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  4. 26 September 2001

Standing Committee On State Development

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SpeakersKelly The Hon Tony; Gay The Hon Duncan; West The Hon Ian; Cohen The Hon Ian; Saffin The Hon Janelle
BusinessCommittee, Report


    STANDING COMMITTEE ON STATE DEVELOPMENT

Page: 17154
    Report: Merger of Country Energy Distributors

    Debate resumed from 6 June.

    The Hon. TONY KELLY [2.45 p.m.]: When I last spoke to this report I reminded the House that the committee found that the merger of country energy distributors would achieve considerable cost savings, particularly in administration and information technology. As I said on the last occasion, in relation to information technology alone New South Wales Treasury informed the committee that its estimates suggested that total savings of up to about $12 million in up-front capital costs and $5 million a year in operational costs could be achieved. Country Energy's economies of scale will enable it to boost revenue and reduce costs, providing a more efficient business that can direct attention on the main game, that is, providing the best service for country energy consumers.

    As I said on the last occasion, there seemed to be a disparity in the service that was provided to many country energy consumers. Those of us who are fortunate enough to have properties in some inland areas, like the Hon. Doug Moppett and me, seem to be a little more fortunate than some of our friends who have properties in coastal areas. Certainly, the view expressed thus far has been that the new Country Energy group seems to provide electricity more equitably to all country energy consumers. One of the greatest potential returns to come out of the merger is the longer-term benefits that Country Energy's size and financial muscle could bring to the critical issue of rural and regional development, which is more important now than at any other time, particularly given the demise of regional airline services.

    Mr Greg McLean of the Australian Services Union regarded the proposed merger as an excellent opportunity for development, as it would create an organisation "to be a very good powerhouse for employment in regional New South Wales, to concentrate on the main game of rural New South Wales … and having depots, admin centres and interface points for the community to visit in its area will assist greatly". Advance Energy believed that Country Energy's infrastructure, its size and its financial clout would enable it to pursue initiatives such as business development strategies and to encourage interstate and metropolitan businesses to relocate to regional New South Wales. In this way, Country Energy, being focused on its regional and rural base, and developing strategic alliances with government departments and other business enterprises, would represent a significant player in the area of State and regional development. I look forward to the important future role that Country Energy can play in our Government's ongoing efforts to promote investment and generate jobs throughout country New South Wales.

    The committee noted the strong support by stakeholders for the appointment of Craig Murray as chief executive officer designate for Country Energy. As honourable members will recall, that appointment had already been announced by the Government at the time the committee undertook many of its inquiries. The committee believes that the long-term viability of Country Energy depends not only on the support and assurances of the State Government but, ultimately, on the philosophies and attitudes of the management driving the new entity. I believe that someone with the respect and industry expertise of Craig Murray is ideally suited to lead Country Energy into the future.

    Many of the witnesses who appeared before the committee, particularly those representing the unions, suggested that the Government's assurances relating to the closure of depots and so on were commendable but it was up to management to implement the Government's decisions, and that if management did not have a bent that way it probably would not happen. The appointment of Craig Murray and his management team seemed to provide a stronger assurance on those issues than the assurances provided by the Government. In recommending the merger, the committee is keen to provide a watching brief over the new entity over the next few years.

    The Hon. DUNCAN GAY (Deputy Leader of the Opposition) [2.52 p.m.]: I am pleased to speak to the twenty-third report of the Standing Committee on State Development. I congratulate the committee on the report; it is an excellent document. As I have said on other occasions, the Government's decision to merge country energy distributors was a good initiative. As the Government knows, I am often critical of many of its decisions. However, the decision to merge country energy distributors was a decision the Government had to make. I hope the Government will acknowledge that it was a decision in respect of which the Opposition could have made it tough for the Government. However, at the end of the day New South Wales jobs were at stake. In opposition, as in government, one has a responsibility to do the right thing. Honourable members may remember that I called for the Standing Committee on State Development to examine and report on the planned formation of Country Energy, and I was pleased that the House backed my motion when it came before the House earlier this year.

