Opinion: Cut the energy virtue signalling and start serving customers

Tuesday, 18 September 2018

Published in the Australian Financial Review

In today's energy market, someone profound has been forgotten: the customer.

Boards and chief executives have become increasingly obsessed with "triple bottom lines", environmental targets, diversity training and corporate social responsibility reports. But businesses are not sustainable unless they deliver customers a fairly priced quality product or service.

If you forget customers, competitors and governments are sure to remind you. Nowhere is this more important than utilities providing essential services – such as electricity – to all Australian households, businesses and other organisations, including hospitals and schools.

As we have seen with the banks, a raw deal on essential services angers Australians. No amount of corporate virtue signalling or spin will make up for customers who feel ripped off.

When Prime Minister Scott Morrison appointed me minister for energy, he gave me one clear KPI – to lower power prices while keeping the lights on.
Australian household prices doubled when Labor was last in government, with sharp increases in wholesale prices in recent years. While wholesale and retail prices have now turned the corner, we still have a long way to go. Australians are struggling with the cost of living, and many small businesses are not able to take advantage of new opportunities.

Higher electricity prices cost Australian jobs in sectors including agriculture, aluminium, steel, cement and manufacturing.

A clear plan

This government's solutions will not be driven by ideology or grand gestures, but pragmatism. Our plan is clear.

First, we will not hesitate to intervene to stop the price-gouging. I am no advocate of increased government intervention in the market, but energy companies need to re-embrace their customers and give them a fair deal.

The Australian Competition and Consumer Commission voiced its concerns about the lack of competition in wholesale and retail markets, and the high-price customers are paying as a result.

We will move to prevent unreasonable late payment penalties, strengthen the powers of regulators to tackle dodgy practices and continue to crackdown on rampant over-investment in distribution and transmission.

With wholesale prices now well off their peaks and energy company profits at record levels, we need to see wholesale price reductions passed through to customers.

Second, we will establish a price safety net to empower customers to get the best deal, ensuring retailers are held to account. Establishing a fair market default price, and ensuring offers and plans provide simple comparisons against this, mean people will get fair deal even when they don't have time to shop around. Confusing customers for profit has to stop.

Third, we will back investment in baseload generation to retain supply and encourage competition. We will force divestments if necessary. Opening up our abundant natural resources – gas, coal, water and the sun – will ensure Australians receive the cheapest and most reliable electricity.

Stretched to the limit

The reliability of our electricity grid is under pressure. The renewable energy targets in Victoria, Queensland and the ACT are dramatically worsening this situation, with unprecedented additions of intermittent wind and solar putting pressure on reliable baseload generators to exit.

The Victorian grid will be stretched to the limit this summer. Given its 50 per cent Renewable Energy Target, South Australia now has among the highest prices in the world and poor reliability.

The sharp price increases and loss of reliability and security after the closure of Northern in South Australia and Hazelwood in Victoria demonstrate how this plays out, as the ACCC analysis showed.

Meanwhile, emissions reductions are the least of our problems, with every prospect we will reach the 26 per cent reduction below 2005 levels ahead of schedule and without interventions.

Bipartisanship is preferable, but Labor needs to decide if it accepts our unambiguous focus on lower prices while keeping the lights on.

We won't accept Labor's 45 per cent Emissions Reduction Target and 50 per cent Renewable Energy Target. Their plan to take the failed South Australian experiment national will take a wrecking ball to our economy.

The situation is dire enough without interventions that will drive up prices and drive down reliability by prematurely driving out coal and gas.

Australians have had enough of unaffordable power bills driven by Labor's virtue signalling, and of corporate greed dressed up as saving the planet. It's time to go back to basics and put customers first.

Angus Taylor is the federal Minister for Energy and member for Hume.