Power companies hit back at minister, saying policy vacuum led to steep bills

Extract from The Guardian

Energy

Australian Energy Council CEO rubbishes Angus Taylor’s claim market misconduct behind high power bills

Katharine Murphy Political editor

@murpharoo

Fri 31 Aug 2018 04.00 AEST Last modified on Fri 31 Aug 2018 04.01 AEST

New energy minister Angus Taylor (left) with new PM Scott Morrison. Taylor used a speech on Thursday to emphasise that his focus in the portfolio will be on reducing power prices. Photograph: Lukas Coch/AAP

Power companies have blasted back at the new energy minister Angus Taylor, declaring the main reason electricity prices are high for Australian consumers is a decade-long vacuum in energy policy – not misconduct in the market.
Sarah McNamara, the chief executive of the Australian Energy Council, a group representing Australia’s major gas and electricity companies, told Guardian Australia the apparent shelving of the national energy guarantee as the prelude to last week’s bitter Liberal party leadership fight would exacerbate the very problems the new minister says he wants to solve.
She said a recent inquiry by the Australian Competition and Consumer Commission, which is the basis of the Morrison government’s current blueprint for power price reductions, did not find evidence of misconduct in the energy market.
“The very report the government is relying on also confirmed that divestiture powers were unnecessary in the current market, and we agree with that,” she said.

The ACCC’s recent report characterised divestiture as “an extreme measure to take in any market, including the electricity market”.

The competition watchdog said the wholesale energy market was highly concentrated, but there were more effective interventions than breaking up companies. The report said: “The ACCC does not believe it would be appropriate to intervene to unwind the way in which the market has evolved across the national electricity market.”
Notwithstanding that caution, Taylor used his first speech in his new energy portfolio on Thursday to recommit the government to pursuing heavy-handed interventions cooked up in the last days of the Turnbull government, including “last resort” divestiture powers to break up the power companies if they engage in price gouging.

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Malcolm Turnbull, as one of his last acts in the top job, first attempted to rework the national energy guarantee (Neg), before putting it on hold, in the process committing the government to a package of measures focused on price relief.

Taylor used Thursday’s speech to emphasise that his focus in the portfolio would be solely on reducing power prices. He said increases in power bills had “eroded the trust of Australians in the capacity of government and politicians to deliver affordable, reliable energy”.

“We need to re-establish this trust.”
But McNamara turned the challenge back on Taylor. She said power prices were high in the current market due to wholesale price volatility “because we’ve been existing in a policy vacuum for more than 10 years now”.
“We do not have sufficient levels of investor confidence to drive the kind of investment the market very badly needs,” she said.
“The Neg appears to be in limbo at the moment although the Energy Security Board will continue to work with the states on the reliability component. We seem further away at the moment that we were a few weeks ago from landing this important policy.”

She warned if the government couldn’t resolve the internal fight which led to the Neg being shelved, and get it back on the agenda, and strike a deal with Labor, that would “mean more of the same – a policy vacuum, that will see more volatility in the wholesale market, particularly as plant comes to the end of its natural life and there’s insufficient firm generation to replace it”.
“That is not good news for customers.”
McNamara said the energy industry had no issue with governments monitoring market behaviour and ensuring compliance with rules and regulations.
She also acknowledged that power prices “can be lower than where they are at the moment – but the missing piece of that puzzle is a national, bipartisan policy framework”.
She said Taylor was correct to point out in Thursday’s speech that perfect certainty wasn’t possible because current governments could not bind future ones, but she said “a bipartisan agreement on a policy does lend a certain durability to that policy which gives investors the confidence they need to be able to commit to these long term assets”.
McNamara said power companies were committed to measures making the market more transparent. “We’ve been working on them for a while.

“We understand people find the market complicated to engage with and we do want to make it easier for people to engage – but that work’s already under way, and that’s very different to suggesting misconduct in this market”.