    The motion seeking referral of the merger plans was born out of a real concern in rural and regional areas that a merger of electricity distributors could lead to a decrease in service and access levels in many areas—and, frankly, those regions could not make do with anything less than the existing levels. It was born out of a concern that the Government had effectively put the cart before the horse by announcing its intention to form Country Energy without any real public scrutiny of the plan. I pointed out at the time that, despite a firm election pledge to conduct impact studies with regard to legislation affecting rural and regional New South Wales, this plan was about to go before Cabinet without any such scrutiny. That is why it was so important for the standing committee to examine the proposal. The work had been done by the Treasury boffins and by consultants who were paid absurd amounts of money. Honourable members will know whom I mean: the group of consultants subcontracted to the Market Implementation Group are paid more than the Commissioner of Police and are the highest paid public servants in this State.

    The Hon. Ian Macdonald: Your mates.

    The Hon. DUNCAN GAY: Are they my friends?

    The Hon. Ian Macdonald: Lots of them are. They worked for your Government.

    The Hon. DUNCAN GAY: My understanding is that they worked for the Queensland Government before they came to New South Wales. They might well be my friends, but I did not realise it.

    The Hon. Ian Cohen: Government members are claiming new friends in anticipation of Coalition Federal electoral success. There is a notable change of attitude in the House.

    The Hon. DUNCAN GAY: I thank the Hon. Ian Cohen for that interjection. That change of attitude is most appropriate. It is a recognition that the great Howard-Anderson Government will be returned and that the fortunes of the Opposition in New South Wales will change. It is good of the honourable member to recognise that that change is already happening. Many country communities remember the situation in the mid-1990s when 22 county councils across the State were dismantled and the six State-owned electricity distributors were formed. Some 2,000 jobs were lost from country centres and long-established service depots, mostly in smaller centres and villages, were shut down. Local knowledge was lost, the time taken to repair equipment or make service calls increased as service teams had to travel longer distances, and there were some well-documented cases of assets owned by the former county councils being stripped from local communities. It was an example of Michael Eganomics at its very best—or worst, depending on your point of view.

    When the Premier and the Treasurer announced the plan to merge NorthPower, Advance Energy and Great Southern Energy into Country Energy, I think it would be fair to say that it came as no real surprise to anyone. Various discussion papers had been circulating for some time and several reform models were being advocated. However, that does not necessarily mean that the plan enjoyed support in regional New South Wales, where people remembered what had happened before. Those models included a possible merger of the retail businesses of EnergyAustralia and NorthPower—which, I understand, was a continuing process until shortly before the Country Energy announcement— and a model that would have involved a merger between Integral Energy and at least two of the other country-based distributors. That proposal apparently fell over when the country-based distributors discovered the extent of some of Integral Energy's financial problems.

    With the onset of full retail contestability [FRC] looming, the news of a merger of some of the smaller distributors was welcomed in part, but it was viewed with some concern in other quarters. FRC will be an exercise in survival of the fittest. An effective government-owned monopoly will be open to competition as customers will have the choice where to buy their electricity. The formation of Country Energy was designed to gather a customer base that would be sustainable under FRC. The new company has a combined customer base of about 700,000, which places it in a solid position to enter the fully contestable market.

    The report of the Standing Committee on State Development has formulated some solid recommendations, and I intend to speak briefly about some of them. The report recommends that the Independent Pricing and Regulatory Tribunal [IPART] continue to work towards a ring-fencing regime for the electricity industry. Ring fencing effectively separates the retail and network businesses of the electricity distributors and, frankly, makes a degree of sense. While it has been met with concern by some players in the market, we believe it is a solid suggestion.

    The second recommendation is an important one relating to the tariff structure of the new company. Country Energy, by virtue of the fact that it takes in three companies, has approximately 700 individual tariffs, and this recommendation calls on IPART to examine any impediments arising from that situation—and one can imagine that there would be many. Across the Country Energy service area there needs to be equity in tariff structures. One of the central themes behind the merger was to deliver best-price electricity to customers, and 700 tariffs could well be a significant impediment to that goal. A great deal of concern was expressed to me and the committee that the merger would lead to the loss of jobs in rural and regional areas. That is not an unrealistic concern based on the experiences of 1995, when 2,000 jobs were lost when the county council structure was dismantled.

