The Oakeshott intervention

Just when it seems the work basket for electricity policy is overloaded to bursting point along comes the Member for Lyne.

We are now less than 100 days away from the Council for Australian Government having to make decisions about energy regulation after its resources and energy ministerial committee has considered work undertaken by the Australian Energy Market Commission.

At the same time we have the Climate Change Authority reviewing the renewable energy target, a task that has been cranked up to feverish contention by elements of the green commentariat.

Meanwhile, in the wake of the Prime Minister’s shoot-from-the-hip (or should that be lip) warning about rising power prices in August, we now have a select committee of the Senate tasked with reporting by 1 November on a range of related topics.

In addition to which we await the AEMC’s “power of choice” review, which is directed towards consideration of how to address the ongoing peak demand problem. (The answer is well known – go for a wider roll-out of smart meters allied to time-of-use charges – but the spirit among State governments is far from willing.)

Over-arching the whole shebang, of course, we have the federal government’s variegated climate change policy from which in recent days has been yanked the plan to close down some emissions-intensive power stations and to which has been added our inclusion as a colony of the European Union’s emissions trading scheme.

More than enough to be going on with, you may think, but now we have Rob Oakeshott MP proposing a private member’s bill that would overturn the present “small F” federal electricity market law and put the national government in charge of retail electricity price legislation.

Robert Pritchard, executive director of the Energy Policy Institute of Australia, has reminded his members that Julia Gillard, speaking at the EPIA lunch last month, said: “My preference is to work co-operatively with the States through CoAG to deliver a better outcome for consumers. We won’t lightly use the big stick of regulation, of stronger powers for the energy regulator and the ACCC. But it’s a stick we hold and which we’ll use if required.”

Oakeshott, observes Pritchard, seems to have seized the Prime Minister’s stick before she decides to use it herself – and he must have kept the Office of Parliamentary Counsel busy for some time because his draft bill runs to 282 pages.

Which raises in my mind the question of what Julia Gillard knew and when she knew it?

Has Oakeshott been encouraged to go down this path to avoid the inconvenience of a cabinet debate on what is actually a hot button issue with the States?

How could the federal government have been unaware that Parliamentary Counsel were engaged on a task of this size?

The bigger question is how will the premiers of Western Australia, South Australia, New South Wales, Queensland and Tasmania react to a king hit of this kind if it turns out that the government will support the Oakeshott bill in parliament?

(You can pretty well bet that the Greens will support it.)

Bob Pritchard, emphasizing that this is a personal view and not EPIA’s, has responded to me thus: “ This is still more than a little hypothetical, but, if the Gillard government is minded to get behind the Oakeshott bill, the Australian Energy Market Agreement among the Commonwealth and the States would need to be amended. This would require the agreement of the States.

“Although the AEMA is not legally binding, the Commonwealth would not lightly wish to be a party to the breach of such an important instrument of co-operative government.

“If the States did not agree, the Commonwealth would need to consider withdrawing from the AEMA.”

All of which, of course, takes us to the next CoAG meeting where, surely, the Prime Minister will find herself being asked straight up if her government plans to support the Oakeshott intervention?

(His rationale, by the way, is “the current NEL is national law in name only – the State governments own the rules and in some cases own the monopolies as well.” He wants to “bring the federal regulator firmly under federal laws with stronger powers to to moderate power bill increases.”)

Perhaps the great irony of the situation is that the comments Oakeshott has made in revealing the bill’s existence all go to the populist end of the equation but any central regulator worth its salt would endorse a pricing regime reflecting the cost of supply.

As well, is he proposing that the Australian Energy Regulator should both take responsibility for approving capex and opex allowances for networks, the main driver of current price rises, and for the final price for consumers?

How will Colin Barnett, with a 2013 election looming in the West, respond to government in Canberra seizing control of WA electricity prices?

Barnett, you will recall, inherited a horrible situation where WA Labor had suppressed power bills for a decade, building up a billion dollar burden on central revenue that was heading towards $3 billion later this decade. His efforts to make power bills more cost-reflective, with increases of more than 50 per cent to date, have been contentious to put it mildly.

Now, what would a national government, committed to cost-reflective pricing (because that is what the forthcoming energy white paper is expected to confirm), do about power prices in the south-west intergrated system, the network serving the populated bottom end of WA?

One could go on about the implications for Queensland and NSW, too – and South Australia also faces an election next year – but the WA perspective serves to illustrate that the Oakeshott intervention more resembles a political land mine for the federal government than a clever strategy.

Julia Gillard’s problem is that she will be confronted in the very near future with both a Senate committee report – will it endorse the Oakeshott proposal? – and the CoAG meetings of energy and first ministers.

This proposed bill will be a very large elephant in the CoAG meeting rooms, the more so because of her “big stick” threat.

If, in fact, there has been some form of complicity between the Prime Minister’s office and the Member for Lynne on this issue, it might end up joining the infamous list of “it seemed a good idea at the time” ideas rather than the much shorter list of brilliant manoeuvres.

Meanwhile, it will be ever so interesting to discover what the Prime Minister thinks of this big stick now someone else is waving it around. Perhaps the Canberra Press Gallery could ask her?

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