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Taking a Big Stick to Common Sense


The final parliamentary week of the current calendar year, being held today, was to assess proposed legislation to enable the Federal Government to use Commonwealth divestment powers — never before employed in Australia — on energy retailers to force them into lowering prices.



The Coalition has since backed down and postponed putting it to the Senate until after New Year, in the teeth of pressure put on them by businesses, stakeholders and the opposition. Several sizable retailers had already planned an appeal to the High Court on the grounds that the means of obtaining the measures would have been unconstitutional.


Why is the incumbent government suggesting so desperate and domineering a move as to take on overarching rights of divestiture? The (mis)reasoning goes that constituencies will be impressed to the point of a balloting by lower electric bills at any costs. And the costs will be monumental.


For this “big stick” talk goes hand-in-hand with signals to underwrite new coal generation, even though renewables are already less expensive, and indemnify them from any future carbon price. A move that the Australian Industry Group indicates could count up to the billions to taxpayers. Is it really meaningful to have lower electricity rates in exchange for massively higher taxes?

Building additional coal plants is far more expensive than new renewables. The life-extensions for existing coal power plants are multi million dollar capers. And we know it full well from really recent memory. $150 million in SA at Playford plant for 7 added years of service life. $308 million in WA for 4 more out of Muja AB. AGL has prudently refused to throw $920 million over 5 years as an alternative to accepting it and setting a closure date for Liddell. Their decision in particular is one of those that the government wants the legal power to forcibly override by threat of divestiture.

Liddell Power Station

The ideology doesn't fit with the party promises. You can't insist on coal and drive down electricity prices.


The costs increase further still by creating an investment climate of uncertainty. To give the Federal government an arbitrary legal power to divest companies for not marching lockstep with their ideological approach to one problem (purchase rates) in the energy market, would be to perfectly preclude stability. Without clear rules, predictability on paper and a coherent national framework forward. Investors will have nil confidence. Without investment there cannot be lower prices.


This government is shooting itself in both feet and now wants to point the barrel at energy retailers.


Big businesses are on it and have weighed in. The Australian Energy Council, Australian Industry Group, the Business Council of Australia, et al, issued an appeal to the Federal government to step back from and abandon the proposed plans for seeking divestment powers via parliament. They are “robustly” against any such investment prohibitive legislation. It is, they insist, “inconsistent with best practice for a modern economy” and poses “deep and genuine sovereign risk.”


2019 will tell.


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