Mark Butler (Port Adelaide, Australian Labor Party, Shadow Minister for Environment, Climate Change and Water) Share this | Link to this | Hansard source

It is a pleasure to speak on the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017. I indicate that the opposition will support this bill, though I also foreshadow that I will be moving a second reading amendment at the conclusion of my remarks. This is a bill that seeks to abolish a review process that has been in place for some years around regulatory decisions made in relation to the National Electricity Market. For some time, affected parties—generally, network companies—have had the ability to seek a merits review of decisions made by the Australian Energy Regulator, the AER, to the Australian Competition Tribunal. This bill seeks to remove that merits review that has been in place and seeks to ensure that the decisions made by the AER are also not subject to merits review by any other state or territory body. Arguably, it is unusual for there to be a merits review of regulatory decisions that have involved very extensive inquiry processes—public consultations, submissions by stakeholders and such like—and that point is rightly made by the government in the explanatory memorandum to this bill. For that reason, the merits review that has existed in the national electricity law has been limited, but broadly within this parliament has come to the end of its useful life.

The limited merits review was put in place some years ago, but when Labor was still in government was subject to a very substantial review in 2012 by an independent panel led to Professor George Yarrow. That review led to changes that were enacted in the final stages of our time in government with the agreement of state and territory governments covered by the NEM to ensure that there were improvements to timeliness and cost, but particularly to refocus the limited merits review process, the LMR, on the long-term interests of consumers, who arguably were not getting a fair deal through the merits view that had been conducted up to the time of Professor Yarrow's review. Those changes were made and have been in place for the last few years. It is a case made by the government and broadly understood, I think, by stakeholders in the electricity sector that, since those improvements were made to the LMR process, it is still very clear that the electricity networks have had the inside running on the LMR process at the expense of consumers, businesses and households in the electricity system. The government rightly makes the point that 12 of the 20 AER regulatory decisions made in the post-2013 period—so post the Professor Yarrow reforms—have been reviewed. In business terms, the total benefit to network companies of those review decisions by the Australian Competition Tribunal amounts to some $7.3 billion that had been sought by electricity network companies, the vast bulk of which was granted to those companies through the LMR process.

So I think there has broadly been a view taken by stakeholders—perhaps not the network companies but by stakeholders—that the changes to the LMR process in 2013 that followed the Yarrow review did not do the job and have not balanced the interests of consumers with the interests of producers—or, in this case, network companies, in the electricity system. As a result, there was, I'm sure, a heated debate at the COAG Energy Council in 2016 about whether there would be further changes or, indeed, abolition of the LMR process altogether, given the experience that electricity consumers faced in the three years following the Yarrow review.

It's pretty clear that the loudest proponents of the abolition of LMR were Labor state governments in Victoria and South Australia and the New South Wales Labor opposition, led by Luke Foley. The strongest resistance to any abolition of LMR was from the New South Wales government, particularly while Mike Baird was the Premier of that government. But, in spite of that, or perhaps because of the inability of the COAG Energy Council to reach a consensus position on this, the Commonwealth government has decided to bring forward this bill. The opposition supports the bill and supports the abolition of LMR. That doesn't mean that there might not well have been some ability for a consensus to have been reached at the COAG Energy Council but, given the time that this has taken and the very clear evidence post-Yarrow of the degree to which this review process appears to be slanted in the interests of network companies rather than the interests of consumers, we support the abolition that is contained in this bill.

I do indicate, though, that, at the end of my remarks, I will be moving a second reading amendment to this bill, because, as was the case with some other legislation in the energy policy portfolio that the parliament or the House of Reps considered earlier today—although this is legislation that should be supported and will achieve some good things in the operation of the National Electricity Market—it again highlights the lack of a broad, holistic energy policy being able to be delivered by this government.

This bill, very rightly, is directed at relieving price pressure on consumers—households and businesses—in the National Electricity Market and, for that reason, we support it. But we also know that the principal driver of energy prices that have been going up and up and up under this government is the lack of policy certainty, the lack of a national investment framework, to pull through electricity generation investment that replaces the ageing generation infrastructure that inevitably is closing, because it was built in the 1960s and the 1970s and has reached the end of its life.

As I said earlier today in this chamber in relation to another bill, this government, when led by the member for Warringah, had a very clear plan about dismantling and destroying the previous Labor government's climate and energy policies. Unfortunately, though, it devoted so much time to its ambition of dismantling and destruction, that it didn't put in place the intellectual work to ensure that there was a replacement investment framework that would guide investment decisions—very long-term investment decisions—being able to be made by electricity companies, whether they were some of the traditional large, thermal generator companies that are familiar to Australian households and businesses or some of the new clean energy companies that are also taking hold here in Australia.

It has been made clear time and time again—and most recently and most notably perhaps, in the report by the Chief Scientist, Alan Finkel—that, more than anything, this country needs clear energy policy investment frameworks to guide these long-term investment decisions over the coming years to set Australia's electricity infrastructure up for the coming decades. Because of that lack of policy certainty, being the principal driver of power prices going up, we have seen wholesale power prices double since this government was elected four years ago. They have doubled. Those wholesale power price increases are now starting to feed through into electricity bills for households. We saw, for example, in New South Wales household power bills go up by 20 per cent, on average, on 1 July this year. They are also feeding into business contracts, which might be multi-year contracts, that are now up for renegotiation. Business after business are reporting increases of 70, 80, 90 or even 100 per cent on their previous contract prices because of the concertinaed effect of the wholesale power price increases that have happened under this government. As I said, the overwhelming solution to this, according to all expert advice that the government and the opposition and others have received, is to deliver some policy certainty for Australian business and households into the future.

Perhaps the key reason for this government not being able to deliver that policy certainty is the deep philosophical divisions that exist within the coalition party room. This is a party room utterly divided, in a deep philosophical way, about how Australia's future energy system should be constructed. It is a party room obsessed about coal and its place in the future to a point that is quite irrational. It seems to ignore all expert advice, including from some of the biggest coal generators that operate here in Australia, that this is a legacy technology. It doesn't mean that there is not going to be coal-fired power in Australia for a very long time. Still, about 76 per cent, on the latest figures, of electricity in the National Electricity Market is generated from coal. That is not going to disappear any time soon. It is a level of penetration in the NEM that has to come down if we are going to have any chance of securing and discharging the commitments that this government made at the Paris climate conference in 2015. We have to get that figure down from 76 per cent.

Leaving aside those climate imperatives, even the Treasurer, who brought a lump of coal into parliament—in a pretty fatuous gesture that I suspect he now regrets deeply—said recently that anyone who thinks that new coal-fired power stations are either cheap or quick is deluded. New coal is not cheap. New coal will not attract investment dollars, because investors understand that there is a very serious carbon price risk and a regulatory risk to any new coal-fired asset that will probably emerge in the first quarter or certainly the first half of the life of that asset. Yet still within the coalition party room they are unable to deliver, or unable to begin to deliver, on the most central of Alan Finkel's recommendations, and that is to deliver a clean energy target. The minister said, 'Oh, there's no rush. This will only start operating in 2020 anyway,' but we know that the Finkel panel said there was, in their words, an 'urgent need for a clear and early decision about a clean energy target'. That is for the reason that these investment decisions take time.

We know that AGL has decided to close the Liddell Power Station in 2022. That is only five years away, which is the blink of an eye in terms of investment and construction decisions in the electricity sector. We know that the Renewable Energy Target, which is a bipartisan piece of legislation in this parliament, is underpinning substantial investment in renewable energy right now, but that investment will drop off very quickly if there is no legislation that charts a path forward beyond the end of the Renewable Energy Target. Although the Renewable Energy Target finishes in 2020, in order to get through the door before the door closes, investment decisions need to be made by next year. If there isn't something in place beyond that date, we will experience the 'valley of death' that was talked about in one of the newspapers this morning. The coalition party room needs to have it out on this question. We on this side understand that there is a deep philosophical division. We are trying to give the coalition room to work through those processes so that there is the maximum chance of bipartisan agreement on a clean energy target that will give investors the confidence to start building the next generation of electricity infrastructure to start putting downward pressure on wholesale power prices for businesses and households.

While that hard work within the coalition party room is underway, the Prime Minister and the relevant minister have been trying to put forward pieces of legislation like this, have summits with big retailers and certainly give the semblance of frenetic activity to try to get down power prices for households and businesses. Well done to them for that. Good luck to them for that. If some behavioural change comes from the summits that the Prime Minister and the minister have had with retailers, we'll welcome that. But something deeper is needed around the retail market. There is something more structurally wrong with the retail market than simply getting the retailers in and asking them to write a letter to a few million customers, thinking that that will suddenly make it easier for those customers to navigate their way through an incredibly complex retail market in electricity.

Really—as far as I can find, at least—the only serious intellectual work that has been done on our retail market is the Thwaites inquiry that was commissioned by the Victorian state government. Unusually—jaw-droppingly so for this building—this was a bipartisan inquiry. You can't imagine this government commissioning an inquiry that would have Labor representation as well as Liberal or National Party representation. But the Victorian state government commissioned John Thwaites, a very highly respected former Labor minister, and Terry Mulder, a very highly respected Liberal minister in Victoria, who was once touted as a possible leader for the Liberal Party in Victoria, along with Patricia Faulkner, one of the leading public servants in Victoria, to conduct a very deep inquiry into what had happened since privatisation and deregulation to the Victorian retail market.

