James Stevens (Sturt, Liberal Party) Share this | Link to this | Hansard source

It continues to be a concerning development of the Labor Party, walking away from a commitment that they made in the election to my constituents of Sturt and to all the people of Australia to reduce electricity prices by $275 a year. In question time, when this was repeatedly asked of the Prime Minister and other ministers, none of them committed to stand by that figure, but many of them suggested that we look at the policy they took to the election—Powering Australia. I thought I'd take the opportunity to re-read it and have a look at some of the things they claimed in that. It reminded me of some of the peculiar elements within that policy and how they suggest that they are going to achieve this $275 reduction. One in particular is this Rewiring the Nation fund that they're creating—a $20 billion fund, according to the fairly scant detail in their policy document—that they say is going to contribute towards reducing electricity prices for Australian consumers. I really do struggle to understand how that is at all possible.

Let's think about the fundamentals of how transmission works in the National Electricity Market, which Paul Keating established—let's not forget—in the early 1990s. When that market was established, we moved to a situation where consumers met the cost of every component of electricity. So, instead of the previous situations, where state and territory governments would build generation, transmission, distribution et cetera and then they would charge households—at times, political considerations would be taken into account there, and perhaps the correct market rate wasn't charged, because, for a political reason, a government didn't want to necessarily appropriately pass on electricity costs—Keating established the National Energy Market. That included, on the generation side, having a market and, on the transmission side—where you can't have a market—having a regulated asset. That was because you can't have different transmission companies competing with each other to transfer electrons from one point to the other. You've got to have a monopoly market, because you could never seriously replicate those assets that you only need one unit of. Therefore you have a regulated asset base.

The regulated asset base means that that is independently valued. In my home state, ESCOSA—the Essential Services Commission of South Australia—determine what the return should be on the value of an asset which is in a monopoly market, like transmission assets are. Owners of those assets need to achieve a fair rate of return, so ESCOSA might say: 'If your asset is worth this amount of money, this is the return that you should get on that. You also get a reasonable cost that you can charge for your transmission.' In the case of transmission, as we're discussing here, you can add that in there, and that is passed on together through that determination to the consumer—that is, the electricity consumers.

The simple reality is that if Labor are proposing to increase the value by putting another $20 billion of transmission into the total transmission network then the charge for transmission will have to increase to the consumer. That's just a mathematical reality that is impossible to refute. They are talking, in fact, of this unleashing $70-odd billion of additional transmission. Again, that is putting $70 billion of extra recoverable charges into the marketplace through transmission charges. Danny Price, from Frontier Economics, who's very highly respected by the Labor Party as an energy economist—he's someone the South Australian Labor government use regularly to undertake modelling and analysis of some of their policies—made this point very simply in April when the policy was being debated during the election campaign. It is simply impossible that, if you're putting $20 billion worth of additional transmission assets into the system, that is not going to increase the transmission charges to consumers by whatever the determined return on that asset is by the independent regulator. It's impossible for anything but that to occur.

This is one of the many significant flaws in Labor's policy, and it's why we will not see them stand by that $275 figure and say it—the Prime Minister or ministers in this place. But I tell you what: when you go to an election and you tell the Australian people that you're going to do something, and that turns out to be a lie, and, instead of power bills going down by $275, it is very likely that they will increase, then the Australian people will mete out a very tough punishment to the Labor Party for that lie. (Time expired)