David Gillespie (Lyne, National Party) Share this | Hansard source

I must say that the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019 is a very welcome and long-awaited piece of legislation. It addresses market misbehaviour in the electricity market that has been evident for some time to insiders and economists who understand the complexities of the market, well before the ACCC inquiry into electricity pricing. That inquiry confirmed what a lot of people understood already, but the average family and the average small business have just suffered increasing energy bills. They have all known that something is badly wrong with our energy system and wanted a better deal. There are several drivers of our high-cost electricity system, which previously was a very cheap and abundant commodity that has been delivered reliably for decades.

The ACCC report identifies market misbehaviour in both the wholesale and the retail markets, as well as in the contract markets. The ACCC identified that retailers have been confusing customers with myriad deals and attendant discounts, but the discounts were based on excessively high standing offers. You can always offer a big healthy discount if the base price at which you're starting your standing offer is very high. We have already addressed this by implementing the default market offers and reference prices, which have delivered transparency and made it easier for people to compare. This system came into force on 1 July.

There are other things that the ACCC report identified, like withdrawal of generating supply, save, for example, scheduled maintenance. If you take out one of your generators at a time of high demand, you don't need to be a rocket scientist to work out that that will deliver a higher price for the generating company, if they only have to operate half the amount of supply, and they short the market. It also gives them an avenue to fill the missing electricity from some of their other assets, like renewables. They not only get a payment for the electricity—and the price is higher—but also are able to access renewable energy certificate prices.

The bill that people pay for electricity comprises many components; I might just put it on the record for my consumers and constituents in the Lyne electorate. The bill one pays includes a cost that the retailer assembles from, namely, the cost of the generation; the cost of the poles and wires; the retailer's costs themselves; and the cost of the renewable energy certificates. I might add—and it is not related to this legislation—that the Renewable Energy Target mandates that retailers have to have certificates to prove that they have sold enough electricity. Some of these retailers are also businesses that run generation; they run power stations, wind farms, coal-fired power stations or solar farms. They also run the retail end of the price that you pay. Some of these gentailers in states like Queensland and South Australia have got, essentially, the dominant share of the market, and they can access a pay point at each of those three parts of the deal. In those states, where they basically have control of the market, they are able to restrict in the contract markets to prevent other retailers of smaller size from entering their market.

This bill will amend the Competition and Consumer Act to define energy market misconduct and what is prohibited, and provide a series of graduated and targeted remedies. It will define a retail pricing prohibition, focused on conduct by retailers where they fail to reasonably pass sustained and substantial electricity supply chain cost savings to their end consumers. It also defines and creates a contract liquidity prohibition to prevent energy companies from withholding hedge contracts for the purposes of substantially lessening competition. It also creates a wholesale conduct prohibition to stop generators from manipulating the spot market, such as by withholding supply.

The graduated series of remedies can start with infringement notices, or contracting orders that the ACCC demands, through to court-ordered civil penalties which are financial—and they are very considerable. In that system the greatest penalty would be a $10 million fine, or three times the value of the total benefit attributed to the misconduct, or 10 per cent of the annual turnover of the corporation in the 12 months before the conduct occurred. The Treasurer can issue contracting orders upon the recommendation of the Australian Competition and Consumer Commission. That will permit the Treasurer to make the corporations provide their generating assets and electricity contracts in the contracting space, so that we will have more retailers entering these markets.

Finally, I turn to the divestment part of this legislation. As you probably appreciate, the EU has divestment powers during mergers and acquisitions, and Australia does have divestment powers—usually in the acquisitions space, or where there's substantial lessening of competition—but in the electricity market, at this juncture, until we get this legislation through, we won't have those as a threat for profound and prolonged abuse of the market, and that is the so-called big stick. Without this sort of sword of Damocles hanging over gentailers, we won't be able to effectively stop this misbehaviour.

The legislation requires both the ACCC and the Treasurer to be certain that misbehaviour has been genuinely proved and continues. The divestiture orders can order the company to break up its assets, but the conduct can't just be a one-off; it has to be fraudulent, dishonest and in bad faith, and it has to be proven, before the court, to have been done for the purpose of distorting or manipulating prices, and the order has to be proportionate and targeted to the conduct. The legislation will apply also to government owned enterprises, but we have seen and we have noticed incredible increases in the charges in Queensland, where the dominant suppliers and retailers are government owned entities. The legislation does have a sunset clause out to 2025, and there are extra powers, increased information-gathering powers, for the ACCC, for monitoring, so that orders can be justified by facts.

I think the legislation will improve behaviour in the market. There are many other causes of increased costs, and some are not bound up in this legislation, but this legislation will address some of the most egregious market misconduct. As I mentioned, there are other initiatives that we've already brought in to correct the system. These include the default market offer and reference pricing. We've got the Retailer Reliability Obligation in place. We are also working on other things to improve the security of the electricity system.

So, in essence, this is a very important piece of legislation. Cheap, affordable, reliable electricity is like water for an economy. People can't survive without water. Economies that are industrialised, and the modern world, can't survive without cheap, abundant, available electricity. Otherwise, we would lose all our industrial capacity, all our value-adding capacity, whether in the processing of food or minerals, and all the accoutrements of modern everyday life—from your mobile phone to your iPad, to your house, to your car, to roads—are manufactured with energy. So the sooner we can get back to having affordable, reliable electricity, the sooner all of those sections of our economy, as well as small businesses and families, will be much better off. I commend this bill to the House.

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