I think it was surprising reading for many, because what it demonstrated is that all of the promises out of deregulation, corporatisation and, ultimately, particularly in Victoria, privatisation—all of the promises about relief and benefits for consumers—have all come to nought. There are obviously costs involved in competition, in the sense that all of those new companies, whether in superannuation or in electricity, need to advertise and need to boost their own case in a competitive market, but the case was made at the time that the swings and roundabouts would be that there were lower costs for consumers that more than compensated for the costs that retailers were incurring through advertising their wares in a competitive market, and that just hasn't happened.

There has been lots of innovation, it would appear, in competitive, privatised retail markets like Victoria and South Australia, which were really the vanguard of the privatisation push by the Liberal Party in the 1990s, but those innovations tend to be aimed at keeping customers for power companies—gentailers or retailers—and maximising the profit to retailers rather than delivering benefits to consumers. It is now a retail market that is incredibly difficult to navigate for most households, and for many businesses as well. I hope that the letter from the retailers that has been jimmied out of the hands of those retailers by the Prime Minister provides some help to customers. But this government needs to start to come to grips with the ideas from the hard intellectual work that Thwaites, Mulder and Faulkner were commissioned by the Victorian state government to do, and I don't see that on the horizon. For all that this bill and the letters might provide some relief to consumers, we need deep structural change in our retail market, as we do in all of the other areas of the National Electricity Market that, frankly, with increasing clarity, have let down too many consumers in Australia since the NEM was introduced in the 1990s.

In conclusion, although we support this legislation and we think that merits review has been given a chance to work in the interests of consumers—and, frankly, it hasn't—its time now is up and it should be abolished. That will not be supported by some in the electricity industry, but I think they have had a chance to make this thing work in the long-term interests of consumers. It hasn't, so its time is up and it should be abolished. We support any change that the government is able to make themselves or to engender through the behaviour of retailers that will provide some relief to consumers. But I make this point again: it is difficult for people to take seriously the Prime Minister's protestations of concern for consumers in the electricity market when at the same time he is pushing ahead with his plans to abolish the energy supplement for 400,000 aged pensioners, for 105,000 carers, for 109,000 disability support pensioners, for 138,000 single parents and many other income support recipients besides. This is a supplement whose sole purpose is to relieve the pressure from electricity bills on some of our most vulnerable members of the Australian community. It is very difficult for people to take this Prime Minister and this minister seriously when they talk about the impact of power prices, while on the other hand literally hundreds of thousands of the lowest-income, most vulnerable Australians in the community are going to take a hit worth several hundred dollars every year for the future. We cannot support that decision.

So, with those remarks, I now seek to move a second reading amendment in the following terms:

That all the words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House notes:

(1) the Government's lack of national energy policy, which is causing an investment strike in new electricity generation; and

(2) the Government’s failure to ensure a national energy policy to support the creation of new electricity generation and deliver affordable, reliable and clean energy for Australian households and businesses."

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Kate Ellis (Adelaide, Australian Labor Party, Shadow Minister for Education) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Andrew Broad (Mallee, National Party) Share this | Link to this | Hansard source

Thank you, Mr Deputy Speaker, and I note your strong interest in the area of energy. It is quite fitting that you are sitting here today, as is the member for Melbourne, who is also in the committee that I chair, the House of Representatives Standing Committee on the Environment and Energy. I'm pleased he had time to FaceTime his children.

It is good to talk about this Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017, because this is really about one part of the energy power bill that people get that, that we don't often focus on. We talk a lot about generation, but we don't always talk a lot about distribution. Of course, up to nearly half of your power bill is the distribution. This bill seeks to limit the appeal process for those energy grid constructors and operators, who want to try to extract more money from what is a reasonably safe investment—building grid—and ensuring we try to keep the price down for consumers.

It pleases me that there's bipartisan support, and I guess that does show the Australian people that there is a level of bipartisanship about the key focus, which is about ensuring that Australians do have access to electricity. In the committee I have been fortunate enough to chair, we've been able to ascertain that there are some things that need to be done. Certainly, you do need a reliable electricity grid; you do need to ensure that things can be done. I do note that after the Black Saturday bushfires there was a royal commission held into the cause of those. The result of that has required some significant upgrading of the safety standards in the Victorian electricity grid, and that of course has added some cost onto household electricity bills.

I want to touch on electricity generally, because this is a great opportunity to broaden the discussion. I note the previous speaker did as well, so I think I can take a little bit of liberty from that. There are three forms of generation within our grid. There is the baseload, thermal generation, which has traditionally been coal—a large, spinning piece of metal, essentially, that creates electricity. There's the intermittent generation, which is predominantly wind and photovoltaic solar. That has been very welcome in my patch. We've had some of the best sun in Victoria. In the area where I live many people now have solar on their roof and there has recently been the installation of large-scale solar in paddocks. Then of course there is the peaking requirement of electricity, which is gas, pumped hydro and, to a lesser extent, batteries—I think batteries will come into the mix.

I think something has been lost in this debate. Shutting down coal-fired power stations without having built capacity to take up the slack from those coal-fired power stations has meant that we've had to have a greater reliance upon peaking generation, which has been gas. This has also coincided with the opening up of gas exports from the east coast of Australia. That has been a driving factor in why electricity generation has gone up substantially. The necessity to have some level of affordable gas in the mix is certainly something that needs to be worked on when thinking these things through. (Quorum formed)

I'm sure that was brought on by the Labor Party because they wanted everyone to hear the great speech I was giving about energy. It shows that we are the party that is actually trying to tackle this. My sense of bipartisanship has now gone slightly out of the window because of my colleagues being disturbed from their evening dinner. The concentration of power generation companies, the profit taking as a result of that and some gaming of the grid, particularly by the Queensland government, have also been contributing factors to the increase in our power prices. My committee certainly intends to hand down a report at the end of the year that will give some future direction for ensuring that our grid remains viable and flexible and is set up for the future.

But there is one thing that's been very interesting: globally, we have seen an increase in the R&D that's gone into wind and solar, and, as a result, the cost of building wind and solar has become cheaper and the power generated from those technologies has increased. I think the member for Melbourne would agree with that. Of course, that then asks the question: do we still need to subsidise those technologies? When I was over in Berlin recently, I learnt that they've just commissioned a large wind power station that has zero subsidy. I think the next challenge for us is to move our focus away from necessarily subsidising the generation source and over to building the grid for the generation source to plug into.

If you think about it, we don't fund businesses but we do fund highways. We let a business grow a product, and then they put the product on a road and transport it to the market. When we construct our grid, we have to start thinking about moving away from subsidising our renewable generation sources and allowing that subsidy to be moved across to building the grid infrastructure that we should have for the future. Currently, we are subsidising renewable energy to the tune of $2.6 billion a year. I believe that we could pretty much get rid of that and put it into grid infrastructure. We could use it for greenfield sites where grids can be constructed that would allow us to take the wind resources off the west coast of Tasmania and the sun resources off Central Australia. This would give us an opportunity to have a more diversified grid.

We also have to look at how we can reduce the price of gas, and I believe the government's been taking steps in the right direction on that. I've always advocated for more of a reserve policy, and I still think there's merit in that, but taking steps in the right direction to make more gas available for Australian households and businesses, thereby reducing power costs, is very relevant. I also think we have the opportunity to improve the efficiency of some of our gas fired power stations. It was pointed out in the Finkel review that some of our gas fired power stations are reasonably inefficient at creating electricity.

The challenge we've got is that the next political debate going on in this place is around a clean energy target, and the fear I have is that it still does not create certainty for investment. I think there will be opportunity for what I would call a 'set and lock' mechanism. Essentially, what has been working overseas is having eight-year policy settings around energy, rather than three-year policy settings. Any time you build something that requires large capital investment, to attract investment you have to have certainty—political certainty and market certainty. If you had a set and lock mechanism, where you set a level of emissions and then lock that supply contract for an eight-year period, that would be a pathway forward to creating certainty. That's something that hasn't been discussed in the parliament as yet.

I also think the Finkel review's recommendation around requiring solar and wind generation to have auxiliary services such as inertia and reliability is essential. You need to understand that there are three components to electricity generation: electrical energy, inertia and reliability. You have to have all three if you're going to have a functioning grid, and I commend the Prime Minister for announcing Snowy 2.0, which will work very effectively, as a large battery, in conjunction with renewable energy resources such as wind and solar.

There also needs to be a discussion about how we run the national electricity market. I don't believe the peaking price of $14,000 a megawatt hour is working. It's not attracting people to build peaking generation. You can't expect someone to build something on the off-chance that it's going to be high occasionally. That would be a speculative investment. We've seen that, in countries and areas that have taken up a capacity market, the capacity market has facilitated greater investment in more intermittent power station. So a capacity market would help facilitate the uptake of more renewables into the mix.

