At a moment of crisis in Australia’s east coast energy markets, business as usual should not be an option for governments.
The current regulatory and taxation frameworks have guaranteed that Australian households and small businesses wear all the costs of the global spike in energy prices, while shareholders — many of them foreign shareholders — enjoy the benefits via massive export returns.
To the near-complete lack of tax paid by large Australian and international energy companies, which have seen windfall profits from gas exports, can now be added large electricity retailers — including some government-owned — deliberately withholding power in order to take advantage of compensation arrangements once they are ordered to provide it by the market regulator. Compensation that will, in turn, be paid for by households and small businesses.
In the case of Origin Energy — which tried to offload its Eraring coal-fired power station back to the NSW government — it is benefiting from both scams via its gas exports and the east coast electricity market compensation arrangements.
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This is a fossil fuel sector ruthlessly gouging Australians, forcing them to pay higher power bills while they sell Australian resources for virtually no return to their owners.
The rules of the National Electricity Market — under which price caps imposed to protect consumers lead, in turn, to a cost that consumers must bear, when there is sufficient energy capacity to meet all requirements — are no longer fit for purpose. The participation of Queensland government-owned generators in the gouging should also put to bed forever the lie that government ownership is some sort of safeguard against gouging and market exploitation.
Reform of the NEM is hard. It requires the agreement of multiple governments with very different electricity sources, exports and industrial bases. And the history of the NEM is of retailers exploiting whatever rules bureaucrats and politicians put in place to maximise their profits at the expense of consumers — a decade ago, consumers were being gouged as retailers exploited pricing rules to repeatedly push up prices. But with the Commonwealth back at the energy policy table after a lost three years, the playing field generously tilted in favour of energy companies needs to be addressed.
And with rampant gouging, the time is right for major reform. If not now, then when?
But the Commonwealth has one lever it can pull itself — a windfall profits tax on energy exporters. The failure of the government to pursue this is looking increasingly reckless. We’re stuck with a significant gap between government spending and tax revenue. We need more sources of tax revenue, or we need to slash our biggest programs like defence, health, NDIS and aged care.
Allowing tens of billions of dollars in windfall energy export profits to be shipped offshore to foreign investors is profound policy negligence, bordering on the criminal. If it’s good enough for the UK Tories, it’s good enough for us.
If this crisis is treated as business as usual, then it will be a major opportunity missed. And we’ve already had too many years of wasted opportunities on energy.
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Yes be brave, be bold – state and federal.
It beggars belief that a country with so much gas and coal is in a situation that it can not keep the electricity supply under control at a reasonable price.
Here in WA where a Labor government decreed that 15% of all gas produced in WA was for local consumption has made living proof that the fuel barons will go along with that – see news about what happened when Labor years ago laid down the law. We re now transitioning from coal to renewables within the very short time frame by the way.
All the eastern states governments including the Federal one is to do the same – nationalise the gas just like Qatar who is the main competitor! They are smarter than we Australians – when the price goes up as it is now Qatar reaps the profits not the oil barons. Unfortunately that will not happen as Labor is in the thrall of the fuel barons just like the lnp.
“But the Commonwealth has one lever it can pull itself — a windfall profits tax on energy exporters. The failure of the government to pursue this is looking increasingly reckless. “
Keep going with your analysis, Bernard.
What prevents or discourages the ALP government from implementing such a tax?
The Machine in SussexSt?
Q.E.D.
“What prevents or discourages the ALP government from implementing such a tax?”
It’s no mystery. Labor made a solid commitment, repeated over and over, that if it won the election it would not increase any taxes nor introduce any new taxes (except for some tweaks of the tax loopholes exploited by big corporations). So no matter how bad things get and how strong the arguments for sorting out the worst problems of our tax system we have a government that is firmly committed to sitting on its hands.
(Those who say News Corp’s strident efforts failed to make any difference in the last election are ignoring this and other examples of News Corp successfully tying Labor’s hands. Thank you, Rupert!)
Of course Labor could say that circumstances have changed so much it must act, and no doubt that would be met by the opposition, News Corp and the rest with the same level of understanding and respect that Gillard’s government got when it introduced its carbon price after similar pre-election promises.
Agree with all that. But what idiots were Labor to say “no new taxes” so categorically during the campaign. How could they not have learned the Gillard lesson!
In any case, who is going to whinge about a windfall tax on a few MASSIVE companies that are currently robbing us all!
Re your last sentence: that is the salient point at the moment. The government is in a honeymoon phase, and can get away with almost anything – Murdoch be damned – if it’s to bring the deservedly maligned gas exporters and private power generators into line. The ‘public’ is rapidly becoming aware of the mess the LNP has made of it all, although not much has been said about the ridiculous covid reconstruction commission Morrison created, which was filled with gas industry men tasked with the ‘gas-led recovery’. Albo could certainly go back on his word about taxes if it means price control, no blackouts, and renewable-driven climate action. Privatisation – of natural resources, natural monopolies and essential utilities – is the bane of modern society.
