Helen Haines (Indi, Independent) Share this | Hansard source

As an Independent, I see my role as advocating for sensible, evidence-based policy that addresses the needs of Indi and the interests of Australia. When I look at this bill, I am not convinced that it does this. The energy minister says this bill will reduce electricity prices by stamping out bad behaviour on the part of electricity companies. I have looked intensely at this question and I don't think the evidence supports this claim.

According to the ACCC, the effective price paid by residential electricity customers has increased 56 per cent in real terms, from 19c per kilowatt hour in 2008 to 30c per kilowatt hour in 2018. The average bill jumped from $1,200 a year to more than $1,600 a year. If we're going to reverse that we need to why. Writing in the Australian Financial Review, the minister says that electricity prices are high because of 'deliberate manipulation of the wholesale market', where companies artificially constrain supply to boost prices and hike their bids in the spot market. That's a big claim and the energy market is complex. So how do we know if it's happening? Luckily for us, the government asked itself this question and we have the answer—and it's a no.

In 2017, the then Treasurer, now Prime Minister, asked the ACCC to conduct an inquiry into the causes of retail electricity prices and provide recommendations as to how to tackle them. In June of last year, that inquiry was handed down. According to the ACCC, wholesale prices made up just a quarter of the increase that people have seen. The largest contributor was network costs, which the government's bill does not address. But did wholesale prices go up to 'deliberate manipulation', as the minister says? According to an ACCC report, that the Prime Minister himself commissioned, no, they did not; that behaviour did not happen. The key problem this bill claims to solve is not happening.

But there's more evidence. In November 2016, the then Minister for the Environment and Energy, now the Treasurer, and the then Treasurer, now the Prime Minister, asked Australian Energy Regulator to closely monitor wholesale prices to catch any abusive wholesale market behaviour following the closure of the Hazelwood power station in Victoria. In March last year, the regulator released their findings. They said:

Our analysis did not identified instances where the opportunistic exercise of market power significantly affected average price outcomes in Victoria or South Australia since Hazelwood closed.

Then, in December, the AER released results of yet another investigation, saying that, 'despite this vulnerability to the exercise of market power, we did not identify short-term behaviour as contributing to recent price rises'.

That's three major studies commissioned by the government, conducted by the government's own agencies, that directly refute the central claim used to justify this bill.

The minister has spoken publicly and often of one study that did find evidence of abuse. This was a working paper from an economist at the Victorian Energy Policy Centre. However, that report has been widely criticised as being deeply flawed. Frontier Economics wrote:

The numerous methodological and procedural flaws in the Mountain-Percy report leave the evidence well short of that required to allege serious wrongdoing by market participants. Certainly, the report does not provide any suitable justification for the government’s misguided interventions in the NEM.

The Grattan Institute's Tony Wood put it more simply: 'The government is trying to solve a problem that doesn't exist.' Electricity prices are high but there is insufficient evidence to conclude that it is because of abuse of the wholesale market.

The latter part of the 'big stick bill' addresses huge margins for retail companies. This contributed just 13 per cent of the price rise, but there is some truth to this claim of the government's. According to the Grattan Institute, retail electricity companies have significantly higher margins than other industries and it's well established that they gouge customers. This is an area where I do support further policy.

But what concerns me about this bill is not only that it might fail to address the real problems in the electricity sector but also that it might threaten investment in new energy infrastructure in our regions. My electorate of Indi, like most in Australia, is not a fossil fuel electorate. There are no jobs in fossil fuel mining or energy generation in Indi. Instead, we are a renewable electorate. In the Hume region, we produce 1,700 gigawatt hours of renewable electricity every year—about as much as a small coal-fired station. We get our energy from solar farms, from 20,000 rooftop solar PV installations and from major hydro generators that bring jobs and income to the towns of Dartmouth, Mt Beauty, Eildon and Yarrawonga. At the Barnawartha biodiesel plant, 16 employees produce 50 million litres of biodiesel every year.

In my electorate, renewables are jobs. By introducing an extraordinary power that has never existed in this country before, the government risks scaring off investment in a crucial industry for regional communities. The Business Council of Australia has said:

… this legislation has the potential to make things worse, perversely creating even more uncertainty and discouraging new investment in the energy sector.

