FUEL PRICE DISCLOSURE BILL 2016 Second Reading Speech

Northern Territory Second Reading Speeches

FUEL PRICE DISCLOSURE BILL 2016

(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)

FUEL PRICE DISCLOSURE BILL
(Serial 153)

Bill presented and read a first time.

Mr GILES (Chief Minister): Madam Speaker, I move that the bill be now read a second time.

The purpose of the bill is to ensure transparency in the Territory’s automotive fuel retail market and to make automotive fuel retailers more accountable to consumers. The bill will allow for the making of Gazette orders that require automotive fuel retailers and those that supply them to provide details and a full breakdown of their retail and profit margins. It also empowers the Commissioner of Consumer Affairs to publish information about the fuel retail market.

Historically we know that the Northern Territory and other regional areas in Australia have always had higher automotive fuel prices compared to other capital cities. Territory consumers are right to be concerned about these higher prices and to expect that they can be justified. This concern is not new.

A number of factors contribute to higher prices in the Territory. These factors include lower volumes of sales, less competition, distance, location, higher input costs including rent and power, lower sales from other sources of income and lack of a refinery in the Territory.

Up until 2010 the retail fuel price differential for unleaded ULP between Darwin and other capital cities was relatively stable, averaging about 8c per litre. However, from late 2010 the price differential began to increase coinciding with a concentration of retailers in the Darwin fuel market. This increase became particularly pronounced over the next two years as the price differential increased to a peak of almost 30c per litre in early 2012. Similar price differentials were experienced across the Territory.

At the start of 2013 we spent much time working on solutions to try to drive competition and find solutions. As you and others will be aware, as Chief Minister I convened a fuel price summit on 7 October 2014. The summit was attended by a number of industry representatives including the Automobile Association of the Northern Territory or AANT, Puma Energy, Caltex, United, the road transport industry, Vopak and the Australian Competition and Consumer Commission. However, the summit did not elicit further information about the structure of the industry and its breakdown of costs other than what was already publicly available.

The summit had the public benefit of discussing and clarifying why it can be expected that petrol prices will be higher in the Territory, but it shed no further light on why the price differential changes or why the cost of automotive fuel in Katherine is consistently lower than the rest of the Territory. What the summit also provided was clarity around the fact that the gap in meaningful public information is in the breakdown of the retail margin. These are issues I believe Territorians would like to understand.

Accordingly, following the summit on 22 October 2014 I tabled the Draft Fuel Price Disclosure Bill in this Assembly. At the same time a Fuel Price Disclosure Bill Scrutiny Committee was established and tasked with the job of scrutinising the bill, including whether it would meet the aims of better informing motorists of the price structure of fuel and promoting price competition. There was a marked decline in the price of unleaded fuel after the summit and after tabling the bill.

It should be noted that following the fuel summit and after a furious lobbying campaign in January 2015 by me and my government, the ACCC announced that it would undertake micro-market investigations into fuel prices in regional markets for the first time in Australia. On 10 March 2015 it announced that Darwin would be the first location to be subject to such an investigation.

On 30 April 2015, after a comprehensive consultation process, the Fuel Price Disclosure Bill Scrutiny Committee tabled its report, which recommended that, amongst other things, in light of the ongoing ACCC investigations and the recent reductions in retail fuel prices, the government should postpone any regulatory intervention. Accordingly, the tabled bill was not progressed for the time being.

The next step in this story came in November 2015 when the ACCC finally published its report on the Darwin petrol market. The report noted that high retail prices in Darwin were reflected in high profits. It recommended increased transparency and the promotion of competition in the market, including the regular publication of the difference between wholesale prices and retail prices providing current retail prices to help motorists shop around, and regular reporting on market concentration.

In the period between the Fuel Price Summit in October 2014 and the release of the ACCC report over a year later, retail unleaded petrol prices in Darwin fell dramatically by 45c per litre. Over this period the retail that ULP prices in Darwin averaged only 1.7c per litre higher than other capital cities and, at times, retail unleaded prices in Darwin were well below the national average.

