Archive for September, 2018

Right royal fuss

The federal Liberal Party having dug a deep hole and thrown itself in to it, seemingly along with the prospects of a Coalition re-election, business attention inevitably is leaning increasingly to what a Labor government’s policies can deliver for energy supply next year and beyond.

The problem is that Bill Shorten & Co have yet to unveil their own energy blueprint, apart from repeatedly pressing green buttons on renewables, and are unlikely to do so when the travails of the Coalition in this area are hogging the media headlines.

Perhaps the biggest threat for electricity suppliers at this point is that Scott Morrison will launch a populist royal commission in to the whole mess, an inquiry that couldn’t report before the next federal poll, leaving Labor to cherry pick the findings at its leisure on winning office.

The degree of angst over the commission prospect is well illustrated in a commentary, written by CEO Sarah McNamara, just published by the Australian Energy Council.

She writes “it is difficult to see what taxpayers would learn from a royal commission that has not already been thrust into the light by the work of ACCC chairman Rod Sims and his team after 15 months of what can only be described as a forensic look at the energy industry.”

And, she says, “a royal commission would add more sensationalism to energy politics; it would send the very worst message at this time for investment confidence and ultimately consumer prices.”

Moreover, “the financial services royal commission was the result of allegations of illegal practises uncovered by journalists and the admission from the financial services industry itself that a royal commission was justified.”

McNamara declares: “No such trigger exists for the energy industry.” Nor, she says, do recent profit results for Australia’s largest gentailers signal the need for an inquiry at commission level. “Profits have been largely driven by the wholesale part of the businesses, not retail, and those higher wholesale profits are a direct result of tightening of firm supply.”

McNamara points out the CoAG Energy Council has already sought powers similar to those of a royal commission for the Australian Energy Regulator via amending the national energy laws to give the regulator the power to compel individuals to appear before it and give evidence.

“CoAG,” she says, “is also seeking to conduct a targeted review of whether additional provisions of the national energy laws or subordinate instruments should attract the highest maximum civil penalty amount. It is a safe assumption the AER will get these powers soon, once the CoAG Energy Council secretariat determines how to implement them. These are akin to a royal commission’s power to compel individuals to give evidence, compel businesses to hand over documents, make recommendations to government, or prosecute breaches of the law in court against businesses or individuals.”

It’s quite telling, I think, that the gentailers, via the AEC, now feel free to snap at the new Prime Minister.

McNamara writes: “It is unclear what the Prime Minister and Energy Minister mean when they refer to wielding a ‘big stick.’  Certainly, they are keen to distract from their failure to progress the national energy guarantee (NEG), but what is clear is that the political heat around energy costs has only increased in recent weeks.”

And McNamara reminds Morrison that, as Treasurer, he commissioned the ACCC’s review into energy prices and it did not find any evidence of misconduct in the industry. “It did point to a range of factors that had led to the current energy situation,” she says, “including that at all stages of the supply chain decisions have been made by many governments that set the NEM on the wrong course.”

Really, she points out, “there is no secret why energy prices fluctuate.”  As the AEC sees it, the major factor behind high power prices in the current market is wholesale price volatility because we’ve been existing in a policy vacuum for more than 10 years.”

She adds: “We do not have sufficient levels of investor confidence to drive the kind of investment the market very badly needs.”

The gentailer lobby group is getting a form of support today from the most outspoken of the large consumers’ bodies, the Energy Users Association.

“Be careful what you wish for,” CEO Andrew Richards is telling the Morrison government via the media “because (you) are not going to come out of a royal commission smelling like roses – (politicians) are just as much to blame for high prices as energy companies.”

And the Energy Consumers Australia CEO, Rosemary Sinclair, adds that, “while we understand the motivation for (calling) a commission,” Australia has just had the two biggest reviews of the energy sector in a generation. What she wants to see is “collective commonsense and a focus on better deals for consumers now.”

In an editorial this week, the Sydney Morning Herald comments that the purpose of flagging a royal commission is to “give the impression that the government is doing something while in fact postponing a decision until after the election.” Morrison, the paper asserts, is “running away from what Malcolm Turnbull called the bitterly entrenched and ideological rift on energy policy inside the Coalition”.

The SMH adds that the Prime Minister may find himself “running on a unity ticket” with Shorten on this issue. The Labor leader, it says, will “happily agree” to holding a commission and “if this becomes a competition of which party can be more hostile to big power companies, the Liberal Party is sure to lose”.

Whatever, as my grandchildren are wont to say, the political odds on an energy commission being set up are now starting to look interesting.