Interview with Ross Greenwood, 2GB - Money News

Transcript

23 October 2019

E&OE

ROSS GREENWOOD: The Energy Minister Angus Taylor joins me on the line. Many thanks for your time Angus.

ANGUS TAYLOR: Thanks for having me Ross.

ROSS GREENWOOD: First up - tell me, the big stick legislation - why does that create certainty? Why does it not create a lack of certainty for companies that want to come and invest in our energy sector? The reason being that if you have got suddenly the threat of the big stick over the top of you, you are less likely I would’ve thought to have invested more money in the electricity generation sector.

ANGUS TAYLOR: Well, there is a few myths here Ross. There is massive investment happening in our electricity sector right now, it is just that the vast majority of it has been solar and wind. We are dealing with a very different problem here though. What we have seen in this sector is bad behaviour. The ACCC said it is unsustainable and unacceptable. We’ve seen behaviour that involves prices gouging, and sneaky late payment penalties which many customers will have seen. This legislation going into place to make sure that anti-competitive behaviour, this behaviour that is not in the interests of customers can be dealt with appropriately. That behaviour has resulted in record levels of profits from the big energy companies and behaviour that many of your listeners will have seen in their own bills and the way they have been treated by the energy companies. There are three parts to this. The companies have got to pass on substantial and sustained savings, particularly if the wholesale price comes down as it is expected to in the coming years. They can’t manipulate the spot market and they can’t withhold electricity contacts to new players coming into the market. That competition, the new entrants coming in or smaller players trying to build their businesses up, there has been behaviour particularly in some states which has held them out and the result of that has been we’ve had less competition, and therefore higher process than we otherwise would have.

ROSS GREENWOOD:  Okay, but isn’t there the crazy situation that I observe - and I do watch the energy markets pretty closely - there are some generators who choose not to participate in the markets on the very hottest days of the year for example or, no well actually on the other way, where there is plentiful energy about and the reason for that is because it is not in their economic interests to generate at a time when the electricity price is less than they might desire it to be. Now that doesn’t necessarily make the grid more stable. And also the other problem is that you’ve got a situation where with some of the electricity generation, so spotting especially on the hottest days of the year there’s not enough and that send prices through the roof. So either which way many of these integrated generation retailers have actually got it both ways - they win if the electricity price is high, they win if the electricity price is low – and as a result you get the sense that maybe even sometimes there is well I wouldn’t say manipulation but there is certainly massaging of the prices to meet there own profit ends.

ANGUS TAYLOR: The ACCC identified there was a real problem, and withdrawal of supply, withholding of supply to push up prices is conduct that can be dealt with under this legislation. It’s much more difficult under previous legislation Ross, and the whole point of this is to stop any manipulation of the market.

ROSS GREENWOOD: But isn’t shutting down a coal-fired power station earlier than what could otherwise be feasible for that coal-fired power station, isn’t that effectively taking supply, significant supply out of the marketplace? As a result, making the grid less stable. As result, making the prices Australians pay and industry pays less sustainable. And so as a result we’ve got industry that walks out of Australia because our electricity prices are too high. Clearly that is to the detriment of the nation as a whole, and even the taxes that your government collects.

ANGUS TAYLOR: No, no – absolutely right. I couldn’t agree more. We saw this with the withdrawal of Hazelwood from the market without any notice, or very little notice. It was closed and we saw the wholesale prices on the announcement of the closure of Hazelwood, more than doubling in Victoria. Now, that’s very serious issue, withholding of supply or withdrawal of supply from the market does push prices up, there’s no question about that and that kind of behaviour is not acceptable. There’s other complimentary initiatives we are putting in place to deal with this sort of behaviour, but that kind of anti-competitive conduct designed to push prices up, that’s exactly what we’re getting at with this legislation.

ROSS GREENWOOD: Okay – one thing is to have the guts to bring legislation through, and you’ve been the subject of significant criticism from the industry as a result of it.

ANGUS TAYLOR: Sure.

ROSS GREENWOOD: The second thing is to have the guts to use it. So, the question from me is would the Government, would you have the guts to be able to use this and strip assets off our big energy companies?

ANGUS TAYLOR: Well Ross, I wouldn’t have gone through all of the pain of getting this legislation to this point over what’s been close to a year of very, very hard work. Labor opposed it 13 times in the previous Parliament. There’s been lots of criticism from the big energy companies, but you’d expect that. I wouldn’t have gone through all of that if I didn’t think this was important, if I didn’t think it mattered for the Australian people and importantly, if I wasn’t, if the Government wasn’t prepared to use it so of course we are. Now, we don’t want to use it. We want to energy companies to do the right thing and we think that the fact that the big stick is there will influence the companies to do the right thing. But you know, you put these things in place so you can use them if you have to, that’s what we’ve done and we won’t take a backwards step on that if there is that sort of anti-competitive, unacceptable behaviour that I described.

ROSS GREENWOOD: Okay, so the big stick is now there, there’s got to be a carrot somewhere –

ANGUS TAYLOR: It’s still got to go through the Senate. We’ve got it through the House of Representatives –

ROSS GREENWOOD: Yes, no, I understand that – you’ve still got to get it through the Senate I recognise that as well, but you know, you’ve at least go it to this point. Next phase of this though is the stick is there, there’s got to be a carrot there and the carrot is quite clearly to make certain that these companies have a stable policy platform on which they can then make the investments that create the electricity to make certain that we; A: have competitiveness in our manufacturing industries in particular than then; B: that we make certain that we don’t have repeats of last year where the lights go off in Victoria.

ANGUS TAYLOR: That’s absolutely right and we don’t want withdrawal of investment either, both new investment and keeping assets in the market, both of these are important and we are very focused on that. But, let’s be clear Ross, there has been record level of investment in this sector. The problem with the investment in generation that we’re seeing is it hasn’t been balanced. It has been almost entirely intermittent – solar and wind. There hasn’t been enough investment in what’s called dispatchable capacity so that’s the generators that you can flick them on when you need them so that’s coal, gas, hydro - they’re all dispatchable. We are too low on dispatchable energy in South Australia and Victoria in particular. We’re at risk in NSW with the prospective potential closure of Liddell a few years out. Queensland and Tasmania are both in a better situation in most circumstances but we have very, very serious problems in Victoria in particular. We need to get more generation into the market and-

ROSS GREENWOOD: You’ve got a Victorian Government right now as you know Angus – you’ve got a Victorian Government that’s hell bent on getting a 50% renewable energy target in there.

ANGUS TAYLOR: Well, you’re dead right. This is a massive problem. You’ve got a Victorian Government that’s worse than that, they are encouraging premature closure of coal-fired power stations, they’ve got a 50% renewable energy target which we know wrecked the South Australian grid under the previous Labor government there, they’ve banned onshore gas exploration and development so you know, you can’t get that dispatchable gas generation into the market, and they’re not interested in connecting to hydro projects like Snowy.

ROSS GREENWOOD: And an Energy Minister who even denied last year that there was blackouts and claimed that these weren’t blackouts at all when 250,000 people could have told her that the lights weren’t on.

ANGUS TAYLOR: Yes.

ROSS GREENWOOD: I mean, this is a denial that you’ve actually got at a state level, which is why again the cohesive policy is needed.

ANGUS TAYLOR: Entirely agree.

ROSS GREENWOOD: I’ll tell you what Angus, I’ve got to leave it there but we’ll chat again very shortly.

ANGUS TAYLOR: Good onya Ross.

ROSS GREENWOOD: Energy Minister Angus Taylor, I appreciate your time.

Minister for Energy and Emissions Reduction