I think this legislation is a very welcome step. This shows the government is prepared to take the first steps. There is more work to be done. I'm actually excited about the future. I think coal will have a future. If you stand behind a 1964 Holden you will see the emissions that come out of the back, and if you stand behind a 2016 Holden—I won't say 'a 2017 Holden', because we don't make them here—the emissions that come out of that are substantially less, yet the power that you get out of that car is substantially more, and it's still burning petrol. I think that's a lesson for us. Let's not denigrate the resource; let's look at the technology we can put around the resource to ensure that we can be responsible.

The solar resources of Australia are immense. The wind resources of Australia are immense. The pumped hydro and hydro resources of Australia are immense. I think we can do it. Ultimately, the government will get there and restore some confidence back into the Australian people that there is a level of maturity in this place, that we're not going to play politics with energy, that our focus should always be on ensuring that the people who want to conduct business and rely on electricity can afford to do so, that the poorest in our society can afford to turn the heater on and that we can ensure that we have the electricity to give us the standard of living that we deserve as Australians. We will get there.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

There are two big things that you would say we have done wrong with our energy system over the last decade or two. One has been to ignore Australia's amazing advantages. We have so much sun and so much wind. We're surrounded by ocean. You would think that we could be the renewable energy world leader and that we could be providing clean, cheap energy to households. But, also, you would think that we could be the place that industry wants to come to for energy-intensive industry if they want a guaranteed source of clean, cheap energy in the region. There's absolutely no technological reason that we can't be a renewable energy superpower. It has just been that we have had governments who have been so enthralled with the legacy power of coal and gas that they went out of their way to find ways of subsidising and supporting that kind of energy and holding back the new kind of energy that would enable Australia to take its place on the world stage.

The second thing that we have done wrong is not treat energy as an essential service that needs to be managed for the public good and provided at the lowest possible cost, bringing down prices as well as pollution. We have turned the whole thing into a market—an artificial market. Because electrons aren't goods that can be sold or traded like other goods at a supermarket, we have had to create all these laws and systems to pretend that electricity is a market like every other market. What we have found is that it has completely failed. It has driven up the cost of electricity, it has not brought on the investment that we need in new generation and it has not built the network that we need for the 21st century. The mantra of the Labor and Liberal parties for the last two decades has been to deregulate and privatise everything. If you work through the bits of the energy market—and I'll come to the bit that this bill focuses on in a moment—you can see the spectacular failure that privatisation and deregulation has meant for our electricity sector.

In the retail sector, when you think about what an electricity retailer actually does, they pay for a lot of billboards—you see ads for electricity retailers around the place all the time—but they don't actually produce anything. They just take the product—the electricity—that's been generated and transmitted to you down the transmission line and then sell it to you for an inflated profit. As a result, in Victoria, where there has been complete price deregulation, 30 per cent of the power bill for a household is just the retailer's profit margin. Thirty per cent is just the retailer's profit margin!

And when you look over to other states or territories, like the ACT or Tasmania, where they regulate their power prices, we see power prices have stayed substantially lower there. The difference between the regulated and deregulated states is so stark that for the same electricity you could be paying for $1,500 a year for a family in the ACT, where they've got a Greens energy minister and 100 per cent renewables, or up to $4,000 if you go over to South Australia. It's deregulation—allowing electricity retail sector to be treated as a market for profit rather than as an essential service—that has pushed up power bills to the point where many people can't afford them. That's on the retail side.

On the generation side—right at the other end, where our electricity comes from—we've seen this government, under the current Prime Minister and the previous Prime Minister, send such a shudder through the energy industry by repealing the carbon price that was put in place in the last parliament that wholesale electricity prices have doubled under this government's watch. There they were saying, 'Oh, my word, the carbon tax is so bad it might cost you an extra $500 a year.' And what they have done? They repealed it, put nothing in its place, and as a result the industry does not know what's going on and wholesale power prices doubled. They feign that it's somehow the fault of some state governments who are picking up the slack because the federal government is turning a blind eye to climate change. But the highest price rises in wholesale power were in New South Wales, where there were Liberal state governments and Liberal federal governments in power for the last few years. That's where the highest price rises in wholesale power generation have been. This government has done nothing more to the generation side other than push pollution up and push power prices up. These are undeniable facts. That's the retail end and the generation end.

This bill deals with some bits in the middle around the networks: the big lines out from the power stations to the substations, and then the distribution substations that happen in the cities and regional areas. What's been going on there? Because Labor and the Liberals have been so intent on treating what is essentially a natural monopoly that should be run for the public good as an artificial market, what has happened? We have seen enormous expenditure over the last few years in the networks, because the way the system has been set-up is that no-one is sitting back planning the networks for the Australian public interest, saying, 'What lines do we need where?' The way the system is set-up is that it relies on these network companies—some of whom are registered in the Cayman Islands—to front up and say: 'We want to build project X. We'd like you to tick off on it.' And when the regulator ticks off on it, they get a guaranteed rate of return that could be six to 10 per cent, and they then pass that on to consumers. Over the last few years under this crazy faux-market system that Labor and the Liberals have developed, we've had $44 billion of new build between 2009 and 2014, simply because the companies have come along and said, 'We'd like to build it, please,' the regulator has ticked off on it and said, 'Yes, you can charge six to 10 per cent extra,' bearing in mind that if the government did it they could do it at the bond rate of around three per cent. But, no, never mind that. We ticked off on them getting this massive profit—a guaranteed risk-free profit—that then gets passed on to consumers.

And the more that people have dug into the detail you realise that, out of this $44 billion, on some estimates, $20 billion of it was totally unnecessary. That's the gold plating and the other extended overinvestments that we've heard about. And it's the investments that the Australian Energy Regulator told the House Economics Committee about where, over the last few years, they would say that a billion dollars a year has been spent just to deal with about three to five days of high demand, instead of looking at other alternatives like demand management—that is, saying to companies or households, 'Actually, if we paid you just not to turn the power on for a bit, or to run it at a lower rate, would you be prepared to take a payment for that?' The Australian Energy Regulator, when it fronted up and gave evidence at our committee, could not name one instance in which they'd knocked back an application to build new network infrastructure because demand management would have been a better alternative. So we've had this massive investment. Why have we had this massive investment? Well, let's look at who runs it: largely companies; some state-owned companies who have been bolstering their state government balance sheets through a form of indirect taxation but largely private companies.

Over the last four years, according to IBISWorld reports, the private companies that run the networks in this country have made $28 billion in profits—$7 billion a year in distribution and transmission, for these companies that are meant to be running the energy system for the public good. It is no wonder that power bills are so high! At every step of the way, from the generation—where there's an investment strike going on, because of this government—through to networks, through to transmission and distribution, where it's being run on a for-profit basis and we are building not the network that Australia needs, but the network that the power companies want. That's what we're building, and they're making $28 billion over the last four years, $7 billion a year—through to retail—where companies are making billions of dollars a year. At every stage, the energy system in this country is being run for profit and treated as an artificial market—and we're not getting the energy network that we need.

As a result, we have a system where—according to the Clean Energy Finance Corporation under the current rules—if you wanted to build a transmission line in Australia, not to a coal-fired power station, which is where most of them are, but out to where the sun is shining the brightest, you'd actually struggle—according to the evidence that they've given—to make the case under the existing regulatory investment test that it was worthwhile. In other words, if someone now said: 'We want to build a transmission line out to a place where the sun is shining the brightest'—or where the wind is blowing the hardest, because that's where the new renewables would be—it might not pass the test. But what does pass the test is $20 billion worth of excess investment to gold-plate the system, which customers are ultimately going to be paying for. Because governments have handed everything over to the private sector and because the rules don't require pollution reduction to be taken into account, we're building an energy system, which consumers are paying for and which is actually driving pollution up.

This bill, the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017, addresses one small part of it. This bill says that, when the regulator knocks back some of those applications for funding or for new investment, then it truncates the circumstances in which there can be an appeal against that. What we have found so far is that it has really been a no-lose situation for the energy companies, because every time the regulator knocks it back—they appeal. If they lose the appeal, they still get to make a decent amount of money because the system is rigged in their favour. If they win the appeal, they get to make even more money. So it's a welcome move. But once you've stuck your hand up—as this government has—and said, 'There's a problem with the way that we fund our networks in this country, and there's a problem with the way that we plan them,' you have to take it through to its logical conclusion. And its logical conclusion is this: in a country like Australia, there is absolutely no reason that our transmission and distribution systems—the grid that forms the backbone of our electricity system, and is a natural monopoly—should be such that a company can front up and say, 'I want a guaranteed 6 per cent return'—or even a 5 per cent or a 4 per cent return—'on my money to build a piece of infrastructure, and I want the consumer to pay the difference', when it's essentially a risk-free investment. It is essentially consumers subsidising private companies to make even more profit, when it could be done much more cheaply if the government just treated it like it used to—as an essential service that is there for the public good.

