Electricity (Amendment) Bill 2006

ELECTRICITY (AMENDMENT) BILL 2006 SECOND READING SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY

Mr Speaker, Sir, I beg to move, “That the Bill be now read a second time”.

Objective

Sir, the Electricity Act was passed by this House in 2001 to provide a legal framework for the governance of the electricity market. The Act creates, amongst other things, a competitive market framework for the electricity industry and a regulatory regime to ensure the security and reliability of supply of electricity to the public.

Since the liberalization of the electricity market in 2001, there have been changes in the structure of the electricity market. The vertically-integrated business of generation and transmission undertaken by PUB in the past has been separated into the competitive generation business and the monopolistic transmission business. Going forward, the Government needs to be prepared for any changes in the ownership structure of the transmission business that could affect the security and reliability of our electricity supply. This will require new provisions in the Act.

In addition, the Act has to be amended to enable the regulator, the Energy Market Authority (“EMA”), to carry out its functions and duties more effectively. Let me now explain the proposed amendments.

Licensing Regime

Clauses 5 and 7 of the Bill amend sections 6 and 9, respectively, to enable EMA to license SP Power Grid Ltd (“SPPG”), which manages the grid operations for and on behalf of SP Power Assets Ltd (“SPPA”), the transmission licensee which owns the grid assets.

Currently, SPPG operates under a management service contract with SPPA. While EMA can impose penalties on SPPA for violations under the Act, it does not have regulatory powers over SPPG. Since the electricity grid is critical infrastructure whose failure can have disproportionate effects on the economy, there is a need to also license SPPG to ensure adequate control over the grid infrastructure.

Security Safeguards

Clause 13 of the Bill introduces a new Part IVA to the Electricity Act, which will allow EMA to control ownership changes in electricity licensees and other entities involved in the transmission business. Electricity licensees involved in the transmission business will also be required to obtain EMA’s approval for the appointment of persons to key management positions. These provisions will enhance regulatory powers over the ownership and management of the grid. Similar provisions are found in other legislation such as the Telecommunications Act and the Broadcasting Act.

Power to Obtain Information

Clause 3 of the Bill amends section 4 to broaden the scope of EMA’s power to obtain information and documents and also to allow EMA to retain any document or information without payment. These provisions are also found in the Telecommunications Act and will better enable EMA to acquire from the market players information EMA requires to carry out its functions and duties effectively.

Improvement to Penalty Framework

Amendments have also been proposed to strengthen the penalty framework in the Act for effective regulation of the electricity industry. Clause 5 amends section 6 to provide for an additional fine of up to $12,500 for each day an offence of carrying out a licensable activity without an electricity license continues after conviction.

Ambit of Market Rules

Clause 15 of the Bill amends section 46 to require the wholesale market operator – the Energy Market Company, to modify the market rules governing the electricity market in accordance with EMA’s directions. Currently, EMA does not have the power to require the Energy Market Company to modify the market rules if the market rules are incompatible with or do not give effect to the prevailing energy market policies. The amendment to section 46 will therefore facilitate the effective implementation of such policies by EMA in a manner consistent with EMA’s functions and duties under the Act.

Clause 16of the Bill amends section 47 to subject the Market Company and market support services licensees - SP Services, to financial penalties for breach of market rules. These companies provide important services to the electricity market, and should be subject to the same penalties as market participants.

Revised Appeal Process

Clauses 17 and 21 of the Bill amend sections 59 and 98, respectively, to provide that the effect of any decision or direction by EMA which is the subject of an appeal will not be suspended by reason of the appeal, unless the appeal is against the imposition of a financial penalty or its quantum. This will ensure that EMA's decision or direction will be complied with during the course of an appeal, while not subjecting the appellant to financial burden. This is similar to existing provisions in the Telecommunications Act and the Competition Act.

Clause 21 of the Bill also amends section 98 to empower the Minister to refer appeals of a technical or specialized nature to an Appeal Panel established by the Minister. Such an Appeal Panel must comprise at least 3 persons, as required under section 65 of the Act, but the appointment of one or more of such persons to the Appeal Panel may be by reason of their technical or other specialized knowledge relevant to the appeal. The decision of the Appeal Panel will be final.

In addition, clause 21 adds provisions on the details of the appeal process under section 98, such as the requirements to lodge an appeal to the Minister within 14 days and to provide adequate details of the grounds of the appeal. These will allow appeals to the Minister to be dealt with expeditiously.

Works by Electricity Licensee

Clause 14of the Bill amends section 31 to specify that an electricity licensee must first seek the approval of EMA to carry out any relevant work in relation to an electric line, electrical plant or other matter specified in the section which is owned or operated by another electricity licensee. It is also expressly stipulated that the right of an electricity licensee to carry out any work under section 31 is to have effect notwithstanding any agreement which prohibits the carrying out of the work.

These amendments will prevent generation licensees from relying on contractual arrangements to thwart the transmission licensee’s entry into their land to, amongst other things, develop the transmission system for the purpose of facilitating entry of new generation licensees. To guard against any abuse of powers by the transmission licensee, EMA’s approval of such works must first be obtained by the transmission licensee. In addition, the grant of EMA’s approval will not prejudice the right of a generation licensee, as owner or occupier of the land in which the works are to be carried out, to lodge an objection to EMA under section 31 of the Act. The decisions of the EMA under section 31 are final.

CONCLUSION

The proposed amendments will help meet the changing demands in the increasingly competitive electricity market while enhancing the security and reliability of infrastructure critical to Singapore. At the same time, they will strengthen the regulatory framework and enable EMA to carry out its functions and duties effectively.

Mr Speaker Sir, I beg to move.