Unfortunately, fuel prices again become the subject of concern for Territorians. While prices in other Australian states have been reducing further, the gap between retail price at the pump in Darwin and the rest of Australia had again widened. This is of particular concern in relation to Darwin’s retail price of diesel, which has not followed the reduction seen in the national average, especially in late 2015 and early 2016. It is also in regard to gas.

The price differentials throughout January 2016 averaged 8c per litre for ULP and 12c per litre for diesel. Despite a recent drop in prices, including this morning when I saw it was about $1.16 for unleaded, this government sees no alternative but to implement this bill and make good our commitment to improve transparency and accountability in the retail fuel market. If fuel companies need to be watched closely to act competitively then we will watch them.

In developing our response to the Territory’s fuel prices the government considered a number of solutions, including the current regulatory environment in the Northern Territory and other jurisdictions. In the Northern Territory there is currently no regulation of fuel prices and no disclosure requirements directed a fuel retails, apart from the terminal gate price under what is called the Oilcode.

The Australian Competition and Consumer Commission’s role is as the national competition regulator and consumer law advocate. It is primarily a law enforcement body and takes an active role in ensuring all markets, including the fuel market, operate competitively and free of collusion. The ACCC also has role in monitoring fuel prices, but not in setting them.

Pursuant to a ministerial direction under the Competition and Consumer Act 2010 in the Commonwealth, the ACCC has monitored prices, costs and profits of unleaded petrol in Australia for the last six years. The Northern Territory Commissioner of Consumer Affairs under the Consumer Affairs and Fair Trading Act retains an overarching function of collecting, collating and disseminating information in respect of matters affecting the interests of consumers. Therefore, under existing legislation the NT Commissioner of Consumer Affairs previously established and maintained a website called NT Fuel Watch, which monitored the weekly high, low and mean prices for unleaded petrol, premium unleaded, diesel and LPG for the Territory’s major centres.

The NT Fuel Watch scheme was discontinued due to the high cost, low uptake of service and lack of consumer benefit in a small market such as the Territory; however, the Department of Treasury and Finance continues to publish a monthly economic brief covering Territory fuel prices.

In addition to the Commissioner’s power of collecting, collating and disseminating information affecting the interests of consumers, section 8 of the Consumer Affairs and Fair Trading Act provides the Commissioner with power in relation to any of his functions to require any person to furnish him information or to answer any question put by the Commissioner. It is an offence to fail to comply with the Commissioner’s request or to give false or misleading information.

The commissioner’s existing powers under section 8 of The Consumer Affairs and Fair Trading Act are somewhat limited. In order to access detailed data about individual retailers the commissioner would need to give notice under section 8 to each individual retailer from whom details were required, and on each individual occasion, and would have to substantiate the purpose and basis on which the information is required in each instance.

Furthermore, The Consumer Affairs and Fair Trading Act is targeted at consumers, which means that it would be difficult to use the act to seek information from those at the wholesale or distribution levels of the supply business, even if that information impacted on the retail price. There is need to strengthen the commissioner’s powers if we are to improve fuel pricing transparency, and this bill is the vehicle to achieve that.

There are already a number of limited disclosure requirements in Australia. At a wholesale level the Oil Code, which is legislative instrument under The Competition and Consumer Act, requires some disclosure including that the terminal gate price, or TGP, be posted by the wholesale supplier each day. It does not require that the components of the TGP be disclosed, however, much of the information regarding the components is publicly discernible including via the Australian Institute of Petroleum or the AIP website.

Interestingly, Western Australia also requires additional disclosure of TGP under a current petroleum products pricing maximum terminal gate price order which requires wholesalers to notify daily TGP to the WA Commissioner for Consumer Protection. The notified TGP then operates as the maximum price for that product for 24 hours. When notifying a TGP a wholesaler must also state each specified component of that price. No other state has a similar legislation.

