The great divide

Tucking in to brunch at an outdoor café in my home area, Sydney’s The Hills district, last Friday and mulling over Malcolm Turnbull’s encounter with energy retailers two days previously, I came to the conclusion that the issue of trust should be explored further in the world of the NEM.

And now, blow me, I have found a really interesting article in Britain’s Utility Week magazine on the very point, highlighting just the issues about which I was thinking in an Australian context. If you put “Utility Week” and “The challenge of trust in utilities,” you can read the whole article yourself.

This is how it kicks off: “Consumer trust and confidence in their utilities providers is far from straight forward. National headlines would have you believe that high prices and profiteering are the crux of the undeniably low public esteem in which utilities are generally held. But, in reality, the issue is considerably more nuanced, involving issues around transparency, loyalty, social equity and fair play. In short, there is no single silver bullet to the challenge of creating engaged utility customers with high levels of confidence in the industry.” Would you change a word of this in thinking about the situation locally?

The parallels run deeper: in Britain, as here, it seems there is a dichotomy between what consumer respondents to surveys say about prices and what they would like to see happen in the marketplace. Just over a third of the UK participants in a new consumer poll say they are paying a fair price for utility services and another 39 per cent say they do not believe the costs are unfair but they would like to pay less. On what I have read here over time, I’d say that’s about the Australian perspective on power costs, too. But then more than half the UK respondents believe there should be an energy price cap and 42 per cent would like to see electricity re-nationalization. Scratch our local community and would you find a very different answer?

British industry commentators interviewed by Utility Week say the magazine’s survey findings of a gulf between perceived value for money and a desire for market intervention reflect the complexity of the public trust challenge for utilities – and fears about future higher prices. Their power sector, on the other hand, chooses to see it as a reflection of a consumer desire for a more clear picture of what makes up the bill: greater visibility about costs. A leading energy analyst with consultants EY says the British answers reveal uneasiness about foreign ownership of utilities or simply a belief that a nationalized industry would provide an easier to understand system with greater standardisation of offerings – and therefore greater equity for all customers. “But fundamentally,” he adds, ”many (believe) essential services such as energy should be supplied by not-for-profit organisations.”

My own take on the local situation is wider: I think the failure of trust here is much broader.

Who among electricity and gas suppliers any longer trusts governments to maintain durable policy positions? The Grattan Institute has pointed to “an acute danger of politicians panicking and rushing to decisions that push electricity prices higher and make it harder to reduce Australia’s emissions.” It talks with good reason of “a decade of toxic political debates, mixed messages and policy backflips that have prevented the emergence of credible climate change policy.”

Trust in the energy reforms launched in the 1990s is eroding. As Energy Consumers Australia puts it to the Australian Competition & Consumer Commission (currently inquiring in to retail power pricing): “A strong case can be made that electricity market reform – the privatization of electricity and gas network and retail businesses, structural separation, retail contestability and the removal of price regulation – has contributed towards a more efficient market. The evidence is less clear that these efficiencies have resulted in lower prices or better service outcomes for consumers.” With politicians at State, ACT and federal level continuing to intervene in power supply, who trusts in the future of a genuine competitive market?

The Turnbull government’s embracing of a mechanism to enable it to interfere in LNG exports if it deems there will be a domestic supply problem in 2018 reveals (to quote a leading media commentator) a collapse of trust between the administration and gas producers.

Investors (unless piggy-backing on subsidies) are voting with their feet with respect to both new generation development and petroleum exploration.

Outside parts of Queensland, how much community trust (especially among farmers) exists for onshore petroleum explorers?

Who trusts modelling outcomes promoting energy technology directions bought from consultants by entities with vested interests?

Who trusts the bulk of the media to deliver balanced news about energy issues set in the real context of economic, technical and environmental challenges?

There is a new Essential Report poll that shows just 17 per cent of respondents rate the performance of the Turnbull government on ensuring reliable and affordable energy as “good” and 51 per cent say it is “poor” with 27 per cent opting for “average.” How far does this reflect an understanding of the complex energy issues and how far a lack of trust in the body politic generally to resolve the “energy crisis”? How many east coast Australians have an understanding of the role of all jurisdictions in pursuing a way out of the current mess?

In this environment, it seems to me that trust is the key to a safe exit from the “energy crisis” but it is well and truly misplaced; every passing day now sees it kicked further under the energy market furniture. And, as the British report indicates, Australia is not alone in this unhappy situation.

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