Wednesday, 5 December 2018
Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018; Second Reading
I'm really pleased to have an opportunity to speak to the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018. I want to say a little bit about the process by which this bill has come to the parliament and the fact that Labor members in parliament, and indeed those on the other side of the chamber, are being called on to contribute to this debate with absolutely no proper opportunity to look at the bill, to properly study it, as our constituents would expect us to do, and to form a view about this next iteration in the government's energy policy. I think the public now is completely of the view that there is no better emblem of the chaos and division that divides this government than energy policy, so the absolute mayhem that's preceded the debate and that's brought the bill before us right now is probably not a surprise.
It's frustrating, as a member of parliament, to have to engage in these really serious policy issues on these terms—these very rushed debates that we're having on this very important subject. This is probably the single most important issue that faces our country right now. It sits across the things that are really affecting the people who live in my electorate. They're affected by energy costs, which have absolutely skyrocketed under this government's rule, and they're concerned because of the complete failure of those on the other side of the chamber to do anything about climate change.
Energy policy is like kryptonite to the people who are sitting on the other side of the chamber. I wonder if the fact that this rush has come on—that suddenly after five years of talking about this we finally have a bill before the parliament, which pretends to deal with some of these issues—is actually not about getting any support from our side of the chamber; it's not to do with the parliamentary process; it's about them, trying to sandpaper and trying to tape over some of the divisions that we've seen erupt many times over the last five years.
We've got the Leader of the House, the former Manager of Opposition Business, chattering away down here at the dispatch box. I'm reminded that, when Labor was last in government, the then Manager of Opposition Business would scream blue murder when something was brought before the House that genuinely was urgent. He would say it was an outrage that we didn't have a proper process in place. Well, the public needs to understand that Labor, which occupies almost half of the seats in this chamber, had one hour with the EM to this bill, one hour to absorb the detail of this, before we went through a chaotic and rushed process, with division after division after division, trying to ram this bill through the parliament. I think it is completely unacceptable. It is unacceptable, but it is not unexpected, because that is what we have come to expect from the government, who still, after five years, are flailing around trying to stick together some type of energy policy. And now, after five years of talking about this, they are expecting us to believe that it is unbelievably urgent and not only can it not wait until the next sitting fortnight but it can't wait until tomorrow. I think that is ridiculous.
I also want to point out that the bill that is being debated here is actually a different policy to what the government put forward yesterday. So, after five years—and the number of energy policies they have put forward must be in double digits—we have a policy change from yesterday, and now the bill is being rushed through the process. It is a bad process; it is a chaotic process. It very much represents the style of government we have come to expect from those on the other side of the chamber—five years, three prime ministers and innumerable iterations of energy policies.
The policy we are debating right now is not the first choice of the government. It is not the second choice of the government. It is probably not the eighth or ninth choice of the government. It might be somewhere around the 10th choice of the government. You can understand that, after going through so many differences of opinion, so many iterations and so many different forms that this will take, the bill we are debating now is a dog's breakfast, it is harebrained, and we don't even really understand where it has come from. It hasn't been through the party room of those opposite. It hasn't been endorsed by the very people who are standing up in this chamber and arguing forcefully for something that they probably haven't even read. That is no way to deal with one of the most important issues facing our country.
I mentioned that we have gone on about this for five years, where the government have thrashed around and flailed around and been unable to come up with an energy policy they can stick to. One of the things that have really irritated me—and I know it has irritated a lot of my constituents—is the way expert views have been treated by those on the other side of the chamber. We know that there are a lot of people on the other side of the chamber who don't accept the views of the 97 per cent of climate scientists who believe that climate change is real. I am reminded of the words of the member for Higgins that I think will ring in the ears of Australians right up until the election. She called the government 'a bunch of homophobic, antiwomen climate change deniers'. That refers to a significant group of people who sit opposite us in the parliament who actually don't believe in the science of climate change. That has been reflected in the way that those on the other side of the chamber have dealt with expert opinion as it has come up on this.
We can all remember back to when the wonderful Alan Finkel was asked to have a really good look at a root-and-branch renewal of energy policy in Australia and come up with some recommendations—that was to adopt a clean energy target, as I recall. But Australia's Chief Scientist's view is just cast aside because 'experts' like the member for Hughes, on the other side of the chamber, didn't like what they saw there. They were unable to adopt the National Energy Target. I am reminded of the words of Senator Jim Molan, in the other house, who has lost his preselection spot. At the time, he said 'it's a very fluid situation' on the National Energy Guarantee. I think that is understating things somewhat!