There would be minimal (if any) objection to large foreign-owned corporations being taxed.
Albo could rightly claim his government imposed no new personal taxes but corporations rolling in profits during a national crisis were fair game.
Those self sabotaging drones being robbed will be the ones complaining the loudest. Murdoch will convince the drones that it’s in their own interests to be screwed over.
A phenomenon well documented.
Strange but true.
Why not just do what the LNP/IPA does?
It was a non-core promise;
we lied;
I didn’t say that;
etc, etc
For gods’ sake, the government exists to work for the people, not just a few CEOs on eyewatering salaries. Just do what’s required, and if they really feel the need, apologise afterwards.
Didn’t Gillard try that with her carbon price? When the L/NP breaks promises, News Corp and the rest are always entirely sympathetic and make every allowance. The fuss soon dies down. But Labor makes any error, or anything happens that can be pinned on Labor even when it’s nothing to with them, or Labor makes any adjustment to anything it said previously; and all hell breaks loose. And all the lies and criticism, no matter how baseless, never lets up. In the end it becomes the accepted narrative.
Not just the carbon price. Take the GFC response. An outstanding achievement by the Labor government, but all it got was grief. The ridiculous pink batts beat up, still regularly referenced by the ABC as the ‘pink batts fiasco’. And so on. So I agree with you, but let’s not doubt any such move by Labor will be made into a terrible millstone for it to carry all the way to the next election, and beyond.
On the other hand, the ALP,could take the required actions and just tell Murdoch to get stuffed. The Murdochracy didn’t win this election for their BFFs, did they? Perhaps it’s time to demonstrate that they can only wield influence if governments let them. Show no fear and the bullies look for another target.
…..and legislate a requirement that all media outlets must be controlled by Australian citizens.
The Americans wouldn’t let a foreign national run a media outlet, why should we?
But hang on. Nobody (except pollies) takes any notice of News Corp. The last election – including the Teal white wash, proved that.
No, you’ve missed the point. Labor came into the election with almost no policies because of, mostly, News Corp. The election proves the opposite of your claim. The fact that Labor has undertaken to do nothing about taxes is a victory for News Corp. News Corp has more influence on government policy than the government. Don’t be distracted by the make up of Parliament or the number of independents or whatever. It does not make any difference when News Corp can do this.
Possum Comitas published a strong case refuting the Liberal lies on the Pink Batts.
A million homes insulated and total deaths the same number despite a 10 fold increase in installations
OK, the constriction seems to be 15 letters.
Why cannot tekki hamsters leave well enough alone?
Have there ever, in recorded IT history arejig that didn’t go wrong and make other aspects worse?
Could they be paid just to get lost?
They could just call a Windfall Profits Levy, as levies aren’t taxes, so we’ve been told since the introduction of the Emergency Service Levy in SA.
There are differences between the two instances, though, alongside the same political dynamics, where our “democratic” governments normally seek election in circumstances where wealthy media owners dominate ideas and reactions to policies put forward by political parties. Gillard said”There will be no carbon tax under a government that I lead” only because she feared a Murdoch media scare campaign if she did not. She meant, of course, a majority government. Instead she got a minority government in which support from the independents and Greens relied on her agreement to a carbon tax. This agreement enabled her government to get more legislation through the Senate. The Murdoch media then attacked her government, just as it had attacked Rudd’s handling of the GFC by highlighting every problem and mentioning no successes and distorting who was responsible for the shortcomings. The Rudd government was to be blamed for every problem, when their only failure was inadequate audits, because they wanted swift action and thought the private sector could be trusted to do the right thing often enough to get away with having few audits (after all, Neoliberalism told them this was so in this most perfect of economic worlds, where competitive markets directed private interest to the public good). The Murdoch media campaigns against Rudd and Gillard had an effect because they attacked policies that did not clearly benefit the entire public.
A windfall profits tax, on the other hand, will clearly benefit the public at large, given the Albanese government’s policies, and will discourage gaming the bizarrely gameable NEM, since the gaming will not provide any profit to the gamers, as it will only increase the take of the government. The loss of windfall profits will not lead the fuel companies to withdraw, since they will still be taking profits from gas and coal at the generous terms that Neoliberal rose coloured glasses have led LNP and Labor alike to offer to them. What will be discouraged will benefit to public at large with cheaper power. There is no way that even Murdoch Media could successfully campaign against this policy. While it might decide to get hostile to the Labor government on other matters, where the public benefit from the Albanese government is not so universal and indisputable as it would be from a windfall profits tax, this will be hard even for Murdoch to bring off, since he would have the government’s popularity to contend with.
