Big stick time — again

Once more energy policy is being used as a vehicle for the games politicians play and the only certainty about the present environment in Canberra is that the consequences for electricity supply will be disruptive and possibly damaging for suppliers.

Industry anxiety about the situation is on display in a media statement issued by the Australian Energy Council (representing the 21 major generators and retailers).

“Reforms to be the market must be properly considered,” it says. “(New) calls for substantial changes risk poor outcomes for consumers. The industry stands ready to engage with the (federal) government in good faith on the extensive range of recommendations made by the ACCC. The devil is in the detail and there are no quick fixes. The ‘national energy guarantee’ must remain the focus.”

However true all this may be from a supply perspective, it is bolting horse time at the top of the Turnbull government because of fighting within its ranks; sound policymaking is always one of the first casualties of such situations.

Today there is an eerie throwback to the Julia Gillard government era with the Prime Minister posting a Facebook video in which he promises “we will not hesitate to use a big stick to make sure big companies do the right thing by their customers.” That is almost word-for-word what Gillard said in August 2012 as she struggled with public unhappiness over power prices – her target then was the network companies.

According to Turnbull’s Facebook comments, the government now intends to try to set a “price expectation” that defines the most mass market consumers should pay. Power companies that don’t pass on these savings will be put on notice by the Australian Competition & Consumer Commission and face the “toughest penalties” if they don’t take appropriate action.

The problem with making up this stuff on the run is that there is always a another flank opened to attack by opponents and the ever-present jackals of the media. The “wave of new laws being hurriedly put together to force private companies to lower their power prices,” the West Australian says this weekend “ignores 2.5 million Australians in WA and the Northern Territory.”

Meanwhile the cynics in the Canberra political commentariat are pointing out that things have reached the stage where the NEG per se is irrelevant. “You could replace (it) with a can of apricots and the situation would be no different,” writes News Limited commentator Joe Hildebrand today.

“Politics in the twenty-teens is the domain of the hardliners and extremists,” he adds. “If you actually pull back and look at the big issue — in this case an energy policy which promises to reduce both power prices and greenhouse emissions — you’d think (Turnbull) was on an unbackable winner. Indeed, virtually all of the moderate voices in politics, the business community, expert think tanks like the Grattan Institute and anyone with half a brain thinks it’s a pretty good plan, or at the very least better than nothing. But that hardly matters.”

Looking at what is going on in Coalition politics right now, I rather think Hildebrand is right – and that, for those of us who care about energy policy, raises the issue of what prospect there is at this juncture to pursue the “certainty” investors keep emphasizing they need? Short answer: not much. The prospects are growing that we will have to get through the elections ahead (Victoria in November, New South Wales in March and the federal one any time from quite soon to May) to see some sort of settlement in this area.

On the other hand, who can tell what will emerge from the horse-trading and dealmaking on the grandest and most desperate of scales (Laura Tingle’s phrase in an ABC commentary) as the Prime Minister seeks to lock in the support of both his own government team and the States who have to deliver the NEG in legislation?

As for the energy retailers, it is hard to see how they can dodge the Prime Minister’s “big stick” in the form of wrecking what the media have dubbed the “loyalty tax” – the costs worn by household and small business consumers on the average standing offer compared with the best deal that can be found in the market. It is claimed that the gap ranges from as little as just under $300 a year to as much (in South Australia) as more than $830.

If the government adopts the ACCC proposal, the Australian Energy Regulator will be given the task of setting a default rate – which will vary across the NEM depending on distribution zones.

However, as the Energy Council says, there is no quick fix. It will take time to draft and implement the necessary steps – and the AER will need to consult on its decisions.

Meanwhile the political circus will continue.

Federal Labor has come out this weekend promising it will implement more simple power bills with a “regulated capped offer” that it claims will save east coast households an average $165 a year.

There is a federal cabinet dinner at The Lodge in Canberra on Sunday night to discuss energy policy. Oh to be an insect on that wall………….

 

 

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