And what have they come up with now? They have come up with a policy that is so devoid of any sense. We have been reduced now to an ad hoc mix of strange rhetoric. We have a grab bag of ACCC recommendations. We have arbitrary threats of intervention that, as far as I am aware, are not supported by any substantial expert in this field. We've got no report; we've got no proper analysis of what this policy would do to energy prices and to our climate aspirations as a country. And, for God's sake, we have the notion that the taxpayer should bankroll new coal investments in this country. It is just extraordinary to me that any group of sensible people could come up with such a bunch of harebrained things, stick them together and then call it an energy policy. The only conclusion I can draw is that the people who are making these decisions are not very sensible.
And it's a completely bizarre approach if the aim of this policy process is to put a kind of conservative stamp on climate and energy policy in Australia, because this is a philosophical nightmare for people who call themselves conservatives. We're left with this absolutely weird thought bubble that really, for the first time, would allow the Australian government to intervene in investments that are being made in the private sector in a way that no expert has recommended. How are we going to end up with good energy policy when the people on the other side of the chamber are asking expert after expert after expert, and all these experts of course come up with the wrong answer, because they can't get recalcitrants like the member for Hughes to sign up to these policies that in some instances Labor has thought are very sensible? So we end up in a place of true crazy; we are in true crazy right now with energy policy.
Never in Australia's history has the sort of divestiture power that those on the other side of the chamber are putting forward as an energy policy existed. Never has this existed in Australia before. It is unprecedented. It is possibly unconstitutional. The government should be punished for even putting this forward as a serious option, much less trying to rush it through the parliament in this crazy way that's happened this afternoon. Energy and climate policy is complicated, and that's why it's really important that we bring scientists and experts into the discussion. I want to just note here, regarding the conversation that we're having about this particular proposal that the government's put forward, that I am not aware of anyone outside of the parliament who supports this. The Sky News hosts that the government loves to listen to in the night hours think it's crazy. The people who actually know something about climate science think it's crazy. It is amazing to me that, in trying to find something that sticks these weird factions together in their party room, they've come up with a policy that has united the environment groups and the biggest polluters in the country to say that it's completely nuts. Yet here we are debating a bill that we've had notice about for just over an hour.
The coalition's proposal is dangerous. We truly believe that. I heard a couple of those on the other side of the chamber talking about ACCC chairman Rod Sims and the report he wrote about competition in energy policy. For anyone listening to the debate, please know that Rod Sims did not recommend that the government adopt this power. This divestiture power has come out of nowhere.
A government member interjecting—
He did not. I'm getting an interjection here. And I do wonder whether those on the other side of the chamber have bothered to look at that report that they invested Australian taxpayer dollars in.
If none of our regulators will support it, if climate scientists in this country won't support it, then surely the BFFs of those on the other side of the chamber in big business support it. Surely they must support it. But even then, when we look to the usual suspects who would back in a coalition policy such as this, we are hearing horror from people who represent business in this country. Jennifer Westacott was quoted in The Australian Financial Review yesterday, I think it was, saying:
The principle that governments can misuse their power to break up companies sets a dangerous precedent that will deter investment across the economy. This will do nothing to solve high power prices for families and businesses struggling to pay their bills today.
It will do nothing to solve high power prices.
We had the Australian Industry Group's chief executive, Innes Willox—no particular friend of the Labor party—saying that industry has grave concerns about the powers in this bill. He has instead asked the government to re-embrace the National Energy Guarantee, which I will come to. But before I get to that, Innes Willox said that the energy policy that we are debating today is:
… the worst piece of public policy making in a couple of generations. The NEG at least gives us a pathway out.
The business community and the energy sector have urged the government to abandon the legislation that we are debating in the chamber today, and I want to quote from a joint statement from the Australian Energy Council, the Australian Industry Group, the Australian Petroleum Production and Exploration Association, the Business Council of Australia, Energy Networks Australia, and the Energy Users Association of Australia. They are scathing when it comes to what is in the bill before us. They talk about the fact that the proposals represent a 'deep and genuine sovereign risk'. We've got Liberals on the other side of the chamber here who are supporting a divestment policy that is described by these people as a genuine and real sovereign risk. Various joint statement makers go on to say:
They are inconsistent with best practice for a modern economy, such as Australia's, and were specifically considered and rejected by the ACCC and the Harper Competition Policy Review. If enacted, these powers would cast a pall over investment in all sectors of the Australian economy and threaten the economic attractiveness of a country highly reliant on foreign investment.
I just want to give one more brief quote from Jennifer Westacott, who wrote in the Daily Telegraph:
Ignoring the advice of the ACCC and instead choosing to head down a path that threatens breaking-up electricity companies will not cut electricity bills.
The watchdog itself has called this "extreme" …
We're running out of people here. We've got the climate scientists who don't support this. We've got the energy experts who don't support this. We've got big business who don't support it. We've got the usual friends of the coalition in the media who don't support this.