The Western Australian Petroleum Products Pricing Act 1983 also imposes disclosure requirements covering petroleum retailers. This is known as the Fuel Watch Scheme. Retailers in much of WA are required to notify their next day prices by 2 pm. They must then change that price for the 24-hour period starting at 6 am the next day. The aim of the Fuel Watch Scheme in WA is to provide certainty and transparency. However, under Fuel Watch retailers are not required to disclose the components of the retail price to the commissioner.

The Western Australian approach which focusses on disclosure at the wholesale level and notification of daily retail prices was considered by the Country Liberals government, but we will not be adopting in the first instance as it does not address the Territory’s circumstances or needs as identified in the summit, that is, the lack of transparency about what constitutes the retail profit margins.

The government also considered the issue of price setting. The Commonwealth government used to regulate wholesale prices through the Prices Surveillance Act 1983. However, price setting for fuel in Australia ceased as part of the national competition policy reforms. Since then it has generally been accepted that a competitive free market is the best way to ensure that consumers get the best deal.

No Australian jurisdiction currently sets fuel prices by assigning a dollar amount, although most jurisdictions have the power to do so, including in circumstances such as natural or manmade disaster, failure of other laws to protect consumers from monopolies or to effectively ensure that consumers benefit from the operation of a competitive market.

In The Northern Territory the Price Exploitation Prevention Act fulfils this function. However, circumstances in which the act can be invoked are constrained by its terms, and there must be sufficient evidence of one of the preconditions in order to invoke its powers. In any event, any market intervention to impose artificial prices should always be a last resort. I will reaffirm that: it should always be a last resort.

After consideration of the Territory’s circumstances and recent changes in the market, this government is of the view that the only way to protect Territory consumers is to bring meaningful transparency to the retail market. This will be done by implementing a legislative framework that focusses on obtaining information from automotive fuel retailers, and where necessary, others in the fuel chain supplying those retailers regarding details and breakdowns of their fuel cost structure.

I will now turn to the structure of the contents of the bill. The Commissioner of Consumer Affairs will be the regulator and have oversight of the legislation. It is proposed that the commissioner will publish on his website information to consumers about the breakdown of fuel prices and the structure of the fuel industry. This includes the publishing of information disclosed by retailers under this Fuel Price Disclosure Bill 2016.

This disclosure will be required by retailers to the Commissioner of Consumer Affairs. It will not be direct from the retailers to the public. Disclosure to the regulator will allow them to check the data and provide the report in a consumer-friendly fashion and ensure the data is available in one easily accessible place. It will reduce both the likelihood of retailers manipulating data and industry concerns about the disclosure of commercial in confidence information. The requirements for disclosure will be set out in a proposed gazette notice or notices. See clauses of the bill for further details. This will be issued by the relevant minister.

These requirements will be focused on obtaining information from retailers on a breakdown of various components of the retail margins in relation to automotive fuel only. The gazette notice will be developed with cross-agency collaboration and in consultation with industry. Although disclosure will initially be aimed at retailers only, clause five of the bill is drafted so that disclosure requirements can be extended to other operators in the supply chain. This power is necessary due to the nature of the NT market where there is a substantial level of market integration.

For businesses operating across other sectors of the market, the commissioner will require disclosure at other levels in the supply chain to determine if such businesses are transferring profits to other parts of the business in order to lower profits at the retail end. The commissioner will in effect, have the flexibility to publish the information in relation to fuel prices in any format he or she considers appropriate. It is proposed that it will be published on the Commissioner’s website. They may choose additional formats such as flyers, bulletins or a mobile phone application at his discretion. There will be no restrictions placed upon what the commissioner can publish. It will be up to the commissioner to determine the information subject to any direction from the minister. However, it is proposed that guidelines will be developed to provide industry with a clear expectation of what is to be published. The Commissioner may require additional information to assist with determining the breakdown of prices, information which may not be suitable or intended for publication.

