Government cannot fund new coal plants without parliamentary approval, advice says

Extract from The Guardian

Energy

New legal advice sought by the Australia Institute contradicts what government has been telling stakeholders

Katharine Murphy Political editor

@murpharoo

Mon 18 Feb 2019 04.00 AEDT Last modified on Mon 18 Feb 2019 04.23 AEDT

The energy minister Angus Taylor has not been clear whether the government will sign contracts with private proponents ahead of the May election. Photograph: Mike Bowers/The Guardian

A new legal opinion suggests the Morrison government will not have the ability to roll out taxpayer support to its controversial plan to underwrite new coal plants unless it enacts supporting legislation or amends existing legislation.
The advice, sought by the progressive thinktank the Australia Institute, argues assistance for new generation projects will require “some form of supporting legislation”, either new or existing, to operate and fund the program, otherwise the arrangements would be open to a high court challenge.
Federal parliament resumes on Monday for one of the last sitting periods before the May election, and the Morrison government has already pulled its much-vaunted “big stick” energy legislation because of concerns it would have to cop an amendment from the Greens and Labor, preventing the government from funding new coal projects.

Pulling the “big stick” package, which created a divestiture power to break up energy companies engaged in price gouging, has sparked an internal backlash from Nationals MPs who want the Coalition to legislate that policy before the coming election, prompting the government to look for workarounds to force power prices down, setting up a conflict with state governments.
Separately to the “big stick”, the Coalition insists it wants to have a shortlist of new power generation projects resolved in the coming weeks with a view to pressing ahead before the government goes to the polls after the budget in April.

The government has been telling stakeholders activating the generation projects, some of which are likely to be coal, will not require the passage of supporting legislation in this sitting of parliament. Power baron Trevor St Baker has proposed two new coal plants at a cost of $6bn.

But the new legal opinion from Fiona McLeod SC and Lindy Barrett contradicts that assessment. It says some low emissions generation could be part funded by the Clean Energy Finance Corporation (CEFC), but there don’t seem to be obvious avenues to fund thermal projects.
As well as the St Baker project, which would see a 1300 MW coal plant built at the site of the shuttered Hazelwood station in Victoria, a $500m pumped hydro facility in South Australia and a coal plant in New South Wales either at AGL’s Liddell coal plant, which is scheduled to shut down in 2022, or at the site of the old Vales Point A power station, Alinta has submitted a proposal for a gas-fired power plant at Reeves Plains in South Australia, a pumped hydro project in NSW and a “marginal improvement” to its Loy Yang B coal power plant in Victoria.
While insisting the underwriting program is moving forward, the energy minister Angus Taylor has not been clear whether the government will sign contracts with private proponents ahead of the May election.
Labor has made it clear for months it does not support taxpayer underwriting of new coal projects. With that said, Labor has also made it clear it will honour contracts entered into by the government in the event it wins the May election, consistent with its long-term federal policy.
But the shadow treasurer, Chris Bowen, told reporters last week the commitment to honouring contracts came with a rider. “We have always consistently said we honour contracts but those contracts have to be based on a legislative framework,” Bowen said.
“While we honour contracts, they have got to be contracts entered into with the force of law behind them, that would be my principal statement”.

Industry stakeholders have criticised the short timeframe for the program, and the Australian Industry Group has warned it could leave taxpayers exposed to liabilities “with a net present value of billions of dollars” because the government could indemnify projects against the costs of new climate change policies.

Richie Merzian, the climate and energy program director at the Australia Institute, said Taylor was “in such a rush to funnel taxpayer funds to new coal-fired power stations before the election, he seems to have overlooked that he has no constitutional authority to do so”.

He said it was ironic that the only avenue available to fund generation projects appeared to be the CEFC given “this is a government that has gone to great pains to avoid addressing climate change and energy together”.

“Almost every coal power station in this country was built with government and taxpayer support, and with the demise of the government’s underwriting program, we may never see another built with taxpayer dollars again.”