    I am pleased that the committee examined this issue in some detail, and its recommendation that a freeze in terminations should apply to the company until an analysis of future requirements has been undertaken is sensible. Given the manning levels at the time it was taken over, it is hard to see how there could have been wholesale reductions in staff. Given the changes in full retail contestability, one would hope that there might be an increase in staff. If that is so, it is important to put that staff back into country areas. I note at this point that the chief executive officer of Country Energy, Craig Murray, indicated to me, both prior to the merger and in the weeks following, that he expected an actual increase in employment as he embarked on a strategy to reopen service centres in rural and regional areas. I will keep a close eye on that commitment and I will continue to monitor the company's employment numbers.

    The Hon. Tony Kelly: So will the committee.

    The Hon. DUNCAN GAY: Yes, so will the committee. Although I do not believe that Craig Murray will be a problem, I am letting him know that if he does not adhere to that strategy he will have a problem with us. Another recommendation relates to the Minister for Energy mounting a public awareness campaign in the Country Energy service area. That is a laudable suggestion, because it will actually give the Minister for Energy something to do besides announcing new initiatives for the Sustainable Energy Development Authority. He is currently one of the underworked Ministers who has a ministry in name only and appears to do nothing.

    I was contacted by a constituent from the far North Coast who had received a letter from Minister Yeadon regarding the transition to Country Energy and the introduction of full contestability. The Minister advised this person that he could shop around for his electricity supplier, and included a list of numbers for companies that he may wish to contact for a quote. What a pity that the majority of numbers on that list were either incorrect or out of date! If the Minister has another mail-out relating to Country Energy, I hope he checks that the numbers are operational and correct.

    There is an essential recommendation in this report which I will follow very closely. Recommendation 7 refers to the board of the new company reviewing access levels for consumers in rural areas and implementing measures to provide improved access levels. That is absolutely crucial. I was appalled to see television reports in January this year which featured the community of Bungawalbin, in the electorate of the Minister for Local Government, and Minister for Regional Development. That community tried for several years to secure a supply from NorthPower, to no avail. Houses were powered by either generators or solar panels, but there was an expectation that a mains power supply was not too much to ask for. After all, this is the twenty-first century, not pioneering times in Australian history.

    The company must be able to guarantee a decent electricity supply to remote areas without a mains supply and to those consumers who are on the end of branch lines. It is not good enough that in 2001 brownouts and blackouts play havoc with electronic equipment and household goods on a regular basis. Many of my friends who live less than three or four hours from Sydney face those problems. Imagine being on a farm, trying to operate computers and use the Internet, and having to face brownouts, with the power supply going up and down and destroying equipment. Recommendation 8, which is equally important, calls for an independent review of the supply reliability in the Country Energy service area, and addresses such issues as the cost of upgrading infrastructure to ensure that benchmarks are reached and maintained.

    I have heard horror stories about problems, caused by ageing infrastructure, which last for days when they should be resolved in hours. Recently I spoke to a farmer from Taralga who experienced a blackout for two days. He rang to report the problem, but the company could not identify where the fault originated and promised to send someone out to take a look. The farmer eventually discovered where the wires had come down across a road, and advised the company. The power was down for almost two days. This is the twenty-first century! Any move to improve reliability is welcomed. I hope that the Government implements that recommendation and others which relate to service reliability and service access as a high priority, because in some parts of the State reliability and security of supply could not get much worse. There is no point keeping services at the current levels. They have to improve. They are unreliable and inadequate for much of regional New South Wales.

    The Hon. Ian Macdonald: My bills arrive on time.

    The Hon. DUNCAN GAY: Yes, they all do. My bills on the farm are higher than they are in Sydney, where I spend more time. Recommendation 10, on page 68 of the final report, refers to the Independent Pricing and Regulatory Tribunal considering the imposition of a customer service obligation as a performance requirement for all electricity companies. This is an important recommendation, and it is not an impossible request. I congratulate the committee on the recommendation and urge the Government to look carefully at it. The report contains a raft of solid recommendations—19 in all. I will not deal with each of them this afternoon because of time constraints. Recommendation 17 is that the Standing Committee on State Development review the function and progress of Country Energy. That is an excellent idea, and it would allow proper parliamentary scrutiny of the impact and effect of this merger.

