Greg Combet (Charlton, Australian Labor Party, Minister for Climate Change and Energy Efficiency) Share this | Hansard source

The government opposes the amendment put forward by the member for Melbourne because it is economically irresponsible and indeed breaches the agreement that the government entered into with the members of the Multi-Party Climate Change Committee, and also for the reason that the existing provisions of the legislation in relation to energy security are absolutely fundamental to investment confidence in the sector.

I have no disrespect whatsoever for the member for Melbourne; I understand his motivations for moving this amendment. But the fact is that, contrary to his assertion, this amendment breaches an agreement that the Greens party reached with the government in the context of the Multi-Party Climate Change Committee. We entered into that agreement as a package, as he indicated. There have been no changes in the goalposts whatsoever. The government has discharged its obligations under that agreement to the word, and it is unprincipled to come in here and put forward an amendment that breaches that agreement.

The assistance to the generators, the Energy Security Fund payments, was a very important part of the agreement. The government made the decision after years of analysis into how to best transition highly emissions-intensive electricity generators into a cleaner energy environment. Of course, it is a transition that will take some period of time. The current arrangements that are in place are the result of in-depth electricity sector analysis and modelling since 2007, and nothing that has happened since the MPCCC agreement was concluded changes the reality and the conclusions that were reached as a result of that detailed work.

Since 1 July when the carbon price commenced, the pass-through of carbon costs in the energy market and to household bills reflects exactly the Treasury modelling which informed the decisions on the basis of the Energy Security Fund payments. Advice was taken from key energy market institutions like the Australian Energy Market Operator, who advised that the government's measures, reflected in the MPCCC agreement, reduced the extent of generator financial distress, supported investment confidence in the sector and could be expected to improve reliability and security outcomes in the short term and reduce spot prices and expedite the transition to a lower emissions fleet over the longer term.

The Energy Security Fund was legislated with the Clean Energy Act, and all the regulators have now been awarded certificates of eligibility by the regulator for those Energy Security Fund payments. To interfere with that and to create uncertainty in relation to that would be disruptive to the investors and to the lenders that are engaged in the electricity generation sector. Changes to those legislated entitlements will directly influence investor perceptions of sovereign risk in the energy market. It would increase the risk premiums for clean energy investors. The advice of my department, consistent with the government's assessment, is as follows: proposals to review or change those legislated entitlements will directly influence investor perceptions of sovereign risk. This risk is exactly the type of risk the package was designed to minimise so that energy security is assured until sufficient alternative capacity is available in Australia's electricity markets. Increased risk in the market would also likely push up wholesale electricity prices and result in further cost pressures for electricity consumers unnecessarily. In addition, all investors in the energy market, including investors in clean energy technologies, would face higher costs for financing due to increased risk levels.

The government is not going to entertain the proposition of the Greens, whether it be by amendment or by any other form, for these reasons. It is in bad faith, in the government's judgement, that this has been put forward. It is in breach of the agreement that we reached. I want to make clear to investors in the energy industry that the entitlements that we have legislated through the Energy Security Fund will not be tampered with by the government. We will not entertain this amendment. It is economically irresponsible. We have in place a comprehensive package to secure energy security for Australian households and businesses. This was a policy initiative entirely separate to the issue of the Contract for Closure, which the government discharged. We stand by the package that was legislated and firmly oppose this amendment.

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