Compliance and enforcement are other important aspects of this bill. The Commissioner will have the necessary investigative audit and enforcement powers, mainly through linking his current powers under Section 8 of Consumer Affairs and Fair Trading Act. Section 8 allows the commissioner to obtain information relating to his or her functions under the Consumer Affairs and Fair Trading Act or any other act. The commissioner can continue to be able to use his power to request specific information from specific purposes under Section 8 of the Consumer Affairs and Fair Trading Act that is necessary.

It is intended that this legislation will complement rather than replace the commissioner’s existing powers. The commissioner will be assisted by fuel officers who will have the same powers and functions as authorised officers under part 3 of the Consumer Affairs and Fair Trading Act. Fuel officers, which include police officers and the commissioner, have the power to enter and search premises and inspect and copy documents.

Additionally, clause 8 of the Fuel Price Disclosure Bill 2016 creates an offence provision for failure to comply with disclosure requirements. The maximum penalty for which is 400 penalty units, currently that is $61 200 and two years of imprisonment. The existing offences under section 8(4) and section 23(2) of the Consumer Affairs and Fair Trading Act will apply to the provision of false or misleading information to the Commissioner or fuel officers respectively. Additional compliance and enforcement tools in the form of infringement notices and the ability to name and shame can also be enabled under the Fuel Price Disclosure Bill 2016.

The regulation power in clause 10 allows for the making of regulations relating to infringement notices. The functions of the commissioner in clause 6 are wide enough to allow for the publication of information in the form of naming a recalcitrant retailer.

Clause 5 of the bill is drafted to show that an exemption in a Gazette notice could operate as a blanket exemption or by reference to regions or individual retailers.

The Fuel Price Disclosure Bill 2016 is designed as a simple framework that is clear, targeted and easy to administer. It will benefit NT consumers by making the retail automotive fuel industry more accountable and more transparent. I commend this bill to honourable members.

As a result of the committee report and a number of recommendations that came out of that - particularly being six - one was do not do anything until after the ACCC report. The ACCC report has been handed down. We are working through the other five recommendations to make sure they can provide the necessary changes. It was not the intent to introduce this bill in until the proposed changes came through the bill as a whole before entering parliament. However, the Country Liberals, and me as Chief Minister, became so frustrated with the widening gap in the margins from the TGP, or the terminal gate price, that we thought it necessary to introduce this.

Although we have not reached the heights of what occurred at the back end of the last term of the Labor government it got close to those numbers again. I note that prices have come down in the last two weeks since my intervention, and again today they have come down, particularly unleaded, but also on a wider basis diesel.

Introducing this legislation is a sign that we are going to proceed with this legislation. We may not be able to bring it back at the next sittings for debate because we are still working through some amendments which will have to be put through this Chamber during that debate as a result of the committee findings. As soon as those amendments are made I will distribute them to all members once they pass through Cabinet, but that is the general timing. This should be a clear message that it should not be left to the Chief Minister to have to engage with fuel companies to try to drive the price down.

I am a supporter of Liberal philosophy, a supporter of free market enterprise and a supporter of the market responding. The only time governments should intervene is where there is perceived or real market failure. In the Northern Territory, between 2010 and 2012, there was an escalation in market failure. We have had some ups and downs in that time with government intervention here and there, whether that is fuel price summit, bills or letters and phone calls or whatever that may have been, but this bill provides a greater degree of certainty about our desire to have to enter the market because we think there has been perceived or real market failure.

I do not anticipate this coming back at the next sittings for debate. It could, depending on the timing of amendments, but it will certainly be coming back. This is a clear message that this bill be passing through parliament, whether in this form or an amended form, because we are certainly clear with our plan about reducing cost of living pressures, which includes reducing fuel prices, not just reducing housing prices, grocery prices and power prices. We are serious about fuel and are committed to this legislation.

I commend the bill to the House and I table a copy of the explanatory statement.

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