    In conclusion, I applaud the work of the committee in producing this valuable report. I thank the Chairman, the Hon. Tony Kelly, for not politicising this report, as he did the report on compulsory competitive tendering—on which he did a good job, but let himself down at the end. This inquiry and report were instigated by the Coalition because the Government did not want the merger scrutinised. It was happy to make an announcement, sit back and wait for approval from the Australian Competition and Consumer Commission, and let the company begin operations. The inquiry went some way towards addressing the real concerns of regional Australia. I urge the Government to adopt each and every one of the 19 recommendations in the report. Country Energy has the potential to be a major benefit to rural and regional areas, and the recommendations of this report will go a long way towards ensuring that the company has a viable future and continues to employ people in New South Wales.

    The Hon. IAN WEST [3.08 p.m.]: Earlier this year the Premier announced a proposal to merge the three existing country electricity distributors—Advance Energy, Great Southern Energy and NorthPower. He made the decision in light of the opening of the energy markets under the national competition policy. The Standing Committee on State Development inquiry into the merger was a timely overview of the many issues surrounding the provision of energy in country New South Wales. As this was my first inquiry with the committee I was keen to ensure that the entire process would lead to optimal outcomes for country families and workers in relation to four basic issues: future employment levels, access, maintenance and repair, and tariffs.

    It is pleasing to note that the committee's report concludes that the merger was the best way forward in maintaining a genuine country-based business which, in turn, would maintain and even improve employment and service levels. It was on these last two major points—employment and service levels—that the Government, together with the union movement and the community, was mainly focused. The committee received a number of quality submissions on the proposed merger, including submissions from unions representing workers in the three electricity distributors. Those unions have a proud history throughout the State of defending and improving working conditions and community standards for workers in the electricity sector.

    The union movement has a strong and critical record of standing up for workers and their families in the public generation and distribution network system since 1905, that is, for almost 100 years. This history has obviously been carried through the recent past, with substantial reforms and efficiencies gained by industry in the last decade or so. The union movement has been an extremely active and valuable player in this reform program. Through its participation in the process, it has strenuously fought for job security and career development of its members and for improvements in the living standard of members' families and communities. With that impressive record, the committee was keen to hear from relevant unions and to tap into their expertise and knowledge about issues pertinent to and arising from the merger of Country Energy distributors.

    The committee, in its deliberations, benefited from the submissions and evidence presented by the Australian Services Union [ASU] and the Electrical Trade Union [ETU]. The work force of the previous three entities had been through a decade-long process of job shedding, leading to uncertainty and instability of employment and service levels. The key issues for the inquiry were the impact that the merger would have on jobs and the ability of the new entity to maintain and improve service levels for country families and communities. Despite concerns about the recent history of electricity reform, the committee was particularly impressed by the record of Advance Energy and its management. Advance Energy was seen to have an open approach, resulting in the rebuilding and equipping of services. It did not institute depot closures, administrative or service centre closures or forced redundancies.

    Further, it conducted retraining and formed partnerships in the banking sector with its region's largest credit union. The steps taken by Advance Energy, along with its opposition to and clawback from contracting out, have provided significant additional jobs and services, together with a genuine community commitment. This has provided a positive outlook for the new management team at Country Energy, which now operates under the management of Mr Craig Murray, former Managing Director of Advance Energy. Mr Murray takes pride in his positive and co-operative relationship with the union movement. He recounted in evidence his own experiences as managing director of Advance Energy. Mr Murray was able to grow the business of Advance Energy and was keen to see similar growth in Country Energy.

    The expansion of Advance Energy has led to an increase in employment of more than 80 people since 1996-97. That is no mean feat, given the circumstances surrounding the industry and, more broadly, rural Australia over the past decade. Mr Murray told the committee that Advance Energy has taken a proactive stance in generating employment and ensuring that people are available to replace an ageing work force. For example, the Advance Energy apprenticeship policy recruits young people from the small rural towns where they will work. He told the committee that Country Energy will recruit local people from smaller rural towns who have family and long-term attachments to the particular area. This policy worked well for Advance Energy and, with Country Energy, has great potential to maintain and improve service levels and employment in the more remote communities in New South Wales.

