Second Reading Speech for the Gas (Amendment) Bill

SPEECH BY DR TAN WU MENG, SENIOR PARLIAMENTARY SECRETARY FOR TRADE AND INDUSTRY AND FOREIGN AFFAIRS, AT THE SECOND READING OF THE GAS (AMENDMENT) BILL ON 1 OCTOBER 2018

1.         Mr Speaker, on behalf of the Minister for Trade and Industry, I beg to move, “That the Bill be now read a Second time.”

Objective

2.         The Gas Act was passed in 2001 to establish a regulatory regime to ensure a competitive, secure and reliable gas supply to the industry and the public. The Gas Act was last amended in 2007 to enhance market access and strengthen safeguards for critical infrastructure.

3.         Singapore’s energy markets have evolved significantly since. Our reliance on imported natural gas has grown, with over 95% of our electricity generated from natural gas, up from 77% in 2010. To meet this demand in a secure and competitive manner, we have built a liquefied natural gas (LNG) terminal to supplement our piped natural gas (PNG) supply. The LNG terminal has also enabled new business opportunities in a variety of ancillary services such as trading, bunkering, and break-bulking, which has enhanced the dynamism of our gas market.

4.         Against the backdrop of these developments in our energy markets, it is necessary to update the Gas Act to ensure that it remains effective and relevant. MTI and EMA are therefore proposing to update the Gas Act in four key areas: first, to enhance gas supply security and the regulation of safety of gas-related activities; second, to enhance protection of critical gas infrastructure and deterrence for serious offences; third, to facilitate competition in the gas market; and fourth, to clarify and improve procedural and technical provisions in the Gas Act.  

5.         In finalising these amendments, MTI and EMA sought feedback from industry stakeholders and members of the public through a public consultation in June earlier this year. MTI and EMA have carefully considered all feedback received and incorporated them where relevant.

6.         Mr Speaker, let me now elaborate on the key amendments in this Bill, starting with the first area, which is to enhance gas supply security and the regulation of safety of gas-related activities.

Enhancing gas supply security and the regulation of safety of gas-related activities

Dealing with severe gas shortage situations

7.         Singapore relies heavily on imported natural gas as fuel for power generation and as industrial feedstock, and any gas supply emergency can adversely impact our economy. The first amendment, in clause 14 of the Bill, introduces a new part VIIIA to the Gas Act, where in the event of an imminent or actual severe gas shortage, EMA, with the Minister’s approval, is empowered to issue directions to require any person to take measures specified by EMA to address or alleviate the severe gas shortage, or prevent it from occurring or continuing. These directions may include empowering EMA to reallocate gas from users who can use alternative fuels to those who have no alternative fuel supplies. These directions may also include requiring relevant parties to enter into, modify or terminate contractual agreements. Persons who comply with the direction will be protected from legal liability, if doing so results in breach of an existing contractual obligation.

8.         The Bill further defines that a “severe gas shortage situation” occurs when there is a shortage of natural gas imported into Singapore that results in gas importers being unable to fulfil their contractual obligations to end-users and where the extent, and likely duration or uncertainty of the period, of the gas shortage is likely to threaten the security or stability of gas or electricity supply in Singapore or result in a severe loss of industrial or economic output. 

9.         Mr Speaker, in moving this amendment, I am mindful that the power to issue any direction is broad and can affect the commercial arrangements of the parties concerned. The amendment is worded as such to provide EMA with the flexibility to react to the wide range of potential threats that may emerge. I would like to assure this House that before exercising this power, EMA would have explored alternative solutions to prevent, address or alleviate the severe gas shortage, such as procuring gas from alternative sources and leveraging on existing market mechanisms and other regulatory levers.  In addition, parties can seek compensation for losses or damage suffered as a result of complying with EMA’s directions. The compensation will be determined by an independent panel set up under the Gas Act.

Enhancing safety regulation of gas-related activities 

10.      The second amendment, in clause 3 of the Bill, amends Section 3 of the Gas Act to enhance EMA’s regulation of gas-related activities. Presently, EMA’s regulatory functions under the Gas Act include “protecting the public from dangers arising from the production, processing, storage, conveyance, shipping, supply or use of gas”.  To cover the broader value chain of gas-related activities, clause 3 of the Bill expands these regulatory functions to include protecting the public from dangers to health arising from such gas-related activities, including the import of gas, which is presently not included. This strengthens regulation over a broader spectrum of gas-related activities and expands EMA’s regulatory control over technical requirements for gas imports to include thresholds for harmful substances such as sulphur compounds and heavy metals.

