Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I'm speaking in support of this bill, the Competition and Consumer Amendment (Abolition of Limited Merits Review) Bill 2017, but for consumers in New South Wales this bill is too little too late. For those pensioners, households and small businesses that have faced a doubling of their electricity prices under the Abbott-Turnbull government, this reform is simply too little too late. That doubling of electricity prices has occurred because of the uncertainty that has been created in the investment market for baseload electricity by this government, which can't make a decision about a clean energy target. When it comes to poles and wires, the overinvestment that has occurred because of outdated rules and regulations regarding investment in the sector—one of those being the limited merits review process—has led to the gold-plating of certain assets, particularly in New South Wales, and consumers have paid for it. Simply, the lack of investment and the lack of a pathway to a renewable energy future has meant that consumers have been worse off.

This bill, through schedule 1, seeks to amend the Competition and Consumer Act to prevent the Australian Competition Tribunal from reviewing certain decisions made under the national energy laws to ensure that decisions made by the Australian Energy Regulator under those laws aren't subject to merits review by any other state or territory body. The limited merits review is typically used to challenge Australian Energy Regulator decisions on regulated electricity and gas prices and pipeline access prices and their increases by network companies in an attempt to secure higher prices and greater return on investment.

I have to say that particular governments have used this to fleece the Australian people. One of those governments that's been very good at fleecing the Australian people when it comes to increases in electricity prices is the New South Wales Liberal government. They used this specific rule earlier this year to stop electricity prices from being reduced for consumers in New South Wales. Through Endeavour Energy and through Ausgrid, they used a limited merits review process to argue for increases in electricity prices. That's right; the New South Wales Liberal government used this rule that is being abolished here today to argue for higher electricity prices in New South Wales.

Now that may be shocking to many consumers in our state. It's certainly shocking to the pensioners who are struggling during winter to put the heater on and keep themselves warm, to the young families who are struggling to make ends meet with electricity prices going through the roof and to the small businesses and, indeed, the large businesses that are struggling to make ends meet because of the increasing cost of wholesale electricity. But that is exactly what that New South Wales Liberal government did. They used this merits review to inflate electricity prices in New South Wales. Why did they do it? Because they wanted to fatten the cow prior to privatising it and selling it off. They wanted to make it more attractive in the market, to inflate their profits and to ensure that they got a higher sale price when they sold those pole and wire assets. That is exactly what the outcome was, and it is New South Wales consumers who have been worse off.

It is estimated that this costs consumers in the vicinity of $100 extra a year on their electricity bills. Because of the actions of the New South Wales government using this limited merits review process, $100 was added to your electricity bill. It was worth it for the New South Wales government, wasn't it, because they added $5 billion in profits for these two bodies that they sought to fatten up before they sold them, which made them much more attractive for privatisation in New South Wales? The result is that these important public assets are no longer owned by the people of New South Wales. They have been privatised and handed over to the private sector. As a result, consumers are worse off, and we are seeing the effects of that now. Pensioners, families and small businesses are struggling to make ends meet when it comes to electricity prices because of this New South Wales Liberal government, and the private sector is not investing in new capacity.

So they sold off the assets. I distinctly remember former Premier of New South Wales Morris Iemma and former Treasurer Michael Costa saying to me when I was running the campaign against electricity privatisation in New South Wales—the New South Wales Labor Party at the time was attempting to have a go at it but, thankfully, didn't go ahead with it—'Don't worry. If we privatise, the private sector will always invest in baseload capacity.' Guess what? The New South Wales Liberal government privatised it and the private sector ain't investing. They're not investing in new baseload capacity in New South Wales, and why would you? Why would you when there's this complete uncertainty about where we're headed as a nation in respect of renewable energy and making that transition from dirty coal-fired power to clean energy?

This Turnbull government is in chaos and can't make a decision about the clean energy target. The Finkel review was handed to the government some months ago. We've had two iterations of it. The first one the right wing of the Liberal Party rejected. Malcolm Turnbull bowed to their needs and rejected it. The government said they would adopt 49 of the 50 recommendations of the second one, but they can't make a decision on the most important one—the clean energy target, which sets the target and the pathway to a renewables future. Because of that we're all paying more for our electricity. The Liberal government use of limited merits review to fatten the cow before selling, then privatising it and the Turnbull government's inability to make a decision about a clean energy target mean that we're all paying more for our electricity.

This bill does go some of the way to solving some of those problems because it gets rid of limited merits review. Since 2013, 12 of the AER's 20 decisions have been subject to applications by network businesses for review. When taken together these 12 network businesses asked the tribunal to increase their revenue by around $7.3 billion over a five-year period, and they have been successful to the tune of $6½ billion. Ordinarily, if the original decisions under the rules had applied, there would be about $6½ billion less of investment in some of these assets and $6½ billion less of that cost passed on to consumers.

The limited merits review regime was established in 2008 and reviewed in 2012 by an independent panel led by Professor George Yarrow. The review identified some serious shortcomings with the regime and led to reforms to improve timelines, reduce costs, increase consumer participation and refocus the process on the long-term interests of consumers. Another review was conducted in 2016 by the COAG Energy Council Senior Committee of Officials. That identified further significant regulatory failures, including: the LMR reviews of economic regulatory decisions, made a routine part of the regulatory process, involved significant cuts to all participants and continue to present barriers to meaningful consumer participation—this is something that has been identified by many, many parliamentary committees in this place; the way the rules are structured at the moment actually prohibits providing incentives for consumers to reduce their demand for electricity, and that has led to significant regulatory and price uncertainty; and a failure to demonstrate outcomes that serve the long-term interests of consumers.

Basically, the rules under which we're regulating, supplying and producing electricity in this country are hopelessly out of date and have been for some time. We need to put in place a pathway to a renewable future whereby we reduce our dependence on coal-fired power but at the same time provide incentives for people to invest in renewable energy. Let's face it, over the longer term, we're all going to be better off because it cleans up our environment, which is better for the future of our kids. It also reduces the cost of producing electricity, because, once you've undertaken those initial establishment capital costs, the fuel is free. Sunlight and wind are free, and Australia, one of the sunniest and windiest places on the earth, should be doing more to incentivise that pathway to renewables. When we do, there needs to be a wholesale rewrite of the electricity market rules.

In this case, the government's taken too long to look at this issue, because they've been at sixes and sevens when it comes to a cogent electricity policy. It's been affecting Australian consumers. It's something that the Labor Party, independent experts who work in this field and those who have oversight of the management of our economy have been talking about for many, many years. Even the Reserve Bank governor, Philip Lowe, identified that this is a serious issue that is holding back economic growth in Australia. He said that the government's chaos when it comes to making a decision on this issue is 'crippling' household budgets. The RBA has further stated that uncertainty in the energy policy environment is delaying investment and affecting investment decisions in other parts of the economy. That's not my view; that's the view of the Reserve Bank governor, who has identified that this intransigence, the government's inability to make a decision on electricity policy and on a clean energy target, is holding back investment in that sector and in the broader Australian economy and is pushing up prices, and we're all paying for it.

Thankfully, the government's seen sense with this particular bill in abolishing the limited merits review. It's an outdated process under the rules that's seen consumers pay more. But, as I said at the beginning, for consumers in New South Wales, for pensioners who have been struggling, for families who have been struggling to pay their electricity bills, and for small and large businesses that simply can't invest and grow their businesses and are being held back by high electricity prices, this is too little, too late. For them, the horse has bolted. The evidence of that is in the fact that electricity prices have doubled. Wholesale electricity prices have doubled under this coalition government.

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