What we ought to be doing, Mr Deputy Speaker, is going further than what's in this bill. We ought to be saying: 'We need to rewrite the rules according to which our energy network is built and funded.' If there's one good thing to come out of skyrocketing power prices, it is that it has forced people to lift the lid on how our energy system has been run for the last couple of decades and, when you lift the lid and look, it is not a pretty sight. There is a very, very good case, regardless of what you think about how generation should be dealt with—there are different views about that—and how retail should be dealt with. I think there's a very good case for full reregulation of the retail market. You just have to look at Victoria and compare it with the ACT to see what benefits you could gain from that. Regardless of what you think about those two ends, for the middle bit—the backbone, the grid, the transmission and distribution networks—there is a very good case for saying, 'We're going to run that as a public good.' As a public, let's build the backbone and then others can come and plonk their generation onto it, and others can sell it at the other end of it, but the natural monopoly that sits in the middle should not be an opportunity for obscene profiteering at the public's expense. Winding back the limited merits review—as this bill does, which is why it's useful and will be supported—is only the first step because, once you put your finger on the problem, you can't then pretend the rest of it doesn't exist.

For too long, big power companies have been getting away with financial murder. They've been getting away with murder by charging what they like to build what they like, even if it's not in the public interest, and consumers have been paying through the nose. It's time to bring it back under public control so that we can bring down pollution, bring down prices and stop Australians having to pay through the nose for high electricity bills and network infrastructure and investment that they don't need. It's time to bring it back under public control because most people in this country think that electricity is an essential service. They don't want a million different power bills and offers; they just want one chance to pay cheap power bills so they can keep the lights on.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

For all of the many distractions, the smoke and mirrors of politics—and there has been a lot of that driven by the Leader of the Opposition—there are always defining issues that make clear the very real differences between those on this side of the chamber and those on the opposite side. The issue of tackling our high energy prices is a perfect example, and this bill illustrates the difference very clearly.

In Australia today, we have a very real and very urgent problem with the affordability of energy. A recent report by the ANU suggests that average electricity prices in my state of Queensland rose by as much as 136 per cent between 2006 and 2016. As many of my constituents know, prices have risen this year by as much as 20 per cent again. In my electorate of Fisher, I've recorded more than 500 constituents during my first year as a federal member of parliament who are concerned about the cost of living and electricity's contribution to it. It's also been raised during most of my 26 listening posts and a great many of my business visits throughout Fisher. I know that this problem is an urgent priority for the people of my electorate and I'm determined to help achieve a positive result for them.

The coalition's approach to tackling this problem has been tough and decisive, but it has also been informed and considered. The government sought to fully understand the energy market and the levers that drive our high prices. Through the COAG structure, we commissioned the Finkel review to ensure that we had fully informed policymaking. The government ascertained that there were issues driving up prices at three separate stages of supply: at the point of generation, in the networks which distribute electricity and in the interaction between retailers and their customers. We are acting to make a difference at each level of those three stages.

In the area of supply, we commissioned the Snowy Hydro 2.0 project, which will add 2,000 megawatts of power to the National Electricity Market—enough to power half a million homes. We are working with ARENA on further such projects in Tasmania, South Australia, New South Wales and my own state of Queensland. We also moved decisively to ensure the security of gas supply. The Prime Minister and the Minister for the Environment and Energy acted fairly, giving gas suppliers the opportunity to ensure a greater supply themselves. However, when necessary, the government acted with tough new regulations to ensure Australians get priority access to the gas supplies that will help to bring down prices.

When it comes to the relationship between retailers and their customers, once again we got tough to make sure that Australians are getting the best deal possible. We directed the ACCC to review retail electricity prices to examine the behaviour of retailers and to ensure that customers are getting the benefit of competition in the market. However, we also went further. Last week, the Prime Minister and the Minister for the Environment and Energy called representatives of electricity retailers to Canberra and negotiated a commitment with them to help customers ensure that they are getting the best possible price.

This government secured promises from retailers that they will inform customers of how much they could save on a better deal, to supply simple fact sheets and to inform their customers when their discount benefits are about to expire. The government will continue to work closely with the industry going forward to ensure that families and businesses pay the best possible rate for their electricity. In contrast to this pragmatic and comprehensive coalition approach, tackling every part of the problem calmly and responsibly, what do we see from Labor? We see an unedifying race to see who can raise electricity prices faster through reckless environmental ideology. You could say that this is the true form of environmental vandalism.

Members opposite would deal with our energy crisis by introducing a 45 per cent emissions reduction target—one of the highest emissions reduction targets in the developed world. You know that such a policy can only be driven by ideology and not by the interests of the people that we, in this place, represent, because the Labor Party's own modelling tells them what a total disaster this policy would be for ordinary Australians. (Quorum formed)

When Labor were in government, their modelling told them that a 45 per cent emissions reduction target would increase wholesale electricity prices by 78 per cent, at a time when businesses were being driven to the wall and some of our constituents were going without heating because of high electricity prices.

The Business Council of Australia called such a move risky and unnecessary. It won't end there. The Weatherill Labor government in South Australia has shown what a Labor-Greens future would look like. Forty-five per cent was not enough for them. No, South Australian Labor insist that only a 50 per cent target will do for them. The results have been nothing less than devastating for South Australia. It comes as no surprise that South Australia has the highest power prices in the National Electricity Market, but that was only the beginning. Labor left 1.7 million South Australians in darkness in blackouts in December, January and February.

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

It's called a storm, you idiot!

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

That's unparliamentary.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

It is unparliamentary, Mr Deputy Speaker Vasta.

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

Yes.

Andrew Wallace (Fisher, Liberal Party) Share this | Link to this | Hansard source

Millions of people spent days without electricity because the government had failed to ensure that there were enough generators of the right kind to provide it. The other leg of Labor's plan for electricity prices, in the words of its Climate Change Action Plan, is to kickstart the closure of coal-fired power plants. Labor intend to force the closure of our lowest cost, most reliable form of energy.

Mr Conroy interjecting—

Mr Thistlethwaite interjecting—

You guys can't quite make up your minds what you want to do. The effect on the electricity prices paid by our struggling businesses and consumers is well attested. In Victoria when the Hazelwood plant was forced to close, electricity prices immediately went up to $135. In South Australia, it has caused a 50 per cent jump in prices for the large industrial users on which the state relies.

We shouldn't be surprised by these policies. Labor's record on electricity prices is clear. During the Rudd-Gillard-Rudd years, prices doubled—an increase of 101 per cent. When the coalition was returned in 2013, our immediate action brought a fall in prices of up to 12½ per cent. That is the difference—decisive and pragmatic action to reduce prices from the coalition; inflated, ideological, virtue signalling from Labor which costs jobs, wrecks businesses and raises prices for all Australians.

The bill before the House today demonstrates that difference once again and addresses the third part of the pressures that are causing high electricity prices for Australian consumers and businesses. Energy networks operate the physical infrastructure that delivers our electricity—the poles and wires. Within each state, these networks operate in a monopoly position, which unless properly controlled can substantially increase the price of electricity. Network costs already make up between 40 and 50 per cent of the price paid by consumers. If we can control that cost, we can make a big difference for all Australians and Australian businesses.

The necessary control exists in the form of the Australian Energy Regulator. But since 2008 the effectiveness of that regulator has been fatally undermined by the limited merits review process. Although set up with good intentions, this process has ended up acting solely and consistently as a means for networks to game the system and generate inflated, monopolised profits at the expense of ordinary Australians. Since 2008, the review process has been employed by networks to challenge 32 out of the 51 Australian energy regulated decisions that have been made. In a balanced and working review mechanism, one could expect that some decisions would favour the consumer and some decisions would favour the networks, but that is not what has happened with limited merits review. In nine years, not a single one of the 32 challenges has resulted in reduced costs for consumers. In fact, as a result of the limited merits review, Australian businesses and householders have paid $6.5 billion more for their electricity. We need to end this rort. The COAG Energy Council has acknowledged that this system is failing and is causing higher prices for consumers, yet COAG has been unable to agree to scrap it.

The price of electricity in Australia is risking people's future in our community today. There are small business owners who face the very real prospect of losing their long-cherished dreams and of having all that they have worked for and sacrificed destroyed by the outrageous cost of energy. The livelihoods of thousands of small business owners and the hundreds of thousands of Australians they employ are at risk unless we act soon. Worse, this energy crisis affects not only the prosperity of our people but, in some cases, their very lives. When there are vulnerable Australians who cannot turn on the heat on a subzero winter's night or who cannot cool their homes in a 40-degree heatwave, then lives are at stake and we have to act.

I know that the people of Fisher are deeply concerned about this issue. It's something that they tell me about every day. I'm pleased to see that this government is taking decisive action. I commend the bill to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I'm speaking in support of this bill, the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017, but for consumers in New South Wales this bill is too little too late. For those pensioners, households and small businesses that have faced a doubling of their electricity prices under the Abbott-Turnbull government, this reform is simply too little too late. That doubling of electricity prices has occurred because of the uncertainty that has been created in the investment market for baseload electricity by this government, which can't make a decision about a clean energy target. When it comes to poles and wires, the overinvestment that has occurred because of outdated rules and regulations regarding investment in the sector—one of those being the limited merits review process—has led to the gold-plating of certain assets, particularly in New South Wales, and consumers have paid for it. Simply, the lack of investment and the lack of a pathway to a renewable energy future has meant that consumers have been worse off.

