the Senate referred an inquiry on the operation of the South Australian and Northern Territory container deposit schemes to the Senate Environment and Communications References Committee. The Senate Committee was to have particular reference to: The pricing and revenue allocation practices of the beverage industry in the container deposit schemes operating in South Australia and the Northern Territory, including: a. management of the operation of container deposit schemes in South Australia and the Northern Territory; b. the cost structure of the beverage industry's involvement in these container deposit schemes; c. the use of unredeemed deposits and unused handling and transport fees; d. alternative scheme structures which ensure beverage producers cannot pass on unreasonable costs from these recycling schemes if such schemes are implemented in additional states or nationally; e. structures to ensure schemes managed under the Product Stewardship Act 2011 do not result in producers passing on unreasonable costs; and f. Any other related matters. The Senate Environment and Communications References Committee tabled its report, Operation of the South Australian and Northern Territory container deposit schemes on 22 November 2012. The report outlines six recommendations; two directed at the Council of Australian Governments (COAG) Packaging Impacts Decision Regulation Impact Statement (RIS) process, two directed at state and territory governments should they decide to introduce their own container deposit schemes, and two directed at the South Australian and Northern Territory governments relating to the operation of their schemes. The inquiry also produced a dissenting report by Senator Xenophon and Senator Whish-Wilson which contained three recommendations. INTRODUCTION The management of waste is primarily the responsibility of state, territory, and local governments. The role of the Australian Government in this area has evolved in the past few years, a particular focus of which has been harmonising national approaches to waste management through forums such as the COAG Standing Council on Environment and Water (SCEW) (previously known as the Environment Protection and Heritage Council (EPHC)). Through SCEW Australia's environment ministers endorsed the National Waste Policy which provides a coherent, efficient, and environmentally responsible approach to waste management in Australia. At the EPHC meeting on 5 July 2010 the Packaging Impacts Regulation Impact Statement process was announced which addressed Strategy Three of the National Waste Policy: "The Australian Government, in collaboration with state and territory governments, industry and the community will better manage packaging to improve the use of resources, reduce the environmental impacts of packaging design, enhance away-from-home recycling and reduce litter (EPHC 2009, p. 10)." The Packaging Impacts Consultation RIS was released on 7 December 2011 and provided a three month consultation period (closed on 30 March 2012) for interested parties and individuals to contribute comments and feedback. There were also public forums organised in all capital cities across Australia, along with three regional areas. Hundreds of submissions from individuals, industry, environmental groups, and local governments were received. At the SCEW meeting on 24 August 2012 Australia's environment ministers agreed to move ahead with a Decision RIS. The Decision RIS will further analyse the seven options from the Consultation RIS, as well as three new options based on feedback from consultation from the Consultation RIS including: a container deposit scheme based on the model that is operating in South Australia, and two additional co-regulatory product stewardship options. The Decision RIS will be presented to Australia's environment ministers for consideration on the best approach to harmonised action across Australia from all levels of government. RESPONSE TO RECOMMENDATIONS Recommendation 1 3.36 The committee recommends that should a national container deposit scheme be agreed to and implemented through the COAG process, steps similar to those used during the GST and carbon pricing policies be taken to ensure it is not used as a justification for price rises beyond those warranted by the scheme. Commonwealth Position: Noted The Commonwealth notes the recommendation of the committee which relate to issues currently under consideration by the Standing Council of Environment and Water through development of the Packaging Impacts Decision Regulation Impact Statement (RIS). The Packaging Impacts Decision RIS process is a Council of Australian Governments process involving state, territory, and local governments, as well as the Commonwealth. Recommendation 2 3.37 The committee recommends that should any other state implement a container deposit scheme, they be mindful of taking steps to ensure it is not used as a justification for price rises beyond those warranted by the scheme. Commonwealth Position: Noted This is a matter for state and territory governments. Recommendation 3 3.72 The committee recommends that should a national container deposit scheme be agreed to and implemented through the COAG processes, there should be appropriate measures to ensure transparency in estimating and reporting return rates for various products and appropriate measures to assist in dispute resolution between any beverage manufacturers and super collectors. Commonwealth Position: Noted The Commonwealth notes the recommendation of the committee which relate to issues currently under consideration by the Standing Council of Environment and Water through development of the Packaging Impacts Decision Regulation Impact Statement (RIS). The Packaging Impacts Decision RIS process is a Council of Australian Governments process involving state, territory, and local governments, as well as the Commonwealth. Recommendation 4 3.73 The committee recommends that should any other state implement a container deposit scheme, they be mindful of implementing appropriate measures to ensure transparency in estimating and reporting return rates for various products and appropriate measures to assist in dispute resolution between any beverage manufacturers and super collectors. Commonwealth Position: Noted This is a matter for state and territory governments. Recommendation 5 3.74 The committee recommends that the South Australian and Northern Territory governments should review their schemes to ensure confidence in estimating and reporting return rates for various products and that appropriate measures are in place to assist in dispute resolution between any beverage manufacturers and super collectors. Commonwealth Position: Noted This is a matter for state and territory governments. Recommendation 6 3.80 The committee recommends that the South Australian and Northern Territory governments give consideration to removing products that are sold in containers less than 100 millilitres and that need to be kept refrigerated from being included in their container deposit schemes. Commonwealth Position: Noted This is a matter for state and territory governments. RESPONSE TO DISSENTING RECOMMENDATIONS 1. The committee should initially request and if necessary compel beverage companies to provide in-confidence time series information (over a period of 18 months) on wholesale prices in South Australia and the Northern Territory and a non CDL state as a comparison. 2. The committee should also request and if necessary compel the ' super collectors ' to provide in-confidence information on their annual profits, including a breakdown by state. Commonwealth Position: Not supported The Commonwealth notes that beverage companies and 'super-collectors' participated in this Senate Inquiry through both written submissions and oral evidence at the public hearing. 3. If a national container deposit scheme is established or any other state introduces a container deposit scheme, evidence from this inquiry — relating to the existence of inefficiencies and profiteering -suggests that serious consideration should be given to excluding beverage companies from involvement with future super collection operations (ie co-ordinator roles). Commonwealth Position: Noted The Commonwealth notes the recommendation relates to issues currently under consideration by the Standing Council of Environment and Water through development of the Packaging Impacts Decision Regulation Impact Statement (RIS). The Packaging Impacts Decision RIS process is a Council of Australian Governments process involving state, territory, and local governments, as well as the Commonwealth.