The pity is that the timidity of the Bowens of this world and their continuing belief in the myths of market control of private interest, the superiority of private business over government action and the benefits of small government lead them to fall short. While virtually everyone on the A C’s recent Q&A told them to go for the windfall profits tax so that Australia would look less like it was putting the profits of fuel companies before the interests of Australian citizens, so that we could be shamed by Norway and even Qatar, Bowen thinks the solution is rejigging the trigger. Changing the NEM so that it is not an embarrassing testament to the stupidity of belief in Neoliberalism would be the real solution. However, Bowen, who seems not to know the difference between science and mathematical models, and who seems to subscribe to enough of Neoliberalism not to realise just how foolhardy the NEM has been from the beginning, will try the minimalist path of rejigging the trigger and, for his pains, could be subject to attack from MM because the public benefit of it will not be as immediate and clear as would be the benefit of a windfall profits tax.
All good points, clearly put.
PLEEEZ use paragraphs so that those deterred by slabs of text won’t be put off.
I will try but I have gotten used to great slabs of text over my life. I did, after all, one upon a time read Immanuel Kant’s “Critique of Pure Reason” .
Pure reason allows no sympathy for such willful self harm.
An agreement made under coercion is neither legal nor valid.
Just. Do. IT!
Watch Moloch writhe and flail.
A windfall profits tax is the least powerful and least useful lever. It will do nothing to address supply or price in Australia (and does not provide revenue for the Federal Govt!! /MMT).
Pure effing greed.
If the NEM is a National Energy Market it seems a bit odd that Western Australia is still moving along quite serenely, with stable electricity supplies and gas prices, while most other states are roiled in chaos with threatened blackouts and prices that are crucifying consumers. This dysfunctional caricature of an energy market is not in fact national, is it? And I’m sure all residents of WA are bloody glad. Too bad for the rest of Australia. Why did nobody ever foresee that letting the energy companies run the show would result in energy policies that work only for the energy companies? Oh, hold on- there were many warnings, all dismissed with contempt by those in charge.
Ratty, WA is a fanastic place to live, especially during the last few years. And we’re accustomed to that peculiar definition of ‘national’ that excludes one-third of the country.
The WA grid is not connected to the rest of Australia – must be all that desert in between.
Maybe another preFederation bribe is needed, like the Nullabor railway line?
Can’t imagine what, maybe a larger share of the East’s pollution, overcrowding, corruption & chaos?
Power is wasted progressively as it traverses very long transmission lines. Power supplied to far western NSW, for example, can involve 90% losses on the way from power generation on the east coast.
Couldn’t those very long transmission lines have solar arrays plugged into them, running the whole length of transmission lines? Then it wouldn’t matter how much power was used in transmission and delivery. Isn’t this simply more of the same old fossil fuel centralized, profit-for-the-few thinking?
Transmission/distribution losses are about 10%, not 90%.
Which is why the Sun Cable program is building a gigantic DC transmission line
See Robo below and check before you post.
The problem with market design is that participants always try to game the system. They are always one or more steps ahead of the regulators. Leaving things to market forces assumes participants, including consumers, have equal power. This is never the case. Neoliberals have this ideological zeal around free markets when they are anything but.
Perhaps some of the billions in network gold plating the government is planning could be better invested in community owned batteries and micrograms – reduce the need for massive new network capacity and all the complexity of renewable power in the grid – to a distributed energy model with community micro-grids feeding their aggregated (say from 300 households) excess demand and supply to the network.
That’s exactly what a modern grid design should encompass – cellular local networks that optimise (minimise) base load generation requirements by pooling aggregated local feed-in sources on a demand basis.
Just don’t call it “gold-plating”, which is a disparaging term for an old fashioned rort from a bygone era.
The new energy network has the potential to liberate consumers from monopoly exploitation. To do so requires a network model of power infrastructure rather than a centrally controlled broadcast model.
Perhaps you can think of a name for that.
Frank,
How about “Democratic” or Distributed generation fed to a “tidal” grid where power/electricity flows into and out of strategically located storage hubs. These hubs could be batteries, pumped hydro or thermal storage which stores the power and returns it to the grid when needed.
Socialists may support that model, M Hutton, but don’t expect buy-in from the business council.
If large corporations can’t exploit the masses, the business council insists on medium business being allowed to sell a battery to every household.
The batteries must be replaced every 15 years and disposed of in landfill sites in national parks.
Figgs, are you talking of islanding small suburban community blocks? Several decades ago the eastern seaboard power system was approaching the status of an infinite grid – where you as a generator within certain limits pump as much power into the grid at your most economic load with some sources operation in droop mode and carrying all the l9oad swings. And as a consumer draw out as much power as you wished with affecting the grid stability.
I provisionally agree and have done so for many years that distributed community generation has advantages, but islanding I am averse to and don’t even wish to think about it until my poor intellectual capacity increases a bit.
With gold-plating of distribution/transmission networks, installation techniques could go a long way to increasing longevity and preventing damage.
I can remember much bleating in the marsh from LNP and their Australian propaganda arm.
The topic of their discontent was the Lab,in Govt., wasting money on “goldplating”the
national (Eastern bit) electricity grid>
It’s a sensible plan, except that massive power users such as the aluminium industries wouldn’t have as much of a chance at getting domestic power users to subsidise their power use.
Aluminium is electricity in a solid..the saying roughly goes . if the industry itself invests in renewable energy it would be logical one would think.