This bill, through schedule 1, seeks to amend the Competition and Consumer Act to prevent the Australian Competition Tribunal from reviewing certain decisions made under the national energy laws to ensure that decisions made by the Australian Energy Regulator under those laws aren't subject to merits review by any other state or territory body. The limited merits review is typically used to challenge Australian Energy Regulator decisions on regulated electricity and gas prices and pipeline access prices and their increases by network companies in an attempt to secure higher prices and greater return on investment.

I have to say that particular governments have used this to fleece the Australian people. One of those governments that's been very good at fleecing the Australian people when it comes to increases in electricity prices is the New South Wales Liberal government. They used this specific rule earlier this year to stop electricity prices from being reduced for consumers in New South Wales. Through Endeavour Energy and through Ausgrid, they used a limited merits review process to argue for increases in electricity prices. That's right; the New South Wales Liberal government used this rule that is being abolished here today to argue for higher electricity prices in New South Wales.

Now that may be shocking to many consumers in our state. It's certainly shocking to the pensioners who are struggling during winter to put the heater on and keep themselves warm, to the young families who are struggling to make ends meet with electricity prices going through the roof and to the small businesses and, indeed, the large businesses that are struggling to make ends meet because of the increasing cost of wholesale electricity. But that is exactly what that New South Wales Liberal government did. They used this merits review to inflate electricity prices in New South Wales. Why did they do it? Because they wanted to fatten the cow prior to privatising it and selling it off. They wanted to make it more attractive in the market, to inflate their profits and to ensure that they got a higher sale price when they sold those pole and wire assets. That is exactly what the outcome was, and it is New South Wales consumers who have been worse off.

It is estimated that this costs consumers in the vicinity of $100 extra a year on their electricity bills. Because of the actions of the New South Wales government using this limited merits review process, $100 was added to your electricity bill. It was worth it for the New South Wales government, wasn't it, because they added $5 billion in profits for these two bodies that they sought to fatten up before they sold them, which made them much more attractive for privatisation in New South Wales? The result is that these important public assets are no longer owned by the people of New South Wales. They have been privatised and handed over to the private sector. As a result, consumers are worse off, and we are seeing the effects of that now. Pensioners, families and small businesses are struggling to make ends meet when it comes to electricity prices because of this New South Wales Liberal government, and the private sector is not investing in new capacity.

So they sold off the assets. I distinctly remember former Premier of New South Wales Morris Iemma and former Treasurer Michael Costa saying to me when I was running the campaign against electricity privatisation in New South Wales—the New South Wales Labor Party at the time was attempting to have a go at it but, thankfully, didn't go ahead with it—'Don't worry. If we privatise, the private sector will always invest in baseload capacity.' Guess what? The New South Wales Liberal government privatised it and the private sector ain't investing. They're not investing in new baseload capacity in New South Wales, and why would you? Why would you when there's this complete uncertainty about where we're headed as a nation in respect of renewable energy and making that transition from dirty coal-fired power to clean energy?

This Turnbull government is in chaos and can't make a decision about the clean energy target. The Finkel review was handed to the government some months ago. We've had two iterations of it. The first one the right wing of the Liberal Party rejected. Malcolm Turnbull bowed to their needs and rejected it. The government said they would adopt 49 of the 50 recommendations of the second one, but they can't make a decision on the most important one—the clean energy target, which sets the target and the pathway to a renewables future. Because of that we're all paying more for our electricity. The Liberal government use of limited merits review to fatten the cow before selling, then privatising it and the Turnbull government's inability to make a decision about a clean energy target mean that we're all paying more for our electricity.

This bill does go some of the way to solving some of those problems because it gets rid of limited merits review. Since 2013, 12 of the AER's 20 decisions have been subject to applications by network businesses for review. When taken together these 12 network businesses asked the tribunal to increase their revenue by around $7.3 billion over a five-year period, and they have been successful to the tune of $6½ billion. Ordinarily, if the original decisions under the rules had applied, there would be about $6½ billion less of investment in some of these assets and $6½ billion less of that cost passed on to consumers.

The limited merits review regime was established in 2008 and reviewed in 2012 by an independent panel led by Professor George Yarrow. The review identified some serious shortcomings with the regime and led to reforms to improve timelines, reduce costs, increase consumer participation and refocus the process on the long-term interests of consumers. Another review was conducted in 2016 by the COAG Energy Council Senior Committee of Officials. That identified further significant regulatory failures, including: the LMR reviews of economic regulatory decisions, made a routine part of the regulatory process, involved significant cuts to all participants and continue to present barriers to meaningful consumer participation—this is something that has been identified by many, many parliamentary committees in this place; the way the rules are structured at the moment actually prohibits providing incentives for consumers to reduce their demand for electricity, and that has led to significant regulatory and price uncertainty; and a failure to demonstrate outcomes that serve the long-term interests of consumers.

Basically, the rules under which we're regulating, supplying and producing electricity in this country are hopelessly out of date and have been for some time. We need to put in place a pathway to a renewable future whereby we reduce our dependence on coal-fired power but at the same time provide incentives for people to invest in renewable energy. Let's face it, over the longer term, we're all going to be better off because it cleans up our environment, which is better for the future of our kids. It also reduces the cost of producing electricity, because, once you've undertaken those initial establishment capital costs, the fuel is free. Sunlight and wind are free, and Australia, one of the sunniest and windiest places on the earth, should be doing more to incentivise that pathway to renewables. When we do, there needs to be a wholesale rewrite of the electricity market rules.

In this case, the government's taken too long to look at this issue, because they've been at sixes and sevens when it comes to a cogent electricity policy. It's been affecting Australian consumers. It's something that the Labor Party, independent experts who work in this field and those who have oversight of the management of our economy have been talking about for many, many years. Even the Reserve Bank governor, Philip Lowe, identified that this is a serious issue that is holding back economic growth in Australia. He said that the government's chaos when it comes to making a decision on this issue is 'crippling' household budgets. The RBA has further stated that uncertainty in the energy policy environment is delaying investment and affecting investment decisions in other parts of the economy. That's not my view; that's the view of the Reserve Bank governor, who has identified that this intransigence, the government's inability to make a decision on electricity policy and on a clean energy target, is holding back investment in that sector and in the broader Australian economy and is pushing up prices, and we're all paying for it.

Thankfully, the government's seen sense with this particular bill in abolishing the limited merits review. It's an outdated process under the rules that's seen consumers pay more. But, as I said at the beginning, for consumers in New South Wales, for pensioners who have been struggling, for families who have been struggling to pay their electricity bills, and for small and large businesses that simply can't invest and grow their businesses and are being held back by high electricity prices, this is too little, too late. For them, the horse has bolted. The evidence of that is in the fact that electricity prices have doubled. Wholesale electricity prices have doubled under this coalition government.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

It's a wonderful opportunity to able to rise to speak on the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017, because it fits as part of a glorious package being put forward by the Turnbull government in dealing directly with the challenge of electricity prices in our Commonwealth.

What we know is that, for the past decade or so, there have been fundamental problems with how electricity, the energy market and energy policy have been approached. Under the previous government in particular, they started this rot where you had policy approach from the bases of worrying about emissions cuts first, worrying about price second and worrying, ultimately, about reliability last. And what's happened as a consequence of a bad fundamental approach to dealing with electricity and making sure there is sufficient energy provided to the market is unsurprising. When you worry about emissions cuts first, you get a policy framework that focuses on that. So, introducing more and more unreliable power means it compromises the stability of the grid and, in addition to that, you just throw away any real concern about issues around prices.

What this government is doing is reorientating the discussion around electricity to where it belongs, mindful of making sure the system's reliable so that people actually have power when they switch on the lights at home; and making sure that industry has access to the electricity they need to be able to generate the jobs to provide for Australians so that people don't just go out there in the workplace and work successfully but earn an income so they can go home and also pay their electricity bills at home, so reliability is critical. Secondly, we are very concerned about price and acknowledge and recognise that people won't pay for electricity, if they can't afford it. But, more importantly, price plays a big role in making sure that all Australians get the energy they need.

In my electorate, there are many people who might own a home—they might have bought it many, many years ago—and it may have substantial value. They may be asset well-off—some people are asset well-off—but, increasingly, pensioners and those on fixed incomes are forced to live in smaller parts of their home during winter because they can't afford their electricity bills. We are mindful of this reality and are making sure policy reflects their needs.

Higher electricity prices always hit the less well-off the most and those who are on fixed incomes. It doesn't matter where you go in this great country, people are very mindful of their electricity bills and of the human consequences when bills go up. And that includes people, by the way, who sit in this House. It's no longer an issue that affects people simply based on their earning capacity or their income; electricity prices have become a hot topic across the nation, because people are facing real price pressure, and the Turnbull government is actually doing something about it.

Getting that organisation of policy focused on reliability first, price second and dealing with the environmental challenges so that people can have a reliable system and can afford their electricity means, not unsurprisingly, they care about the environmental consequences and are happy to work with the government and private investors to manage the change. But, if you don't have that, you're not going to be able to get it because people are rightly going to return and focus on making sure they have reliable and affordable power first.

