PRIME MINISTER:
Well thank you very much Mark. It’s great to be here, back in Brisbane.
I’m delighted to be here as a guest of the Queensland Media Club and I want to acknowledge Opposition Leader, Deb Frecklington and the Lord Mayor Graham Quirk, and all of my parliamentary colleagues who are here with us today.
Before I move onto energy can I just say, as I’ve conveyed to them directly today already, our congratulations, our admiration to the Australian divers, doctors, who played such an important role in rescuing those boys from the cave in Thailand.
[Applause]
It's one of the most heroic and inspiring episodes of our times really.
It's hard to imagine anything more frightening than being trapped underground in the dark, let alone having your children trapped underground in the dark.
And the courage of those men and women who affected that rescue, the Thai Navy SEALs, the British divers, the Australian divers and doctors - of course, we acknowledge Dr Richard Harris from Adelaide who played such an important role - but the whole team from the AFP, Department of Foreign Affairs and Trade, from the Australian Defence Force. They worked together with their international partners in a way that is an inspiration, an inspiration to all of us.
So I want to thank them on behalf of a very, very grateful nation.
[Applause]
Now, my single clear-eyed focus is to reduce the cost of energy for Australians.
Too much ideology and even idiocy has taken the place of engineering and economics and energy consumers have suffered accordingly.
Corners were cut in the process of injecting competition in what used to be state-run enterprises, undermining the long-term benefits that competition could bring.
Electricity networks were encouraged by government regulation to be gold-plated and so they were, and the consumer had to pay.
Interventions in the national energy market - most significantly force-feeding of renewables into the market without any thought for firming or storage - distorted price signals.
Federal and Queensland Labor governments allowed gas to be exported from the east coast and despite warnings that this would result in gas shortages for domestic customers, did nothing to protect the domestic market.
Retailers created confusing and opaque pricing. Discounts were concocted off inflated standing offers. With one mistake, a pay-on-time discount turned into a punitive, unfair late penalty.
Consumers and businesses suffered.
Now, my approach has been to bring a businessman's hard-headed attitude to problem-solving. And here the problem is clear. Energy is too expensive. And the measure of any proposed solution is equally clear - will it help reduce energy prices?
So the answer is not one fuel type or another, and those who place some sort of moral or magical quality on a particular type of machine miss the point.
The answer does not lie in mandating a wind turbine on every corner, a solar farm in every suburb or a new coal-fired power station in every region tomorrow.
The starting point for lower prices today is a competitive consumer-focused market.
Dispatchable energy, firmed energy, can be delivered by a wider range of technologies than ever before.
Let them compete. And may the cheapest solutions win. As they will if we let the market work.
We want the consumers to win. They must be the winners. That's whose interests we're looking after.
Now, the market will find the most efficient price using the different features of different types of generation - baseload or flexible, centralised or distributed and so on.
We don't have to make a technological choice. We must create the framework to deliver the cheapest mix of power.
Now, prices are starting to fall. Energy companies are having to work harder to attract and retain their customers and the uncertainty over investment is dissipating.
Over the past year there have been a million sessions on the energy-made-easy.gov.au comparator site and through this and our other actions with retailers, over 400,000 families and small businesses have switched plans and saved hundreds of dollars a year.
Last year, I told the story of Christine DaCosta, a single mother with four children living in Brisbane. She used the EnergyMadeEasy website of the federal government, she found a better deal that'll save her $300 a year.
According to the Australian Energy Markets Commission, a residential customer in Southeast Queensland can knock $504 off their power bill by moving from a median standing offer to the cheapest market offer.
On top of that, here in Queensland, reductions in prices that came into effect from the beginning of the month mean a family takeaway shop owner can now save between $400 and $770 depending on their supplier; a hairdresser between $129 and $243; a real estate agent between $137 and $258.
Now, we’ve acted to increase gas supply, as you know. Some of the gas companies in the room will know, in a fairly heavy handed way – particularly for a Liberal Prime Minister.
But we’ve done that, we’ve helped accelerate gas projects and reform the regulation of pipelines.
Wholesale gas prices have halved over the last eighteen months.
Between 2007 and 17, electricity prices, on the other hand, had a compound annual growth rate of eight per cent - even with the fall in prices after we repealed the carbon tax.
Now, electricity charges are made up chiefly of the cost of generating power from coal, gas, wind, solar, hydro, also known as wholesale costs, the cost of the poles and wires that deliver electricity across the nation, or network costs, ‘green’ schemes of various types and there are quite a few, and the cost of the retailer who sells the power, the retail costs. The contribution of those drivers differ from state to state.
But according to the ACCC, across the National Electricity Market over the last decade increases in network costs, that's the poles and wires, have contributed 38 per cent to those price increases, followed by wholesale generation costs, another 27 per cent.
And that element was felt most recently with the hasty closure of large baseload generators, particularly Northern in South Australia and Hazelwood in Victoria.
Wholesale prices in 2016-17 increased dramatically with tighter supply.
Reliability suffered, most noticeably in South Australia, where their reckless reliance on renewables without storage or firming capacity left their system vulnerable.
What were they thinking? What was that Labor Government thinking? Had it not occurred to them that the sun doesn't shine all the time and the wind doesn't blow all the time?