Expanding the scope of “designated gas licensees” and special administration orders

11.      The third amendment, in clause 8 of the Bill, expands the scope of “designated gas licensees” under Part VIIB of the Gas Act. These are licensees who require EMA’s approval for changes in ownership, and board and chief executive officer appointments, in view of their strategic importance to our gas system. Presently, the only designated gas licensees are the gas transporter licensee, that is PowerGas Ltd, which is responsible for the operation of the gas transmission system, and its agent licensee, that is SP PowerGrid Ltd. We are including the LNG terminal operator, that is Singapore LNG Corporation Pte Ltd, as a “designated gas licensee”, in view of its critical role in ensuring energy security. To allow flexibility to designate gas licensees as the gas industry evolves, the amendment will also empower the Minister to specify other gas licensees as “designated gas licensees”, going forward if the need arises. 

12.      The fourth amendment, in clause 22 of the Bill, amends Sections 33 and 34 of the Gas Act to expand the scope of the Special Administration Order (SAO), to provide EMA with greater flexibility to deal with unforeseen emergency scenarios. 

13.      Presently, an SAO can only be issued in relation to the gas transporter and LNG terminal operator licensees. The amendment will expand the scope of the SAO to cover any gas licensee. This will bring the SAO provisions in the Gas Act in line with those in the Electricity Act.

MTI and EMA have also incorporated feedback from the industry to make clear that the SAO can be issued in relation to some (and not necessarily all) of the affairs, business and property of licensees. This will enable the SAO to be tailored to the gas-related business of licensees whose business include non-gas related parts, as may be appropriate in the circumstances.

14.      The fifth amendment, also in clause 22 of the Bill, amends Section 34(6)(b) of the Gas Act to allow licensees to apply for a Judicial Management (JM) order under Part VIIIA of the Companies Act once EMA’s consent is obtained. The Gas Act currently prohibits a gas licensee from applying for a JM. The intent is to ensure that critical licensees are not unilaterally placed under JM and dissolved. However, this restricts non-critical licensees from applying for a JM even though their restructuring or exit would not adversely impact our energy security and system stability.  Hence, the amendment allows JM of a licensee if EMA’s consent is obtained.

Enhancing protection of critical gas infrastructure and deterrence of serious gas related offences

15.          Mr Speaker, let me now elaborate on the second key area of update – enhancing protection of critical gas infrastructure and deterrence of serious gas related offences.

Protection of submarine gas pipelines

16.      The sixth amendment, in clause 6 of the Bill, introduces a new Section 32B to the Gas Act that makes it an offence to damage any submarine gas pipeline. Submarine gas pipelines within Singapore’s territorial waters convey imported natural gas to our gas network. Damage to these pipelines can disrupt Singapore’s gas and electricity supply and result in high economic losses. Presently, damage to any submarine gas pipeline is an offence under the Merchant Shipping Act that carries a maximum fine of only $50,000 and/or imprisonment of up to 2 years upon conviction. This is too low to effectively deter damage to submarine gas pipelines. In view of the higher costs of repairing submarine gas pipelines vis-à-vis land-based gas pipelines, a higher maximum fine of $2 million and/or imprisonment of up to 5 years upon conviction will be imposed. This is a calibrated increase compared to the $1 million fine and/or imprisonment of up to 5 years for damage to land-based gas pipelines.

Clarify liability of parties responsible for damaging land-based gas transmission infrastructure

17.      The seventh amendment, in clause 5 of the Bill, amends Section 32A of the Gas Act to rationalise the different offences currently provided in the Section, which include offences relating to damage to land-based gas transmission infrastructure. Such infrastructure is critical in ensuring the flow of gas to businesses and households. The amendment also seeks to extend the reach of the Section by making a person who causes or permits another person to damage land-based gas transmission infrastructure guilty of an offence. There is no need for the former to have any particular relationship with the latter. Finally, the distinction between damage in earthworks and non-earthworks related situations is removed as it is strictly not relevant to assessing culpability. The penalty for offences under this Section remain unchanged as a maximum fine of $1 million and/or imprisonment of up to 5 years upon conviction.  