    The view that jobs would be not only maintained but possibly even increased was supported by evidence from Dr Don Anderson of the Market Implementation Group. Dr Anderson informed the committee that the merger had the potential to increase employment in a number of ways. Firstly, it would create a commercially viable business structure which could maintain employment and services. Secondly, it would achieve savings from the retail sector rather than from the network side of the business. Thirdly, the policy would increase employment because the large geographical area covered by Country Energy would necessitate the location of staff throughout rural New South Wales. Such evidence was given to the committee to indicate that Country Energy, with an annual turnover of $1 billion, employing almost 2,500 staff and serving the needs of about 700,000 consumers, would have the necessary financial and skills base to mix with the big companies in the full retail contestability of the new energy market.

    The new energy market presents a number of challenges for all its stakeholders. Despite the problems associated with past reform processes, the committee is confident that the size and strength of Country Energy gives the new entity an ability to maintain a strong and active presence in the new energy markets. That presence will and should always be built on an effective and productive relationship between management, the work force and the community. I look forward to watching the progress of Country Energy through the coming years and to seeing it thrive in the new deregulated market, based on an ethos that recognises the value and the role played by its work force. I commend the submissions of ETU representative Mr Bernie Riordon and ASU representative Mr Greg McLean. I commend the report to the House.

    The Hon. IAN COHEN [3.18 p.m.]: I was interested to hear the Deputy Leader of the Opposition speak in such glowing terms of what is essentially a committee chaired by the Government. It shows that at a committee level members can put aside politics and work as one entity. That approach reflects the value of committees in this Parliament. I thank the secretariat—Mr Steven Carr, director; Mr Rob Stefanic, senior project officer; Mr Stephen Fenn, research assistant; and Ms Annie Marshall, committee officer—for its unstinting work, for putting up with the staccato schedules of politicians and for doing an excellent job in the formation of this report.

    Quite clearly, this report has been based on both thorough research by the secretariat and information gathered from inquiries and hearings of the committee. However, I remain concerned about a number of matters, such as the social impacts of such a merger, the maintenance of employment opportunities, and means to ensure that this larger entity will be able to compete effectively with other distributors in the national electricity market in order to provide cost-effective and efficient retail electricity services, reducing risk and improving the financial return to the New South Wales Government, rather than developing a large-scale entity that will not necessarily benefit the people of country New South Wales. I am one of those country-based people who have real concerns. In the area that I come from, northern New South Wales, we would not lose a great deal in the loss of NorthPower.

    The Hon. Janelle Saffin: It would be great to lose NorthPower!

    The Hon. IAN COHEN: The Hon. Janelle Saffin, who lives in the same region that I do, expresses what I suppose is the general sentiment of that region. We look to a brave new world in which perhaps anything will be better. There has been significant dissatisfaction with not only NorthPower's service delivery but also the number of blackouts that have occurred since I have been in the area.

    The Hon. Janelle Saffin: And brownouts.

    The Hon. IAN COHEN: And brownouts. Those power interruptions have been occurring over a number of years. Yet another matter of dissatisfaction is that many NorthPower people have been cavalier in their attitude towards electricity consumers and customers. Whilst the general tendency for entities that get bigger is to become more and more alienated from their consumers, therefore making it more difficult for them to get appropriate services, my hope is for improved services under the directorship of Mr Craig Murray. I have good reason to feel that his directorship will be an asset and that there will be an addition to the services delivered to the people of northern New South Wales, who have not been served well by NorthPower in recent years. As the Deputy Leader of the Opposition said, the report has some 19 comprehensive recommendations covering quite a number of issues. I will deal with only a few of those. I will not deal with most of the recommendations, particularly as other honourable members have already commented on them. Recommendation 5 of the committee is:
        The committee recommends that, if the formation of Country Energy proceeds and in the event surplus labour requirements in some occupations are identified, a freeze on any terminations should be applied until a needs analysis of staff requirements is undertaken and that negotiations be initiated with relevant unions and relevant communities prior to implementation.