You might think, 'Well, big business would say that.' But what about the Human Rights Commission? They say they are robustly opposed to the creation of unilateral divestment powers for the Treasurer—that such discretionary and quasi-judicial powers represent deep and genuine sovereign risk, and, if enacted, these powers would cast a pall over investment in all sectors of the Australian economy. And the Energy Users Association, the people this bill is supposed to be helping, said:

The investment uncertainty that passing this Bill will create will only increase the risk faced by the electricity supply chain. A risk that will inevitably be passed on to our members in the form of even higher prices …

Right now, we have interest in almost three gigawatts of renewables projects just in my electorate and the Hume region alone, covering all of my electorate and that of my neighbour, the member for Nicholls. That's two Hazelwoods worth of power. If built, these projects would bring $4 billion to the local economy and supply us with the cheapest form of power going around. On top of that, in the mountains of Indi we have the potential for enough pumped hydro storage to supply Australia's needs 13 times over—6½ thousand gigawatt hours. That's seven Snowy Hydros. The minister talks, rightly, about the need for greater investments in dispatchable power and storage to support the integration of renewables. But how will we attract this to Indi, where we have the best storage resources in the country, with the government creating this type of sovereign risk?

In recent weeks, I've listened to many views, and the message I keep hearing is that this law will not help drive investment in our region. The CSIRO estimates that Australia needs $400 billion of investment in utility-scale generation over the next 30 years. This is because our antique coal plants are breaking down and being retired, and will need to be replaced. The best thing we can do to drive down prices is to bring on this investment in the cheapest form of power we have and create a policy framework that incentivises investment in storage and firming to support the integration of those renewables.

Sadly, I fear that this bill risks undermining the good work the government has done, in fact, to lower prices. Analysis by the Grattan Institute of futures contracts in the mainland electricity market shows that prices are expected to trend downwards to around $70 per megawatt hour. This is the government's 2021 price target. The interventions the government has already made seem to be working. The market is correcting itself. The government talks about the closure of the Liddell station as needing urgent action—possibly under the powers of this bill—to ensure that New South Wales doesn't run out of power. But the government's own projections released just a few weeks ago, the 2019 Electricity Statement of Opportunities, show that New South Wales will remain well within the reliability standard even after Liddell closes, and that's not even counting new generation assets that will come online in the next three years. The pressure the government has already placed on companies and the impact of its retailer reliability obligation seem to have worked. In a worst-case scenario, just 0.0019 per cent of electricity demand will be unmet in New South Wales, up from 0.001 per cent today. Finally, the government's introduction of a default market offer will lead to savings of $500 to $800 for some households, and the early evidence indicates that this is already happening. The government do not need to introduce this bill, because they've already got us on the right track. I fear this big stick will wack us back to being off course.

I opened my remarks by articulating how I see my role as the independent member for Indi. My role is neither to necessarily support nor to oppose whatever the government does but to look at legislation on its merits and do what I can to improve it, and here are three concrete ways we could improve this legislation. First, we could introduce a sunrise trigger. We should empower the Energy Regulator with new powers to investigate market misconduct. If, after one year, they find evidence of companies engaging in the types of misconduct under consideration, the bill would automatically come into effect. Right now, the government claims we need new powers to punish bad behaviour, and the companies say the behaviour doesn't exist. Let's call both their bluffs. If the companies are so sure it's not happening, they won't mind a year of scrutiny from the AER. Equally, if the government is convinced it's happening, they'll have nothing to fear from making the legislation contingent on finding evidence. Second, we need to remove the powers of the Treasurer to make unilateral decisions. In its current form, the bill enables the Treasurer of the day extraordinary and inappropriate powers. Cooler heads must prevail. Third, we must amend the bill to ensure it cannot be used by the government to force coal stations to stay open for longer than they planned. If this happens, it will threaten investment in new generation and keep prices higher for longer. This big stick cannot become an ideological whip for the government.

As I laid out today, I have deep reservations about the bill. However, it is clear this bill will pass, so I must decide what role I will play. On the night I was elected I committed to working with the government, whoever it may be, to improve policy. I believe that, if this House can soften the bluntest edges of this bill and the government is then willing to listen to communities on the ground and work to increase investments and jobs in renewable energy, we may have a constructive path forward. I will be supporting sensible amendments to this bill, like the changes I have outlined today, but I am willing to support passage of the bill through the House. I do so with deep reservation, but I do it believing that I can work with rather than against the government and I can achieve the most I can for Indi and for regional Australia.

Now I speak directly to the energy minister. You have assured the nation this bill will not slow investment in renewables. You have assured us this bill will not be misused. So our eyes turn to you. You have promised much, and now you must deliver. We look to you to see what you will do to ensure investments in renewables and storage remain high. We look to you to see how you will convert our $4 billion renewables pipeline across Hume into actual investment. We look to you to see how you will give confidence to the energy market, and we look to you for ways to export our knowledge to the world to reduce emissions overseas that are harming our communities here. You will get your stick, but Australia needs its carrot. I extend, again, my invitation to come to Indi to learn from our nation-leading, community renewable projects and find ways to develop with us our potential for storage. We look to you. We want to work with you, and we will not blink.

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