Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Climate Change and Energy

Industry Research and Development Act 1986

Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025

Purpose and Operation

Section 33 of the Industry Research and Development Act 1986 (the Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.

The Minister for Industry and Science has delegated the power under subsection 33(1) of the Act to prescribe the Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program (the program) to the Minister responsible for administering the Australian Energy Market Act 2004 (currently the Minister for Climate Change and Energy). The delegation was made under subsection 33(6) of the Act.

The statutory framework provided by section 33 of the Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing the administrative burden on the Commonwealth.

Once a program is prescribed under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non-corporate entity, or by their delegate (under section 36).

The purpose of the Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025 (the Legislative Instrument) is to prescribe the program. The funding for the program has been secured through the Department of Climate Change, Energy, the Environment and Water (DCCEEW) in the 2024-25 Mid-Year Economic and Fiscal Outlook, at Appendix A page 218.

The program provides $716.3 million in funding over five years from 2024-25 to the Australian Energy Market Operator (AEMO) through a grant over multiple releases.

This funding will support AEMO to uplift core digital systems to enhance their effectiveness and reliability.

The program will be administered by the Business Grants Hub, within the Department of Industry, Science and Resources, in accordance with the requirements of the Commonwealth resource management framework, including the Public Governance, Performance and Accountability Act 2013 and the Commonwealth Grant Rules and Principles 2024.

DCCEEW will oversee the grant and program milestones through an interdepartmental oversight committee (the committee). The committee will be chaired by a Senior Executive Service officer within DCCEEW. The committee will be comprised of nominated senior public officials from relevant agencies as deemed appropriate, including technical, governance and risk advisors. The committee will have visibility of program implementation, spending decisions and receive or request progress updates. The committee may provide relevant and timely advice to the program delegate, AEMO and DCCEEW.

Grant payment decisions will be made by a program delegate, who will be a Senior Executive Service officer and who will be informed by advice from the committee and the recommendations of an assessment by DCCEEW officers. This will ensure that the program delegate will be able to perform relevant functions in accordance with the Commonwealth resource framework.

As the program is a closed non-competitive grant that supports the implementation of policy decisions made by the Government, the program will not be subject to merits review. Merits review of the program would not be appropriate because decisions will relate to the provision of a grant to a unique service provider with no market competitors. The allocation of this grant therefore reflects a budgetary decision of a policy nature made by the government to fund this program. The Administrative Review Council has recognised that it is justifiable to exclude merits review in relation to decisions of this nature (see items 4.18 of What decisions should be subject to merits review? https://www.ag.gov.au/legal-system/publications/what-decisions-should-be-subject-merit-review-1999). This instrument will instead be subject to parliamentary scrutiny.

Persons who are otherwise affected by decisions or who have complaints about the program will be able to provide feedback to DCCEEW. DCCEEW investigates any complaints about the program in accordance with its complaints policy and procedures. If a person is not satisfied with the way DCCEEW handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.

Statement of the Relevance and Operation of Constitutional Heads of Power

For the purposes of subsection 33(3) of the Act, the powers of the Parliament to make laws with respect to the following are specified for the program prescribed by the Legislative Instrument:

• Trade and commerce (within the meaning of paragraph 51(i) of the Constitution)
• Communications (within the meaning of paragraph 51(v) of the Constitution)
• Corporations (within the meaning of paragraph 51(xx) of the Constitution).

Trade and commerce power

Paragraph 51(i) of the Constitution empowers the Parliament to make laws with respect to ‘trade and commerce with other countries, and among the states’.

The program will support trade and commerce among the states by uplifting the core digital systems used to operate the national electricity market, which is an interconnected electricity system operating across multiple States and the Australian Capital Territory.

Communications power

Paragraph 51(v) of the Constitution empowers the Parliament to make laws with respect to ‘postal, telegraphic, telephonic and other like services’. ‘Other like services’ includes communication using electronic means.

The program will improve the core digital systems, including communication systems, used by AEMO in the operation of the national electricity market.

Corporations power

Paragraph 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ (together, constitutional corporations).

In Williams v Commonwealth (2014) 252 CLR 416 (Williams No 2), the High Court, considering section 32B of the Financial Management and Accountability Act 1997 (the FMA Act), held (at [50]) that:

A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.

However, the relevant provisions of the Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the Act corresponds to section 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the Act. Subsection 35(2) of the Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2).

Further, subsection 35(3) provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.

The program provides funding to AEMO, which is a trading corporation. AEMO will engage in its own activities to uplift core digital systems to enhance their effectiveness and reliability. The activities of AEMO will be regulated through the grant agreement with the Commonwealth pursuant to subsection 35(2) of the Act. The terms and conditions of the grant agreement will set out what the funding may be used for, and the circumstances in which it must be repaid.

Further details on the Legislative Instrument are set out in Attachment A.

Authority

Section 33 of the Act provides authority for the Legislative Instrument.

Consultation

In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department and the Department of Industry, Science and Resources have been consulted on this Legislative Instrument. The program was designed through collaboration between AEMO, DCCEEW and other relevant government agencies. As the program has undergone extensive consultation within government, it was considered unnecessary to undertake additional consultation in relation to the Legislative Instrument.  

Regulatory Impact

It is estimated that the regulatory burden is likely to be minor (OIA24-08059 refers). An Impact Analysis is not required.

Other

The Legislative Instrument is compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.

ATTACHMENT A

Details of the Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025

Section 1 – Name

1.       This section specifies the name of the Legislative Instrument as the Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025 (the Legislative Instrument).

Section 2 – Commencement

1.       This section provides that the Legislative Instrument commences on the day after registration on the Federal Register of Legislation. 

Section 3 – Authority

1.       This section specifies that the Legislative Instrument is made under section 33 of the Industry Research and Development Act 1986 (the Act).

Section 4 – Definitions

1.       This section provides for definitions of terms used in the Legislative Instrument.

Section 5 – Prescribed program

1.       Subsection 5(1) prescribes the program for the purposes of subsection 33(1) of the Act.

1.       Subsection 5(2) provides that the program provides funding to AEMO to uplift core digital systems to enhance their effectiveness and reliability.

Section 6 – Specified legislative power

1.       This section specifies that, for the purposes of subsection 33(3) of the Act, the powers of the Parliament to make laws with respect to the following are specified:

1.       trade and commerce with other countries, and among the States (within the meaning of paragraph 51(i) of the Constitution);
2.       postal, telegraphic, telephonic and other like services. (within the meaning of paragraph 51(v) of the Constitution);
3.       foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Industry Research and Development (Australian Energy Market Operator (AEMO) Digital Systems Enhancement Program) Instrument 2025 (the Legislative Instrument) is to prescribe the program. The program provides funding to the Australian Energy Market Operator to uplift core digital systems to enhance their effectiveness and reliability.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

The Hon Chris Bowen MP

Minister for Climate Change and Energy