    I hope that that recommendation holds and is followed through. It is important to maintain employment levels in these circumstances, particularly as whole communities in country New South Wales can be strangled, economically and socially, by a loss of employment in their areas. Employment loss is bad enough for the cities, but in country centres—one of which I will mention later—the loss of employment has a trickle-down effect that can paralyse local communities. Recommendation 7 is:
        The committee recommends that, if the proposed merger proceeds, the Board of Country Energy review access levels for consumers in rural areas and implement measures to provide these consumers with improved access to supply of electricity, whether by supply line or by energy alternatives, at reasonable cost.
    I am pleased that the recommendation mentions looking at alternative energy production. As Mr Murray has said, in many circumstances in the country stringing lines out is not necessarily the most cost-effective way of supplying electricity to some households. It is important to recognise that there are alternative means that are both cost-effective and of great benefit not only to the industry itself but to local manufacturers and industry. It is also important to bear in mind that those alternative energy sources have a considerable positive impact on Australia's appalling present rate of greenhouse gas emissions, and we must look at those opportunities.

    I live on a property in a sensitive environmental area that is at the end of the electricity supply line. In the past I have argued with NorthPower about any opportunity to go off the grid and whether it provided any support for a stand-alone system on the property in which I am a shareholder. My representations were met with a blank refusal, in fact with antagonism. I hope that under this new regime of Country Energy, and with the largesse of a bigger corporation that can see beyond the small-minded attitudes that have so far existed, landowners such as me can be involved in joint ventures that will have positive environmental consequences not only at the local level, in reducing the destruction caused when power lines are put through environmentally sensitive areas, but also in respect of a reduction in greenhouse gas emissions as a result of the development of stand-alone systems. I quote recommendation 9:
        The committee recommends that the Minister for Energy, the Treasurer and the Independent Pricing and Regulatory Tribunal:
        • consider recommendations of the independent review of energy distribution infrastructure, and
        • take proactive measures to ensure sufficient capital and maintenance expenditure is committed to ensure the reliability of energy supply by line or alternative means.

    It is very important that these stand-alone systems are put in place. Recommendation 10 is:
        The committee recommends that the Independent Pricing and Regulatory Tribunal consider imposing a commitment to service obligation as a performance requirement for distribution network service providers with respect to service connection and reliability.
    I think all committee members would agree that a commitment to service obligation as a performance requirement and customer services support are important aspects of the recommendations of this report. As the Deputy Leader of the Opposition has mentioned, that is a matter of significant importance to consumers. It is interesting that chapter 1, Introduction, contains a quotation from the Hon. Duncan Gay regarding his introduction of the terms of reference for the Legislative Council's consideration. The honourable member made a number of supporting comments that included:
        With amalgamation we must ensure not only that jobs are protected but that the service does not simply remain the same; it is essential that the service improves. People in regional New South Wales are putting up with blackouts which last a minimum of 12 hours. In the past local power failures lasted only three hours. The recent brownouts have affected electronic equipment, and that is unacceptable.

    As a crossbencher and a member of the Greens, I agree. The Government also agrees. The report is moving towards recognising those problems. In particular, the area in which I live has a significant problem. People do productive work from their homes; they often work with computers and transfer significant amounts of information. The north of New South Wales has had major problems with energy surges and spikes which have the potential to damage very expensive equipment. Those surges and spikes can have a devastating effect on many people who have deliberately moved to that area. Whilst it is geographically a long way from major population centres, it is an area in which people can work productively using available technology. However, these surges and spikes in the system have been typical of power supply in the north of New South Wales.

    I am concerned with the source of energy in New South Wales, where electricity is primarily derived through thermal generation, using black coal, brown coal from Victoria, and relatively small amounts of natural gas and oil as fuels for generation. At a national level, thermal sources comprise some 89 per cent of total electricity generated. Hydro schemes represent only 8 per cent of the electricity that is generated, which is a small percentage—not that the Greens are supporters of hydro schemes on a large scale as they can be quite detrimental. The committee's report states:
        The committee is also aware of the increased interest and promotion of alternative energy such as wind, wave and solar power as well as biomass generation including methane and energy from waste generation. Concerns were however expressed in the committee about biomass generation sourced from native forests.

    That issue is something about which I am particularly concerned. I am glad that it has been referred to in that context in the report. New South Wales is not headed in the right direction with its biomass cogeneration plants—an issue about which I asked a question today during question time. This inappropriate fudge is simply aimed at reducing greenhouse gas emissions in New South Wales. We can do better. We must look more towards stand-alone electricity in those areas than at biomass power generation. I am glad that the issue received a mention in the report. It is an issue that I will bring up time and again.