Enhancing deterrence against dishonest/fraudulent consumption of gas and meter tampering offences

18.      Beyond enhancing protection of critical gas infrastructure, there is a need to effectively deter the dishonest consumption of gas and tampering of gas meters.

19.      The dishonest consumption of gas presently carries a maximum fine of $50,000 and/or imprisonment for a term of up to 5 years upon conviction. However, in cases where the dishonest consumption of gas is carried out on a large scale and the value of gas dishonestly consumed is substantial, the existing penalty can be disproportionately low compared to the value of gas consumed and ineffective as deterrence. 

20.      Hence, the eighth amendment, also in clause 7 of the Bill, amends Section 47 of the Gas Act to mandate that the court imposes an additional fine equivalent to three times the value of gas dishonestly consumed, on conviction for dishonest consumption of gas and meter tampering offences. This amendment takes into consideration that the cost of the gas that is dishonestly consumed is borne by all paying consumers. This enhances deterrence by ensuring proportionality between the penalty imposed and the value of gas dishonestly consumed. 

21.      The ninth amendment, also in clause 7 of the Bill, expands Section 47 of the Gas Act to specify that it is an offence to do anything that compromises or affects the ability of a meter in registering the quantity of gas supplied to any person or premises. This amendment will enable EMA to prosecute persons who use novel or unconventional methods to tamper with meters, with a view to dishonestly consume gas.

Facilitating competition in the gas market

22.      Mr Speaker, let me move on to the third key area of update to the Gas Act that aims to facilitate competition in the gas market.

23.      Part IX of the Gas Act presently empowers EMA to regulate anti-competitive practices and conduct in the Singapore gas market. To facilitate competition in the gas market, the tenth amendment, in clause 15 of the Bill, introduces a new Section 72A to the Gas Act that enables EMA to issue guidelines to inform the gas market regarding practices and conduct that are anti-competitive. This amendment is consistent with the Competition Act, which similarly allows the Competition and Consumer Commission of Singapore (CCCS) to publish guidelines to guide market behaviour. To ensure that the industry’s views are incorporated, EMA will consult the industry when formulating these guidelines.

Clarifying and improving procedural and technical provisions 

24.      Mr Speaker, the final key area of update seeks to clarify and improve technical provisions in the Gas Act.  

25.      First, clause 20 of the Bill amends Section 93 of the Gas Act to enable regulations to be made to specify the procedures for submission of appeals to and consideration of appeals by the Minister regarding EMA’s regulatory decisions. This will enable regulations requiring the facts, issues and grounds of appeal to be set out clearly when appeals are made and enable the Minister to reject appeals that do not meet these requirements. Confidential and sensitive information submitted in appeals will also be safeguarded. This will facilitate consideration of appeals by the Minister, and bring the Gas Act in line with existing appeal provisions in other Acts, such as the Telecommunications Act. 

26.      Second, to better reflect EMA’s functions in ensuring the security and reliability of our gas supply, clause 3 of the Bill amends Section 3 of the Gas Act to clarify that EMA’s regulatory functions include arranging for the secure operation of the gas transmission system, which EMA already performs.

27.      Third, clause 21 of the Bill amends Section 96 of the Gas Act to broaden regulations that may be made under Section 96(2)(o) relating to the conversion of a gas pipeline network to convey natural gas. The broadened regulations will enable EMA to require relevant parties, such as building owners/managers, to submit updated plans and other information to the licensees carrying out the conversion works. It will also allow regulations to be made to provide for termination of supply of gas to any premises if the conversion is not carried out successfully, on safety or other grounds. Clause 21 also amends Section 96 to enable EMA to recover costs for services provided in connection with its regulatory functions, without having to prescribe the costs as fees.

28.      Last, clause 19 of the Bill inserts a new Section 92A to provide for various moneys collected by EMA under the Gas Act to be paid into the Consolidated Fund.

Conclusion

29.      Mr Speaker, in summary, the proposed amendments to the Gas Act that I have elaborated on in my speech are necessary to ensure that the Gas Act remains effective and relevant against the backdrop of changing energy markets and business models.

30.      Sir, I beg to move.