This abolition of limited merits reviews sits as part of that framework, acknowledging that about $6.5 billion have been passed on to average Australians because of a bad policy framework that has led to contention around prices and that flow-on cost to consumers. This simple measure taken by the Turnbull government—let's be honest and acknowledge those opposite and those on the crossbenches who are prepared to stand up and support the government's efforts to reduce prices on households and thank them for it—to deal with some of these challenges is real. It doesn't sit in isolation. We know the major investment in Snowy Hydro to increase the potential is part of the package as well. Further measures will continue to be rolled out, and the intervention in the gas market is a direct consequence of what deals the previous government signed up to, knowing full well that there were going to be consequences for the domestic supply of gas and the price of gas. They are being tackled as well.

There will be further measures introduced over time to make sure that every lever that is available to the federal government—and many of them sit with the states—to make sure Australians can afford their electricity bills in the coming years in delivering reliable, affordable energy, while also dealing with some of the environmental consequences of energy production, will be addressed by this government. It is a position based on integrity and understanding the nature of the problem rather than going off on grand idiotic and policy objectives set out by the more ideologically extreme parts of the opposition as we have seen in previous governments.

This doesn't mean that we don't recognise very directly the challenges that are faced across Australia. Recently, I had some lovely constituents come and see me who raised concerns they had, for instance, about the environmental effects of stationary energy—in particular, Dr Joan Corbert and Gillian King. They came along and presented me with a petition from constituents of the concerns they had. Their petition was principally signed out of St Peter's Church in Brighton in Were Street. It said:

This petition of concerned people of the electorate of Goldstein, draws to the attention of the House the severe and urgent threat that climate change poses to the health, well-being and security of all people around the world, particularly our poorest and most vulnerable neighbours.

The petition goes on to say:

We remind the House that Australia's greenhouse emissions are the highest per person among wealthy nations while our emissions reduction targets are among the weakest.

We therefore ask the House to do all in its power to protect communities in Australia and our region from the harmful impacts of climate change - such as more severe heat, extreme and unpredictable weather and rising seas - by:

This petition was signed by many people, and I will be providing it to parliament for consideration. When you sit down and talk to people like Gillian and Dr Corbet and have a mature dialogue about the important need to make sure we have reliable power, to protect the interests of the citizens that I have spoken about—particularly those on fixed incomes, or those less well off—they are mindful and aware of the situation. They are also mindful and aware of the fact you need a reliable and stable grid. So the measures in the Finkel Review are directly around making sure that there is battery storage for unreliable or inconsistent energy from renewable sources and play an important part in that discussion. That is what happens when you have a mature and sensible discussion around the consequences of reliable and affordable energy, while also making sure we minimise our environmental footprint: you can actually engage with people to take them on a journey and address the challenges that this country faces.

Unfortunately, that is not what we get from the opposition. Instead we get soundbites and ideological posturing by the Leader of the Opposition and many of his acolytes on the opposition benches. The consequences of the approach they take will only lead to higher prices and more unreliable energy. Increasingly there will be a diminishing in anything they are going to do around emission cuts, so you actually achieve nothing. That's why the Turnbull government approach is so rational and sensible and focuses directly on what we need to do as a nation to make sure that those who are concerned about the environment have their concerns addressed. It is making sure we don't have unnecessary and disproportionate harm for those who can least afford the consequences of bad Labor policy. That is one of the great challenges we face in driving energy policy forward.

There is a constant sovereign risk that sits over this policy in this country. It is called the Australian Labor Party, in concert with the Marxist member for Melbourne. They see no lesser opportunity to be able to nationalise parts of the electricity market. We heard that from the Marxist member for Melbourne, only a few minutes ago, where he wanted to be able nationalise parts of the grid, because he somehow has this delusion that if you just get bureaucrats in a room, somehow they are always going to act in the best interests of the people. The truth is, very clearly, we have seen across human history that that doesn't always work and, in fact, it often has the complete reverse effect. And if you want to see that, just look at the behaviour of the Queensland state government, where they have near complete ownership of their energy generation assets, but it's not leading to massive cheaper prices. In fact, the incentives are, perversely, in a different direction, and what they actually do is try to find new ways to raise new revenue. By comparison, the great state of Victoria, which privatised its assets many years ago and got a good price for them—and that was one of the great achievements of the Kennett government—has consistently had much lower prices than many other parts of the country, where it's been driven by public ownership. Drawing such simple Marxist conclusions, as the member for Melbourne does, does a disservice to the communities he is concerned about and does a disservice to the nation.

The other thing we need to be mindful of is to not just have a conversation with those people who are concerned about the rises in greenhouse gas emissions—though we should be mindful of that and we should work with them very successfully, which this policy is doing. But it is actually addressing the real challenges that industry faces. One of the things about the Goldstein electorate is that we are quite industry-light; there aren't many industrial parks; there is one significant one around part of Sandringham, but as soon as you leave the Goldstein electorate, in parts of Moorabbin and Braeside and Dandenong, there is more industry. But although there isn't a large amount of industry, it is full of industrious people, people who sacrifice, take risks and invest in the future, not just for their own gain but to employ many Australians and provide the jobs that this nation seeks—the foundation of this great country.

I was disturbed recently when one of the businesses came and spoke to me about the reality they faced when coming up to renegotiate their power prices and bills. There are lots of similar stories around this country. I'm not going to discount it by saying this is just isolated to businesses based in the south-east of Melbourne. But I wish the member for Isaacs were here because a lot of those businesses operate out of his electorate, even if they are owned or operated by people within the Goldstein electorate. The consequences they face not only from bad policy at a state level but also from previous federal governments not approaching energy policy seriously are quite real. In fact, this small business—I won't mention who it is—is a manufacturing company producing parts for things like vehicles. When the owners went to market to ask what their energy prices are going to be on wholesale contracts, they saw a dramatic increase over the next three years. The increase, estimated against all the competitive scenarios for electricity prices, ranges from between 270 per cent all the way up to over 300 per cent.

When you see over many years the potential for a nearly 100 per cent increase year on year, the consequences for job creation, for employment, for people to continue to be able to operate their business in a way that delivers human outcomes for the owners and for the employees are very real. That's the situation that is being faced in the south-east of Melbourne right now. That is the situation being faced by many businesses that operate all across the country. We know the worst of it is being experienced by the great state of South Australia due to the legacy of many years of bad Labor governments, particularly their overinvestment in renewable power without any consideration or understanding of the consequences of the policy. It's true we need to provide an environment of market certainty. We need to get more businesses to invest capital, to take risks and to invest in the future building of this country. That is at the heart of what this Turnbull government policy is seeking to achieve.

There remains perpetually one big, fat risk in this country and it is called the prospect in the future of a Labor government. That is the risk. Every time any Australian wants to look at why their electricity prices are going up or why people say there is no investor certainty or confidence, it is because of the people who sit opposite. They will not get off their idiotic, ideological approach to energy policy. Particularly under their super shifty leader, Bill Shorten, they will sell out Australian households, Australian businesses and Australian jobs at any opportunity if they think they can appease voters, particularly in some electorates like that of the Marxist member for Melbourne.

It is time we as a nation grew up. It is time we as a nation realised the real energy challenges we face, and the only solutions are being provided on this side of the House by people like the member for Deakin, who is sitting at the table, like the member for Kooyong, Josh Frydenberg, and like the member for Wentworth, the Prime Minister. It is a measured, sensible, proportionate policy that is taking the country with us and is making sure we deliver the outcomes that this country needs. So, while mocking by those opposite may make them feel better at the moment, the legacy consequences will be felt by Australian households into the future. I'm proud to be part of this government because we are focusing on what we need to lower the household electricity prices that every Australian faces. We are making sure we provide the investor framework, opportunity and certainty to make sure we can not only increase supply to the market but also, more importantly, make sure we are mindful of the human consequences of bad policy decisions. We on this side are anchored in reality, we understand the market and we are making sure we deliver for every Australian.

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017. What a pathetic contribution from the member for Goldstein. It makes me yearn for the days of Andrew Robb; seriously, it does. I have some news for you, Sunshine: you have been in power for four years and you have done diddly squat. What is the sum total of the announcements of those opposite on energy policy? Study after study; hot air after hot air. I have news for you: the Snowy River announcement is a study, nothing more. You are not cutting rock; it's a study. On top of that, you have to sit down with some retailers; if you hit them over the head with a piece of wet lettuce, nothing changes. There have been four years of talk, but suddenly it's government by dictate.

Let's look at the facts: wholesale energy prices have doubled in the last four years, and that is flowing through to retail electricity prices. Why have wholesale energy prices doubled in the last four years? For two reasons. First, because there is a failure to invest in the next generation of capacity in the market, the next electricity generation. Why aren't people investing? Because there's massive uncertainty around energy and climate change policy caused by this government's dillydallying and the ideological warfare within their own ranks about what their climate change policy will be. This was the fatal flaw in the member for Goldstein's contribution.