    There is mention also in the report of tariffs, welfare groups and voucher payments. People in country areas are experiencing difficulties. It is easier for those in the cities who cannot afford electricity tariffs to access the St Vincent de Paul Society and a number of other support groups and welfare agencies. It is difficult for those who are living in country areas. There have been previous reform measures, in particular, the restructuring of the electricity industry in 1995. On page 41 of the report we find this statement:
        240 positions were lost in the Clarence Valley which coincided with a restructuring of the timber industry and a number of government instrumentalities amplified the impact on the community.

    In a city context the loss of 240 jobs is viewed as a relatively small loss, though I am adamant about the fact that no job loss is good. However, a country area such as the Clarence Valley has an increasingly depressed economy. The committee report also states:
        local businesses suffered through losses of activities such as transport, accounts, processing, banking, postal services, health, printing and cleaning

        local motor traders lost sales and trade-ins of energy distributor vehicles and

        schools lost 100 pupils in one town with a flow-on effect to staffing levels and associated economic benefits to the town.

    Those are the sorts of things that happen in country communities. This new electricity enterprise would do well to maintain high employment levels in the future. It must assess the potential of employing youth in these areas so that they do not have to leave country towns and go to the city to get jobs, thus exacerbating the problems in both city and country areas. Mr Craig Murray, the new chief executive officer designate of Country Energy, presented well to the committee. Committee members believe that Mr Murray will do an effective job. Mr Murray spoke at length about issues such as stand-alone electricity, how to get power generation to country areas and about other issues. When referring to full-time contractors, he said:
        I really do not believe in full-time contractors. I do not see why full-time contractors have to be necessary. If you have to employ a contractor it seems to me that, as a manager, you are simply not running the business well enough. Certainly you need contractors at times for set periods to cover peaks and troughs or some new work. But if you have a contractor year in and year out, and we have very few, then I simply think that the matter has to be addressed. If you need that role and it is full-time then it should be carried out by an employee because I think that with employees you do have much greater control over standards and conditions and the rest of it. I would look at taking the same approach that we have taken and, that is, to look at any functions that are out on full-time contract and to look at bringing them back into the business.

    I am glad that Mr Murray spoke in those terms. I look forward to being part of this committee, which will undertake ongoing surveillance of this new entity. There are many positive things to be said about it. I quote from the conclusion in the report:
        The ultimate success of a merged country energy supplier will rely on the philosophies and attitude of the management driving the new entity.

    I have a great deal of optimism about Mr Murray's abilities. This entity has learned from its past mistakes. I hope that, in the future, we will have a more efficient service delivering better to country people. I hope that there will be sufficient checks and balances in the system to prevent inefficiency of service and to ensure a better attitude towards consumers as opposed to the arrogant attitude that has been the hallmark of past producers in country areas, in particular NorthPower. I look forward to seeing results and to being able to talk with people from the newly merged Country Energy about greenhouse gas reduction, financial efficiency and environmentally sensitive methods of electricity generation. I am pleased to have been part of the development of this report.

    The Hon. JANELLE SAFFIN [3.37 p.m.]: I commend the Standing Committee on State Development for undertaking this important inquiry, in particular for country New South Wales. Some concern was expressed when the Government announced that there would be a merger. However, there was also a lot of positive comment as people felt that we needed some sort of company or structure that took a broader view about energy matters, and not just a parochial view about environmental and other issues. I support committee recommendation No. 15, which states:
        The committee recommends that the Legislative Council supports the merger of Advance Energy, Great Southern Energy and NorthPower to form Country Energy.

    The title "Country Energy" is an excellent choice. All the committee's recommendations are good recommendations, but I wish to address only a few. Recommendation No. 5 states:
        The committee recommends that, if the formation of Country Energy proceeds and in the event surplus labour requirements in some occupations are identified, a freeze on any termination should be applied until a needs analysis of staff requirements is undertaken and that negotiations be initiated with relevant unions and relevant communities prior to implementation.