But I want to talk now about the Liberals who don't support it. The member for Chisholm, who was until very recently a member of the Liberal Party, has been absolutely scathing. She has noticed the very obvious impact of the bill before us, which is that it won't lower electricity prices. This is a doozy. It's not going to help us meet our climate targets and it's going to do nothing to lower electricity prices. The member for Chisolm says: 'It will drive up cost and prices. The fundamental problem with pricing in electricity is a shortage of dispatchable generation. Who is going to invest in new generation if they are at risk of a divestiture order?' What a sensible question from the member for Chisholm.
I also can't finish this debate without mentioning the member for Curtin, who has been a very proud foreign minister of Australia and who has now moved to the backbench. The member for Curtin has been very vocal in this debate, as good Liberals should be, because what is being proposed by those on the other side of the chamber is a dog's breakfast. It is a silly grab bag of things that don't amount to a cohesive policy, and the way that this has been rushed into the parliament demonstrates to me that those on the other side of the chamber know and accept that if this policy were properly exposed to public view and public debate, as it should be, it would be rejected, as I think it will be by Labor.
I rise to support the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018. My erstwhile colleague and friend, the former senator Nick Xenophon, has been championing the much-needed divestiture powers for the ACCC for some time. I am so proud to be standing in this place to see the beginnings of his visions being achieved. Jurisdictions comparable to Australia have the power to break up monopolies or oligopolies where this is in the interest of free and fair competition. This is not the radical power that some make it out to be. We only need to look to the United States or, indeed, the UK to see this sort of legislation at work.
It is a crucial power that the government needs to wield in the best interests of consumers, and I applaud the government's recognition that the time for this idea has finally come in Australia. Centre Alliance believes that the Australian Competition and Consumer Commission should be granted such powers across all market types, not just energy markets. For example, the abuse of market power by supermarkets upon their suppliers, especially upon agricultural suppliers, would be much more self-regulated if the supermarket monsters, as they are so aptly described in Malcolm Knox's book of the same title, knew that divestiture powers hung over their heads as a remedy of last resort. The supermarkets have been squeezing our farmers to the point of threatening the viability and sustainability of entire farming communities. I cannot think of any farmer across the country who would disagree with me that divestiture powers in the supermarket and agricultural supply chain industries would be much welcomed.
To give proper due and credit for his foresight, I now quote former Senator Xenophon's additional comments to the Senate inquiry into the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016:
As it currently stands, in rare situations where a market power abuse finding has been made by a Court, the Court can order the company be restrained and also impose a large fine against the company. This is problematic for two reasons:
(a) No amount of restraint or fine will bring back to life the hundreds of small businesses that have been wiped out by a large company's misuse of their market power. Once small businesses have failed the market dominance of the big business is entrenched forever. I have witnessed this happen across the Australian business landscape in the grocery, fuel, hardware and liquor sectors.
(b) The perpetrators of market abuse can be so large that the fine may well be considered by the offending company as simply a cost of business. A monetary fine does not constrain dominant companies from misusing their market power, because they know they will rarely be caught and, if they are, the short term penalty will not be more than the longer term benefit they have obtained.
Senator Xenophon continued by proposing that divestiture legislation should be 'a remedy of last resort' and should also be something where the court, not a minister, has the final say. Again, to quote my former colleague:
It makes sense that a Court should have a remedy in its tool kit that makes it impossible for a serious or repeat big business offender to offend again.
Divesture would enable the Courts to break up serious or repeat big business offenders who have grown so large their conduct is not sufficiently influenced by Australia's Competition Laws.
Former Senator Nick Xenophon had the vision, and the government is finally acting. He understood that the powers needed to reside with the courts and not with the executive. I am pleased to see that, with the bill before us, the government has been persuaded to agree. This is not to say that I don't believe we should have a NEG; I think we should have more than just this power in the parliament. However, this is a very important step. I hope that this is the first step towards a broad set of divestiture power arrangements for the government to act against companies who abuse their market share and abuse Australian consumers. Centre Alliance reserves its substantive position on this bill in the Senate, but, on my rapid and preliminary reading of this bill, I commend the bill and its intent to the House.
I'm delighted to stand today to speak in support of the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018, which goes to the heart of the differences between the Liberal-National coalition and the Labor Party. We on this side of the House want to make electricity more affordable and reliable; those on the other side of the House want to introduce a secret electricity tax. We stand by the Australian consumer, small and medium businesses, families, pensioners and students; those opposite stand by big energy companies and big unions. We on this side of the House believe in competition and a fair marketplace; the Labor Party believe in monopoly power and vested interests. We on this side of the House believe in the need to have a balanced energy mix; those on the other side of the House are more than happy to see a catastrophe by taking a wrecking ball to the economy with a 45 per cent emissions reduction target.