It's not about lower prices versus emissions policy. You can't lower prices until you have clarity about emissions policy and you have a serious and credible pathway to reducing emissions. The cost of uncertainty has been estimated by the Energy Council—the peak body for all the generators in the country, not hippies and not mad greenies. This is Origin, AGL, EnergyAustralia, Pacific Hydro, Snowy Hydro—all the big guys that produce the power this country depends on. They've estimated that the cost of the uncertainty caused because the government can't manage energy policy is equivalent to a $50 carbon price. That price hangs around the necks of the minister for energy and the Prime Minister because they can't get the dinosaurs in their party room to agree to a credible energy policy.

The second driver of electricity prices growing in this country is gas. Gas is the marginal generator, so, if we see gas prices go up, we will see energy prices go up. This government have done nothing for four years. Suddenly, they discovered a problem, called in the gas companies and hit them over the wrist, but nothing has happened. Labor, on the other hand, have had a policy around a national interest test for some time that will increase gas supply in this country. All we get from this government is talk and review, not concrete action. There's been one review that has made sense, the Finkel review, and they're whiffing the big recommendation. The 49 other recommendations, like the ones that go to generator reliability obligations and AEMO's role in planning, are really important and will make a contribution, but they don't mean much without the central recommendation, which is about ending the uncertainty about carbon pricing and climate change policy in this country—the Clean Energy Target—and this government can't resolve it because they're fighting amongst themselves.

I'm convinced that Prime Minister Turnbull and the minister know where they need to go, but they can't take their party room with them. We see the member for Hughes, the member for Warringah and the member for Menzies driving this policy debate because they hold the whip hand. We've got constant uncertainty that's impacting on generation right now. On top of that, we've got more talk around the Snowy River scheme, an announcement that's already blown up. The government promised that, if the study came forward with a recommendation, it would be for a $2 billion investment. We had testimony from the department of energy in estimates that it's actually going to be $4 billion, not $2 billion, so it's already doubled in cost in six months, and the time lines have blown out from four years to seven years. So a study came up with something decent to recommend and the time to implement has already blown out from four years to seven years. It's no wonder this government can't manage a chook raffle in a pub; they can't even manage to get a study right. What's the end result of all this? My constituents suffer. With due respect to the member of Goldstein, I'm sure his electorate is a lovely part of Melbourne, but it's very prosperous; it's very middle class. That's great, but I've got the poorest town in all of New South Wales, Windale, in my electorate, and the people of Windale suffer the most. Energy prices disproportionally hit working-class people and pensioners. It's the people in my electorate who suffer the most. That's why urgent action is needed.

I will turn to the legislation, which is around the abolition of the limited merits review. We do need to look at how we treat the transmission and distribution networks in this country. It's undoubtedly true that gold-plating has occurred in the past, and the limited merits review needs to be looked at and abolished. But we've got deeper issues around the rules that govern investment by transmission and distribution companies—the networks, to use a shorthand term.

The rules disproportionally favour capital expenditure over operational expenditure. That's been demonstrated in testimony before the committee I'm deputy chair of, the House's Standing Committee on the Environment and Energy. The incentives are wrong. The incentives favour capital expenditure because it gives them a guaranteed rate of return that is practically risk free, whereas we can make real advancements around investment in operational expenditure using things like demand management to reduce the need for investment in new generation and new transmission infrastructure that will make a real impact in this country. But the rules aren't right for it, so that's why we need genuine review in this area. We do have to be careful in all this that it doesn't lead to policies that disproportionately impact the workers in that sector. We have to be very cognisant that things that tackle capital expenditure have real merit, but if we unintentionally affect operational expenditure that leads to cost cutting and reducing workers to below a safe ratio, that is of real concern. Investment in the transmission distribution network needs to be looked at with a hard eye.

If I can return to my main thesis that, if we're serious about tackling energy prices in this country, we need to solve the climate change and energy dilemma. We need to solve it. We need to put in place concrete policies that will drive the next wave of investment, because we need a new wave of investment. Our generation fleet in this country is very old. The average age of the power stations in Victoria is 44 years, and in my home state of New South Wales it's 35 years. This generation is old and needs to be replaced quite soon.

The Liddell Power Station in the Hunter Valley will close in 2022; Vales Point Power Station will reach its 50-year anniversary in 2028; Eraring Power Station—the biggest power station in the country, proudly on the shores of Lake Macquarie—is due to close, at the latest, in 2034; and Bayswater, up the Hunter Valley, in 2035. Fully a third of our coal fired power stations, which provide 9,000 megawatts of capacity—completely overshadowing the contribution Hazelwood was making in my region—are due to retire in the next 18 years.

The debate should not be whether we need to replace them—because we do need to replace that capacity—but what we replace it with. We can replace it with the most economical generation that also, quite fortunately, happens to be the least emissions intensive. We're actually in a happy position, if we get our policies right, where we can satisfy an environmental goal of decarbonising the energy sector and also get the cheapest possible generation. That's because the economics of the power sector have changed. They've changed over the last few years, and almost everyone recognises that except for the dinosaurs in the Liberal party room.

It is economic fact—and you just have to talk to the generators themselves or the energy analysts or Bloomberg New Energy Finance—and incontrovertible fact that renewable energy is now the cheapest source of new generation in the world, particularly in Australia. It's still the cheapest source when you combine it with firming capacity, whether it's storage or gas-fired peakers. Even when combined with that additional investment, it is still cheaper than new coal-fired power. You can now get a wind farm with contracts being written for a levelised cost of energy at $55 a megawatt hour. Solar farms have been written for as cheaply as $75 to $80 a megawatt hour—and that's the unsubsidised cost of energy. ARENA has testified that you should add in about $20 a megawatt hour for storage to firm up that capacity. You can get new wind farms built in this country with matching storage or dispatchability for $75 a megawatt hour.

What will new coal cost? It will be $150 a megawatt hour. They're not my figures; they're the figures from the industry. Bloomberg New Energy Finance go out and talk to the financiers and say, 'How much will it cost you to build a new coal-fired power station in this country?' They're saying, '$150 a megawatt hour.'

Look at other more advanced technologies that, so far, aren't mature. For example, concentrated solar thermal, which is solar thermal that is purely dispatchable because it has storage with it. The South Australian government has written a contract for $78 a megawatt hour. It's unclear whether that's the true levelised cost of energy, but industry experts say it's not far off. If you're genuinely going use the concept of baseload and you're getting baseload solar for less than $100 a megawatt hour, coal can't compete with that at $150 a megawatt hour.

We need to have a fair dinkum debate in this country. We need to talk about what are the most economical sources of new generation in this country and we need to have an honest conversation with the Australian people. Those on the other side aren't having that conversation. The worst and most disrespectful thing you can do to workers is lie to them, and that is what the government is doing right now when it says, 'You don't have to change,' and that, somehow, the best way of getting cheaper electricity in this country is to build a new coal-fired power station in northern Queensland or in New South Wales. That is economic lunacy. That is not me talking as some sort of environmentalist; it is the market talking. The private sector is not interested in building a new coal-fired power station in this country, because it's not economical. The only reason anyone would even contemplate it would be if this government did something incredibly silly like provide billions of dollars of subsidies or indemnify against a carbon risk for 40 years—a whole list of economically irresponsible actions—to make coal competitive with renewable energy that can be made dispatchable.

What this debate should truly be about is what is the cheapest source of new power in this country. Happily, it is also the most environmentally responsible. I think it is a sad indictment of the modern Liberal Party that it is not embracing market mechanisms to decarbonise our economy and to get investment in this sector. That is what the clean energy target is, a market mechanism. It's not my preferred market mechanism. I would prefer an emissions intensity scheme or another form of emissions trading scheme because I believe, and I think most reputable economists would say, it's more economically efficient. But because the fossils in the Liberals' party room have stood over the Minister for the Environment and Energy and forced him to retreat within 12 hours—as we saw happen in December last year when the draft report of the Finkel review came down—we can't have an EIS and we have to go to a clean energy target. Nevertheless, it is a market mechanism that will help to decarbonise our economy, which we need to do if we are to fulfil our Paris commitments and compete in the next industrial revolution, which will be around clean energy technologies.

But those on the other side just don't get it. They are really no longer the Liberal Party of Mr Menzies. They are truly the modern Democratic Labor Party. They are full of reactionaries who are completely suspicious of markets, who don't understand markets and who are opposed to markets. That is what they are. When they talk about massive new subsidies for coal, when they talk about using NAIF loans, they are about distorting the market. When they reject a carbon price, which internalises a negative environmental externality, which is what greenhouse gas emissions are, they are rejecting the market for Soviet-style command and control. That is truly what it is, and that is the great tragedy of the Liberal Party. It is no longer the Liberal Party; it is the DLP. BA Santamaria would be very proud of them; Bob Menzies would be ashamed of them.

That would be fine if this were an esoteric debate, but it's my constituents who suffer, it's the working class people of Windale who suffer and it's my energy workers at Vales Point Power Station and Eraring Power Station who suffer because of the false hope and the lack of reality that those on the opposite side peddle. That's why we need to have a rational debate in this parliament, but we're not getting it from the government. I am not the only one who is saying it. Every serious actor in the energy sector, if you talk to them, on or off the record, will say that this government is a disgrace and is failing the Australian people because it is chaotic and divided and those in it are interested only in looking after their own jobs.

