Alan Eggleston (WA, Liberal Party) Share this | Hansard source

I endorse Senator Cormann’s remarks and call attention to the fact that Treasury have not recognised that Western Australia is an energy island and the Western Australian electricity market is very different to that in the eastern states, which, for some strange reason, is called the national electricity market. They may not have noticed that Western Australia exists—except that when it comes to the payment of royalties and taxes from the mining industry they are very well aware in Treasury that we exist.

It seems very strange that the national electricity market is really the eastern states electricity market and that rules have been made pertaining to the eastern states electricity market which are totally inappropriate to Western Australia. The Western Australian electricity market is very different to that in the eastern states in that WA depends for its electricity generation largely on gas from the North West Shelf being carried to the south-west of the state in the Dampier to Bunbury pipeline. This will continue to be the case even if renewable energies replace coal in Western Australia.

Griffin point out that there is a historic price competition in Western Australia between gas and black coal in the western electricity market and that WA’s long-term energy security will be compromised by the current CPRS settings. In other words, the energy security of the south-west of Western Australia, where most of the population live and where there is a lot of industry, will be compromised unless this legislation is amended. Griffin further point out that the so-called national, or eastern states, electricity market is based on a competitive spot market into which all generators supply electricity, whereas the western electricity market is based on bilateral contracts. In the selling model, the price of electricity is locked in for the length of contracts, and there is no capacity in the western electricity market to pass through to consumers the increasing price of carbon, which generators will bear over 15 years from the time the scheme is introduced.

By contrast, in the eastern states, in the so-called national electricity market model, based as it is on competitive spot prices, the additional cost of carbon over 15 years will be passed through via the market clearing price. That means that Western Australian generators will not be able to pass through the price of carbon to their customers and they will be progressively disadvantaged as the price of carbon rises. Western Australia, according to Griffin, asks that the western electricity market have a separate ESAS formula with an emission intensity cut-off limit at 0.75tCO2. This is not a request which I think can be ignored or denied. Western Australia does depend on gas. This is a very serious and very genuine anomaly which needs to be corrected, and Griffin has put up some proposed amendments which have now been put to the Senate by the Western Australian senators, and I would strongly urge the government to, in the interests of fairness and understanding of the fact that Western Australia is actually part of the Commonwealth of Australia, agree to these amendments so that there can be a rational and reasonable approach to electricity marketing in Western Australia. I suppose one might even wonder if, had we had more time, for example, and waited until after the Copenhagen conference, it might have been recognised that these anomalies occur. I do hope that the minister will correct this anomaly, and I would ask her if she would do so and commit the government to doing so.