    I can understand the thinking of the committee. Obviously that recommendation is designed to protect the jobs of workers, particularly in country areas. None of us wants any of those jobs to disappear. Pages 41 and 42 of the report refer to a submission from Mr Greg McLean, Assistant National Secretary of the Australian Services Union. He refers to the comparison between Advance Energy and NorthPower, when they were originally set up, and to how they dealt with issues relating to workers, redeployment and retraining. With regard to Advance Energy the Australian Services Union [ASU] submission stated:
        … the open approach by the previous CEO, Chair, Board and Senior Management team at Advance Energy were re-building and equipping of services—
    And that is important—
        along with no depot closures, no administrative or service centre closures, no forced redundancies but re training, along with partnerships into the banking sector with its Region's largest Credit Union.
    The ASU submission continued:
        These steps that have been introduced along with its opposition to, and claw back of contracting out have provided significant additional jobs, services and community commitment …
    The submission referred also to NorthPower, with which, obviously, I am familiar on a daily basis. In respect of NorthPower, Greg McLean, the Assistant National Secretary of the ASU, said in evidence:
        … we have had substantial concern about depot closures, removal of services to the community and also some of the work practices that were being introduced there. We have pet concerns on contracting out, use of long-term casuals and ensuring the maintenance of the award system. As recently as just after the announcement was made I found myself visiting the Port Macquarie area and found a number of people there who I considered had been there for far too long as casual employment.
    That is indicative of the concerns we had for NorthPower workers. The manner in which NorthPower operated was the cause of many so-called blackouts and brownouts and an enormous number of breakdowns, which impacted on residents and businesses alike. I kept a log of the occasions when people would call me to tell me what was going on. In one short period a business in Ballina experienced 56 hits or surges that affected its computer system, its fax—everything. On every occasion the business lost information and had to reboot its system, and that cost it money. It was a motel business and prospective patrons could not book in during the periods of brownouts and blackouts because the premises were in complete darkness. Sometimes the power would be cut overnight.

    When the power is cut to the area in which I live, which is 18 kilometres from Lismore—and this seemed to happen frequently over the past 18 months—we may be without electricity for anywhere between four and 24 hours, and no indication would be given as to when the power will be restored. The report also addressed the issue of repair and maintenance. At page 63 the report refers to repair and maintenance as a real issue, particularly with NorthPower. We used to talk about the issue a lot in our area. We felt that the system was not being kept up to standard and that that was the reason we were experiencing a significant number of surges, hits and brownouts. I recall that for 12 months a power pole lay in front of a property at Tregeagle waiting to be erected. Everyone knew about it and talked about it. That is what we had to live with daily.

    I thank the local newspaper, the Northern Star, for its coverage of an issue that has impacted significantly on the community, at both business and personal levels. In an editorial the newspaper likened the service to those of Third World or developing countries. I do not wish to be too unkind to NorthPower, but because of the level of service we had nobody I know in my area has said that the merger with Country Energy is a terrible thing. Everyone has said that it will be good, that at last we might get some decent level of service. It was acknowledged that with the merger a different type of management practice was needed—a broader management structure with broader ideas, wider thinking, in order to provide the level of service of Advance Energy and other providers. There were good people on a community consultative committee but I am not too sure what they were able to do.

    There was a point at which I felt driven to write a letter to the Premier, even though he is not the Minister responsible. I asked the Premier, because of the negative impact the issue was having on the regional economy, regional business and private residents, to take an active interest in the matter. With my permission the letter was printed in full in the Northern Star, and the Premier has taken an active interest in our area. Thankfully, some of the issues of concern will be addressed as a result of the merger. Recommendation No. 6 is really important. It states:
        That the Minister for Energy initiate a public information campaign within the proposed Country Energy distribution area to inform the community of the proposed changes and their implications.
    It is important that that happen. At the time of the previous electricity restructure—when NorthPower and other providers were created—there did not seem to be any willingness on the part of NorthPower to talk to the public in our area.

    The Hon. John Jobling: That is fatal.

    The Hon. JANELLE SAFFIN: It is absolutely fatal. It does not matter what level of bureaucracy is operating—private or public—those who use the service must be consulted.

    The Hon. John Jobling: It is frustrating when power is cut for three days, especially if you live in one of the valleys.

    The Hon. JANELLE SAFFIN: Absolutely frustrating, particularly if you are a dairy farmer. NorthPower did not talk enough to the public. In my letter to the Premier I emphasised the benefit of convening community forums in order to talk with people. Subsequently, such forums were conducted and they proved to be successful, albeit a little late—although it is better late than never.

    Pursuant to resolution debate interrupted.

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