Cheaper energy means more affordable food

Prime Minister Malcolm Turnbull, Environment and Energy Minister Josh Frydenberg and Resources and Northern Australia Minister Matt Canavan announced yesterday a series of actions aimed at addressing the national energy crisis that’s also hurting farm production through significant price spikes in recent years.

One of the core issues is the cost of gas due to limited east coast supply streams.

However moratoriums on extraction by some state governments have been criticised by the mining sector and other analysts as being politically motivated and contradictory to scientific and economic rationalism.

But the Coalition’s new plan aims to address the energy crisis in identified areas, consistent with the Finkel review’s recommendations, by putting downward pressure on prices and reinvigorating the market, while addressing greenhouse gas emissions.

A statement from Mr Turnbull and the two ministers said the government would finalise “tough” new regulations in the gas sector to give Australian customers priority access to gas supply before it’s exported, to commence on July 1.

The plan also includes strengthening the Australian Energy Regulator (AER) by providing it with an additional $67.4 million to stop energy network companies “gaming” the system and overturning rulings in the courts.

The Australian Energy Market Operator (AEMO) will also be asked how to ensure new continuous dispatchable power is provided, including what support is needed to promote new investment.

“The finalisation of our tough gas regulations will increase supply to the domestic market, putting downward pressure on gas prices which have risen because of supply shortfalls,” the statement said.

“Restrictions will be placed on gas exporters when there are shortages in the domestic market.

“We will stop big electricity companies from running to the courts to try to overturn the AER’s decisions.

“Companies have made 52 appeals and the courts have ruled against consumers 31 times - this will end.

“To back this, we will strengthen the Regulator by providing it with an additional $67.4m to ensure it is fully equipped to address behaviour in the market that is pushing up electricity prices.”

The AEMO will also be asked to; identify existing and potential loss of continuous, dispatchable (baseload) generation; talk to suppliers and customers, particularly large-scale emissions intensive industrial users, about what they need to secure future investment; and examine how much continuous power is needed in the short term to stabilise power prices.

NIC CEO Steve Whan said the government’s action to try and invoke downward pressure on energy prices was welcome news to all people interested in seeing Australia produce competitively priced food and fibre.

“Irrigators have been making the point, consistently, that Australia is putting in danger its ability to produce reasonably and competitively priced local produce with its energy prices,” he said.

“How can any business be expected to stay competitive when it experiences a single year increase in power cost of over $87,000, as one SA family owned orchard experienced this year?”

Mr Whan said the NIC had made submissions to various inquiries calling for strong action to redress the massive imbalance against consumers in the, “so called market”.

“We’ve said we felt suppliers were gaming the market and welcome a big boost in resources, and a clear mandate from government, to the Australian Energy Regulator,” he said.

“Abolition of Limited Merits Review is also welcome, once again a system that seemed to work only for the big network owners and their phalanxes of lawyers.

“Action on the price of gas is also critical.

“We know gas is an important step-down fuel toward a lower carbon emitting energy sector and seeing the federal government exercise its power in this area is very welcome.”

Mr Whan said Australian irrigators wanted to see some certainty in electricity policy so long term investment decisions can be made.

He said the government’s outlined process for better planning in future for the base energy supply “will be welcome” if it contributes to electricity policy certainty.

“Irrigators have made it very clear that we believe prices must and can come down,” he said.

“We’ve called for a 30 per cent reduction and going forward a price of 8 cents per kilowatt for the electrons and 8 cents for the network.

“For a country with bountiful energy resources, both renewable and non-renewable, that shouldn’t be too much to ask.”

Political action aimed at addressing energy price crisis

Mr Turnbull said one of the factors driving electricity and energy prices right now was the high price of gas which has risen “very rapidly” in large part because of a shortage in the domestic east coast market.

“We are addressing that - we’ll be able to impose restrictions on exports on gas from the east coast sufficient to enable the market, the domestic market to be properly supplied.”

Mr Turnbull said abolition of the Limited Merits Review would also have an impact on prices.

He said network transmission and distribution companies have prices they can charge set by the Australian Energy Regulator.

But unlike other utilities like telecoms and water they’re able to have a merits review to the Australian Competition Tribunal, which they have regularly taken advantage of and generally been successful to the tune, in recent years Josh of about $6.5 billion additional cost to consumers, he said.

“So to protect consumers and to ensure consistency with other similar utility sectors we will be taking steps to legislate to abolish the Limited Merits Review,” he said.

Senator Canavan said gas was a staple and “the bread and milk” of businesses and “they can’t substitute away from it”.

“It is unsustainable for our country to be the world's largest exporter, but to be paying some of the world’s largest prices for gas,” he said.

“That will erode support for a gas industry in this country if it is maintained and that is why we're taking action to be able to bring more gas on to the domestic market to help lower prices down to a more reflective international level.

“It is significant action but it shows the commitment of this government to bring downward pressure on energy prices to protect jobs and help households pay their bills.”

Mr Frydenberg said by abolishing the Limited Merits Review process, “we believe that that will put downward pressure on electricity prices”.

“We tried to get COAG agreement to this but various states have a vested interest in that they own some of the poles and wires,” he said.

Senator Canavan said the legislative measure on gas export controls would be a disallowable instrument, “But at this stage, we welcome support from other political parties”.

Mr Turnbull said the latest energy market interventions – versus the Liberal party’s ideology of the free markets – “fits in with is ensuring that Australians have affordable reliable energy, that's what we've got to do”.

He said “every market is different” and electricity markets in the US had “much more” government involvement and regulation than Australia and the US is “the home of free enterprise”.

“Ultimately our job as the federal government - and of course, this is a shared responsibility with state governments - so our job, collectively, is to ensure that Australians have the most affordable, the most reliable energy that we can deliver and that of course, that we meet our emissions reduction commitments,” he said.

“We're taking steps which have an immediate impact.

“The measures about dealing with gas have an immediate impact on the gas market.

“How long that takes to feed in to somebody's domestic gas bill, time will tell.

“But it will have at the wholesale level - which of course is from where all of the prices come from - it has an immediate impact.”