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.