Legislative Council Wednesday 31 October 2018

Ms  FORREST  (Murchison) - Mr President, I will take a word out of the Government's playbook when it comes to amendments in this place.  I will not be opposing this legislation.  As we mentioned in the briefing, it remains a concern when governments interfere in energy pricing.  I understand the volatility in the wholesale energy price, particularly the Victorian wholesale energy price, and some of the factors behind that.  This response from the Government is to give effect to a policy to keep energy prices low for Tasmanians.  That is a really good thing because many Tasmanians are struggling to pay their energy bills. 

There are fundamental, underlying problems not being addressed and some of these cannot be addressed by this state.  They need to be addressed by the Commonwealth.

As to the Wholesale Electricity Price order, as the Leader said, the Treasurer may issue a WEP order if he considers that market-based mechanisms to determine the wholesale electricity price in Tasmania are not delivering a price consistent with the actual wholesale cost in the state.  One has already been created to cap the price rise at the Hobart CPI of 2.1 per cent.  It has the effect of removing external price shocks.  We added the two-year sunset period when we dealt with this last year because we were told that Treasury was going to undertake a review to decide whether to delink from the Victorian wholesale energy price setting.  It appears it has done that review and decided this is the way to proceed.  I am not sure how broad and public that review was.  It seems it was a decision that had already been made.  We are now looking at how to put a framework in place to keep a cap on electricity prices, and some would argue that is the only thing this state could do without Commonwealth intervention in some of the issues they need to address.

On 22 October there was a really interesting MacroBusiness podcast.  I am happy to share this with members if they do not have access to MacroBusiness.  It is called The Influence of Gas on Renewables.  It talks about the issues with the oligopoly we have with gas on mainland Australia and the challenges when governments fail to act on this, which is impacting on electricity prices.  If those in Treasury have not listened to it, I strongly encourage them to.  As it says on the post with the podcast attached -

There is only one answer: regulation. We need domestic gas reservation and pipeline price fixing. Now endorsed by the ACCC:

Until we address some of these challenges that are bigger than us and external to Tasmania, we are still going to find it a difficult challenge.  Federal governments, past and present, have shirked their responsibility in this.  I will read part of an article from The Age 29 October by Ross Gittins, called 'Sensible electricity rules await the next government'.  He has a bit of a crack at the federal government, and talks about some of the underlying problems of the electricity pricing -

The monumental stuff-up of the move to a national electricity market, with its price blowouts at every level - generation, transmission and distribution and retail - was decades in the making.  Only with the doubling of retail prices over the past decade has realisation dawned that the federal government can't escape ultimate political responsibility for a national market run by a squabbling committee of state and territory energy ministers.

There is our little part of play.  It goes on -

But Morrison's announcement last week of a desperate collection of good, bad and indifferent measures to get retail prices down in a hurry, or at least appear to be getting them down, seems no better than a crude attempt to bludgeon some quick retail price cuts out of the three oligopolists that have come to dominate the market. 

As was powerfully demonstrated by the events leading to the overthrow of Malcolm Turnbull, no government whose members can't agree that the threat of climate change is real is capable of achieving a policy regime that restores a stable future for the energy industry. 

Don't be fooled, however, by the industry apologists claiming the only real problem is the uncertainty about future governments imposing a price on carbon emissions, and the rises in the wholesale price this is now causing as coal-fired power stations die of old age without adequate replacement.  That relatively new problem accounts for little of the retail price doubling over the past decade, which is the underlying reason for the public's anger over the cost of electricity. 

Putting the blame on the inability of the two federal political sides to agree on a response to global warming sweeps under the carpet the oligopolists' gaming of the wholesale market, the distribution industry's gaming of its price-setting formula, and the blowout in retail margins, following the state governments' deregulation of retail prices. 

Companies at the distribution and retail levels are earning rates of profit far higher than they need to cover their cost of capital and risk-bearing.  The public have every right to be up in arms and the federal government every right to step into the mess in search of ways to reduce profitability in prices at the retail level.  Particularly because what the feds would be doing is correcting years of misregulation by dysfunctional state governments.

It is not a question of deregulation versus regulation.  Electricity has always been more highly regulated than other industries and always will be.  The national electricity market is, after all, a creation of government which, from day one, has been (not very well) regulated by public authorities.  Rather, it's a question of how and why you intervene to correct the mess.  Whether you act carefully and reasonably to get the industry moving toward a future that's sustainable, financially and environmentally.  Any changes need to be fair, although in this the balance should err in favour of fairness to consumers and business users, who've been overcharged for years.

The industry can't be allowed to use the trade union argument that their present rates of profitability are 'hard-won gains' that must remain sacrosanct.  When something should not have been allowed to happen in the first place, it's no crime to belatedly reverse it.  Talk of 'sovereign risk' is self-interested bulldust.  You can't have a democracy in which governments are forbidden to change course. 

But none of this seems to describe Morrison's motivations.  He want price cuts, he wants them now, he doesn't care much what stick he waves to get them.  A word of free advice, Scott; claiming to have achieved bigger price cuts than the punters see in their quarterly bills will only make them angrier. 

Years of problems bring us to this point.  Yes, the Government is taking some action to try to address the significant volatility in the pricing arrangement we have been linked with.  It has notionally been in our favour in the past; it has been stable.  In recent years, particularly with the closure of the Hazelwood Power Station but not due to that alone, we have seen a significant volatility and the Government is taking action to try to find a way forward.

I trust this is an interim measure to deal with the immediate period, while a new structure is found or a new framework is found that removes the political finger on the trigger that could be potentially used for political gain.

I hope our Energy minister can work constructively with other Energy ministers from around the country, the federal Energy minister and federal government to see these major challenges addressed in a way that should have, has not but needs to happen if you are going to make headway in stopping the overcharging that has been going on around this country for years.