Chris Crewther (Dunkley, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Competition And Consumer Amendment (Abolition Of Limited Merits Review) Bill 2017. Power prices are excessively high, whether in my electorate of Dunkley in Victoria or elsewhere in Australia. The average person is suffering, particularly those who cannot afford to pay their power bills. It's one of the subjects that are most frequently raised by my constituents in Dunkley, and I know it's raised elsewhere across Australia. It is something that people expect us, the Turnbull coalition government, to take action on. So the cost of living is a crucial focus of the coalition. It is a real issue that affects Australians every day. It is, indeed, crippling families, the elderly and businesses, particularly small businesses, who cannot afford to pay their bills, who are struggling to pay their bills or who are having reduced profit margins because of higher electricity prices. It is a focus of this government and has been an ongoing subject, particularly since late last year.

Electricity and gas are non-negotiable commodities and consumers have minimal bargaining power. They can be, for example, subject to monopoly rents. So we have a responsibility to do something to ensure that national regulators have real power and that Australians are not being ripped off. The extensive review and appeal system is racking up huge bills where costs are passed on to the consumer.

Let's look at this bill. This bill legislates to remove the ability of networks to appeal the merits of decisions of the Australian Energy Regulator. It also removes limited merits review. Currently, electricity and gas networks can appeal merits of decisions of the Australian Energy Regulator to the Australian Competition Tribunal. Indeed, 32 out of 51 Australian Energy Regulator decisions have been challenged since 2008. Never has an appeal by networks resulted in reduced costs for consumers and businesses. In fact, consumer bills have increased by $6.5 billion and network costs have increased to 40 to 50 per cent of the overall household bill.

This bill is actually equalling the treatment of electricity and gas networks with telecommunications, water and postage services. Other sectors do not have access to merits review. With these changes providers will still have access to judicial review if they want to challenge the Australian Energy Regulator's decisions, as with other sectors. Limited merits review was an appeal based on the merit of the decision whereas this is focusing more on the judicial grounds.

But this bill isn't just removing the limited merits review; it's also providing additional funding for the Australian Energy Regulator of $67.4 million. This ensures that they are fully equipped to address behaviour in the market that is resulting in higher than necessary electricity prices. It's also a recommendation of the Finkel review. It is critical to consumer confidence in our electricity and gas markets. Recently I went to a business in Carrum Downs, which is just outside of my electorate. Pacific Urethanes employs a large number of people from my electorate. They're an Australian owned company specialising in the development and production of polyurethane systems. (Quorum formed)

The opposition interrupted the speech because they want to continue playing games with our country. They don't want to hear about the fact that we want to reduce electricity prices for Australian consumers. They don't want to hear about companies in my electorate, like Pacific Urethanes, who are suffering in terms of their energy prices and who have reduced profits because of the electricity prices continuing to increase. This is why we are taking action and this is what I am talking about. It's unfortunate that the opposition continues these games in this House.

As I was saying, Pacific Urethanes is an Australian-owned company specialising in the development and production of polyurethane systems for Australian and export markets. In my electorate in particular, there are 16,000 small businesses. The business that I'm talking about is one which employs a significant number of people in my electorate and contributes to those who are already employing from those small businesses in Dunkley. Last week, I met with a couple of the directors of Pacific Urethanes, Jim Hall and technical director Gerard Murray. They talked about the fact that they've had an increase in running costs due to an increase in energy prices, and an increase in the cost of doing business has therefore had a cost on jobs. This then directly impacts upon people's livelihoods. These are people who have been hit twice from poorly constructed energy policies: firstly, by the limited merits review, first implemented in 2008 under the former Labor government; and then by the failed reforms in 2013—not to mention the carbon tax in 2012. The big causes of price rises and decreased income reported to me by businesses in Dunkley arise from some of these policies.

The Turnbull government is working to support small business and to remove hurtful legislation which is damaging the cost of doing business in Australia and hurting our markets. The impact on businesses is significant. Not only do businesses have to deal with regulation, red tape and the cost of doing business; they have to deal with the regular increase of electricity prices, which feeds into their bottom line and their opportunity to create jobs and more outcomes in our community. It also feeds into the security of their investments not only in their business but in our wider community. And there are flow-on consequences, whether it's for the local community organisations that they sponsor or for the sporting clubs and so forth.

I want to go now to some of the constituents in Dunkley. A gentleman called me up recently saying he couldn't afford to heat the house, so he only does so when his daughter comes to visit. A resident in Frankston signed up to an electricity and gas plan and contract that said they could expect a bill of $386.65 per quarter for a medium-sized family with 1,000 kilowatt hours per quarter. That excluded connection fees and pay-on-time discounts. Based on previous estimates, up to $193 of this constituent's quarterly bill could simply be network costs. Some providers don't let you choose the billing frequency, and this is a huge burden and cost to bear in one go if you have to pay a big bill up-front. Not only are consumers and residents in my electorate being hurt by electricity prices; they have had insult added to injury in that electricity and gas networks have two chances to appeal decisions made by the Australian Energy Regulator.

Dunkley also has one of the largest retirement populations in Australia. I've had a number of the retirees and senior citizens of Dunkley come to me recently—for example, Brian of Seaford, Vera of Frankston, Duncan of Mount Eliza and Bill of Frankston South. They've all raised the issue of electricity prices and our energy policies with me. They also raised the fact that nearly everyone in their age group are raising energy and electricity prices as one of their key issues. So we do need to do something about this. It's not only an ethereal concept; the fact is heating in winter and cooling in summer are essential to the health of our elderly citizens. For example, they are much more sensitive to temperature changes than younger people.

In the wider Victorian context, power prices are already high. We have seen Hazelwood shut down at a time when we need energy security. Absolutely, we need to invest and increase our renewable energy sector but consumers are hurting from every angle. We need energy security at the same time as there is investment in renewable energy, and more than ever we need to act now. It is a critical time and we need to take action around power prices. We have seen the state Labor government in Victoria failing with the respect to their energy policies, not to mention their safety record. For example, the 2016 Safety performance report on Victorian electricity networks: 30 September 2016 highlighted a number of safety failures. For example, United Energy was one with a significant number of failures in their network, and action to correct this has not been properly taken by the Victorian state Labor government.

Why do we need this bill? We need this bill as previous attempts have shown us that reforms are not working, that the limited merits review regime needs to be completely abolished. I'm looking forward to bipartisan support to lessen the cost of living for all Australians—and I hope there'll be no more quorums or other things during this speech that will disrupt the details of the actions we are taking to help everyday Australians. It is inevitable that we must move towards renewable energy. Prices are currently high due to the cost of transition and the lack of energy security. Consumers cannot afford to be hit twice by the cost of their electricity and gas bills.

If this bill is not passed, we'll have further appeals of decisions by the Australian Energy Regulator, which will result in higher electricity and gas network revenues and higher prices for consumers. As I said earlier, not once has an appeal to the Australian Competition Tribunal resulted in a reduction in costs for consumers. This bill removes the regulatory burden and provides greater regulatory certainty. It ensures the Australian Energy Regulator's decisions are respected whilst ensuring the right of access to judicial review. It removes the cost from consumers of $6.5 billion, including for residents in my electorate of Dunkley. Currently, consumers get to foot the bill for the electricity and gas networks' privilege of appealing the decisions of the Australian Energy Regulator. The Australian Energy Regulator is there for a reason and we need to make sure its decisions actually mean something and have outcomes that can be enforced and reinforced, and that benefit people in my electorate and across Australia.

To conclude, again I note that consumers in my electorate of Dunkley and elsewhere are being ripped off due to the right of electricity and gas suppliers to appeal decisions made by the Australian Energy Regulator. Thirty-two out of 51 decisions made by the Australian Energy Regulator have been appealed using the Australian Competition Tribunal, and not one has had a positive outcome for consumers. The Australian Competition Tribunal effectively has been a second regulator. Costs have been passed on to consumers, including in my electorate of Dunkley. The limited merits review process has resulted in increases to bills across the board of $6.5 billion. People everywhere are being hurt by the cost of energy, so we need to ensure that the Australian Energy Regulator can actually regulate the industry.

We have an obligation to the Australian people and I have an obligation to the constituents in Dunkley to make sure that their voices are heard. People are telling me they cannot afford this anymore, particularly the elderly residents of Dunkley. Prices are, in some cases, up to double the actual cost of electricity and gas due to network costs. It's the No. 1 issue that is coming across my desk in community surveys, through email campaigns, over the phone or in person. People in my electorate of Dunkley and across Australia expect me and the government to do something, and rightly so. People's health and household budgets are facing an impact because of the increases to electricity prices, and we must provide security for Australian families.

I know that those opposite recognise the need to act on this matter, but let's hope that they work to ensure positive results and lower electricity prices for consumers. I am proud to stand up for the Dunkley voices who have reached out to me and the Turnbull coalition government. The Turnbull coalition government are indeed listening and we will not let them down. We will act to ensure that Australian consumers have lower electricity prices into the future.