SPEERS: 04/12/18

December 04, 2018


DAVID SPEERS: The Government’s energy policy, now in large part rests on this ‘big stick’ approach – a forced divestment of assets by power companies. It is watered down somewhat today, in particular there will now be Federal Court involvement. The Federal Court will have to order any divestment. Labor though says it is still a bad idea. Joining me now is Shadow Energy Minister Mark Butler, thanks very much for your time this afternoon. What is your main concern about this now? 

MARK BUTLER: We think if this was going to be in the interest of consumers then the consumer watchdog, the ACCC, that conducted a thorough investigation into the operation of the electricity industry over the last 12 or 18 months, would have recommended it and they didn’t. We know that they considered it very deeply; the question of vertical and horizontal integration in the electricity industry and they decided not to recommend this presumably because they didn’t think it would be in the interest of consumers.

Equally when Ian Harper did his National Competition Policy Review, he considered this question of a divestiture or a divestment tool either by the Treasurer or by a Court it doesn’t really matter so much, the question is will this be in the interest of consumers and at a time when we need investment and investment uncertainty is really at a substantial high the last thing we need is further uncertainty.

SPEERS: But if a company is gaming the system and is artificially keeping prices too high what is wrong with this idea? I appreciate it wasn’t recommended by the ACCC or anyone else but what is wrong with this idea in practice?

BUTLER: Because it is just something made up on the run. The ACCC looked very closely at the question of the gaming of the market in electricity, very closely, and clearly came to the view that recommending a policy like this, or a tool for government like this would not be in the interest of consumers.

SPEERS: Is this your concern that it would scare companies away from investing in the market?

BUTLER: Yes I think that is our substantial concern because no one really understands what is driving this. Still the Government is not able to put legislation in front of industry or the Parliament to indicate what is going to drive this. As I said the ACCC has looked at this question very closely because over the course of its inquiry a range of stakeholders raised the question of integration in the industry, vertical and horizontal. Obviously there is horizontal integration in the generation sector in states like New South Wales, which has been the subject of lots of commentary. There is vertical integration between the generators and the retailers. The ACCC clearly came to the view that busting that up would only lead to more investor uncertainty and higher prices.

SPEERS: So if you win the election and you’re in government and the Government manages to get this in place, you will repeal this?

BUTLER: We haven’t even seen the legislation yet but we are opposed to it. Chris Bowen has made that very clear as the Minister with probably the most direct responsibility for this if we are elected to government. But our position has been very clear, if there was a case for this the consumer watchdog would have made it. Instead what we have got is a Government making policy on the run and not even able to keep to their original policy on the run.

SPEERS: Okay we’ve only got a minute left because there are divisions in the House I know you need to get back to as well. Malcolm Turnbull has been out there once again making the case for the National Energy Guarantee. I just had Innes Willox sitting here saying he would also like to see you guys implement the National Energy Guarantee. Correct me if I’m wrong, you’re saying you’ll only do this if there is bipartisan support when you are in government? Why that big caveat?

BUTLER: Because the investor value in a market mechanism, which is essentially Parliament putting in place a mechanism on a set and forget basis, the only value lies in bipartisanship. What the investors, industry, bankers the lenders have said to us for years now as we have tried to come to grips with this as a Parliament is they need to understand the rules and they need to understand that both major parties of Government accept the rules. They recognise that targets might be different and they can price for that.

SPEERS: Barring a big backflip from the Coalition again you’re not going to get bipartisan support for this?

BUTLER: I don’t think anyone holds out hope for bipartisanship between now and the election but we hope that if you get through the election, whoever wins that election, then the Coalition party room will come to their senses and realise that three months ago they made a very serious mistake. They junked a policy that as Scott Morrison said, had a broader basis of support than any other measure he had seen in his ten years in Parliament, supported by every single business group. Not just the suppliers of energy obviously, but importantly big energy users like Innes Willox.

SPEERS: We’ve got to go Mark Butler short and sweet but thanks very much for popping in and joining us this afternoon.