This bill comes after a long suite of measures have already been introduced, and actions taken, by the Liberal-National coalition with a view to ensuring energy is affordable and reliable. We have, after all, already cut the carbon tax. We reined in the networks. We put more gas into the system, into the market. We increased transparency. We revisited and reinvested in Snowy. We put downward pressure on wholesale prices. These measures have already delivered a reduction in prices, which is why we are so happy: we've got runs on the board. We already have a strong unity of purpose around ensuring that energy prices come down and we have a reliable system. That is also why we are now embarking on a new set of measures that includes introducing a price safety net, introducing a reliability obligation, backing investment in reliable generation and, of course, this bill before the House today, which is all about introducing a big stick against those who wish to price gouge and those who wish to act improperly in the marketplace.
What this bill is all about is ensuring that we have legislation in place to penalise companies for misconduct. That is why we are looking at penalising where there are problems in retail, in contract liquidity and in wholesale contracts. We need a retail price prohibition, a contract liquidity prohibition and a wholesale conduct prohibition. Where misconduct is found, there is a graduating level of penalties, as any responsible suite of enforcement measures would typically entail. This includes everything from warning notices through to infringement notices, through to civil penalties, through to Treasurer-issued contracting orders and through to, ultimately, that possibility—in extreme cases of fraud, of dishonesty and of bad faith—of a court-ordered divestiture order coming into being.
If that's what this bill represents, it's a fair next question to ask why. Why would we introduce a big stick into this marketplace? Why would we ensure that we can hold those who act improperly to account and penalise them in order to drive their behaviour? All one needs to do is look at how the energy market operates in Queensland, to see how important this piece of legislation is. In Queensland, the Queensland state government generates approximately 70 per cent of all energy in that marketplace. It effectively enjoys a monopoly. We already know that there has been an overinvestment in poles and wires in Queensland. Indicative of a marketplace that risks systemic abuse, there is a guaranteed return—known as weighted average cost of capital, or WACC—of about six per cent on the poles and wires. It is of no surprise, especially given that the Labor Party are in government in Queensland, that there is no state that has had such a dialling up of poles and wires investment as we've seen in Queensland. There is an overinvestment of $7.3 billion.
In other words, there's this inherent incentive for the Labor Party in Queensland to keep investing in poles and wires because the more they invest, the more they can get a return. Do you know who they get the return from? They get the return from everyday Queenslanders who are ripped off through their electricity bills. Not only is there an overinvestment that they are taxing Queenslanders for but they are also enjoying that six per cent guaranteed return. That is too high, but there is absolutely no attempt by the Queensland state government to remedy the situation and accept a lower guaranteed return.
Furthermore, in Queensland, yet again, there is an act of absolute dishonesty where there is a secret tax. We've seen a drop in wholesale prices in Queensland. Between October and October, one-year wholesale prices went down by 40 per cent, yet that wholesale reduction has not been passed through to the consumer. We have had an enormous heatwave for the last couple of weeks in Queensland, and we have had pensioners who have not been able to put on the air-conditioning units. We have had families who are forgoing certain things in life that most families can enjoy. We have Christmas coming to us, and families are hesitating about putting on the Christmas ham because of the price of electricity. That reduction in wholesale prices has not been passed through to consumers.
Lastly, let me make this point about how the Queensland government run their electricity system. They have this inherent scam going on. You would be forgiven for thinking it's a laundering activity, because what they do is say to their state utility, 'State utility, you take on debt.' Then they turn around to the state utility and say, 'Now give me back that debt and call it a special dividend.' All they're doing is funnelling money. They put the debt in the state-owned entity and take it back as a special dividend—but, wait for it; it's not over yet. They also put a 4.8 per cent interest charge on that debt. It's all recovered, of course, through their electricity prices. Who pays for this mismanagement? Who pays for it? It's the average consumer, the average family, the average Queenslander. All it is is a sophisticated scam where the state government enjoy an opaque, complex system, because they believe that they can con the everyday Queenslander. Well, that scam has been broken. The game is up. But it is indicative of the poor behaviour in this system. It is indicative of the type of behaviour that we need to root out, because, if we are going to ensure that the consumer, the Australian, comes first, we can't tolerate this.
Of course, big unions are a part of the game. If you look at the unions involved in the Queensland energy sector, collectively, in the 2015-16 financial year, they donated over a million dollars to the Labor Party. It should come as no surprise that the protection racket continues from the Queensland Labor government. Furthermore, you do wonder, whether it be through enterprise bargaining agreements or others, how much they have rorted. And thus I support this bill and look at Queensland as an example for its need.