Apparently no thought at all, except a long extension cord to the Latrobe Valley.
The sudden exit of large thermal generators heightened the risk of costly blackouts and we saw that on 28 September 2016, where electricity supply in South Australia was lost - for hours in the east of the state and weeks in the west, where strong export industries including fishing, agriculture, mining were left stranded.
And at the heart of the problem was a failure to integrate energy and climate policy - a failure we are correcting with the National Energy Guarantee and, at a ministerial level, for example, by combining energy and environment in the same portfolio. So Josh Frydenberg is the Minister for Energy and Environment.
Now, the structure of the Renewable Energy Target imposed a subsidy separate to the price signals of the energy market. Prices went up but new investments in reliability did not. Labor ignored reliability and the importance of dispatchable power. And so, price volatility drove outcomes. The system was compromised as investment signals were distorted.
There was also an increase in the size of firms that both generated and sold electricity - vertical integration. And to be blunt, some in the sector took advantage of their strong positions using the cover of uncertainty to take advantage of consumers.
Now, last year, as you know, I secured agreement from the energy retailers on measures to put downward pressure on electricity prices including contacting nearly 1.6 million households to offer a better, cheaper deal on their power bills.
Now, as part of this consumer-first approach, putting the customer first, all the business people here in the room will understand the wisdom of that. In March 2017, we commissioned the ACCC to conduct a thorough root and branch review into retail energy markets to examine the behaviour of the sector and find the solutions that would lead to lower prices.
That's what this is all about - lower electricity prices. That's what we're seeking to achieve.
Now, we received the report on June 30, and it's been released today. I want to thank the Chairman, Rod Sims, and his team for their characteristically comprehensive and careful analysis.
Their assessment is blunt - markets have not worked well for consumers. The National Electricity Market needs to be reset, and essential to that reset is the implementation of the National Energy Guarantee.
Unnecessary costs need to be removed; a greater focus is needed on low-income households; competition is needed to combat market concentration, and more direct policing is required to prevent market manipulation.
The National Electricity Market can be restored to an efficient, fair and competitive market that works in the interests of consumers.
The ACCC does recognise there is positive progress in the electricity market leading to lower prices - recognition that our policies are working.
It estimates that if its recommendations are adopted, savings for residential customers could be, by 2020-21, up to an average of 24 per cent and for commercial and industrial customers, 26 per cent. They're savings, they are forecast.
Now, the ACCC finds that while consumers who regularly review or switch plans have benefitted from competition, many have been trapped by a market that is complex, opaque and unfair. Inertia and complexity have worked to advantage the retailers at the expense of their customers.
Discounts, the report says, have become misleading. There is no benchmark for consumers to judge what they're really getting, because retailers set their own inflated standing prices. The ACCC recommends the creation of a new benchmark or default price, set by the Australian Energy Regulator. That would provide a clear reference point for consumers.
Discounts are offered in return for consumer behaviour, such as paying on time. But conditions that see consumers lose all of their discount for a late payment are effectively a brutal late penalty disproportionate to the cost to the retailer and they recommend that practice should change too.
The ACCC would also like to see more transparency from the private price comparator sites, so that customers know what commissions are paid. Consumers have a right to know. Again putting the customer first.
In wholesale markets, the ACCC finds that vertically integrated companies have been applying an additional internal premium on generation prices of between 26 and 42 per cent on average, which they have passed directly onto their retail prices.
They go on to recommend a cap on further acquisitions and mergers of 20 per cent of generation capacity across any National Electricity Market region; the separation of the two Queensland Government-owned generators into three independently operating competitors; and, greater powers for the Australian Energy Regulator to investigate market manipulation and increased fines.
In gathering evidence, the ACCC found the financing of new generation assets outside the big vertically integrated gen-tailers was inhibited, because either commercial and industrial users were not prepared to enter into sufficiently long-term power purchase agreements, or when they were, banks were not prepared to recognise their credit beyond five years or so.
So the ACCC has made a very interesting suggestion - that where a new firmed or dispatchable generation project, which could obviously consist of several assets, has commercial and industrial customers secured for say the first five years, the Australian government agree to acquire power at a low price - say $45 a megawatt hour - for years 6-15. Now, such a put, to use a financial term, would secure bank finance, and as the ACCC says, and I quote, "Encourage new entry, promote competition and enable commercial and industrial customers to access low cost new generation." Remember, commercial and industrial customers are two thirds of the demand on NEM.
Now we'll look further at this proposal over the coming months as we consult with the Energy Security Board, AEMO, AEMC, other jurisdictions, industry and consumer groups about the ACCC's recommendations. But this recommendation has the distinct advantage of being thoroughly technology-agnostic, and well designed, should serve to support our goal of cheaper and reliable energy.
Now, the National Energy Guarantee brings together energy and climate policy by maintaining system reliability. It requires retailers to purchase a minimum level of electricity generation that can be sent out continually or on demand. And at the same time, meet an emissions intensity that enables us to meet our international commitments.
As John Pierce, the chair of the Australian Energy Markets Commission remarked last year: “We’re not pricing carbon. What we’re pricing is reliability.”
The Guarantee will ensure investment in whatever technology the energy market needs – solar, wind, coal, gas, batteries, pumped hydro and others. It’s not pro-coal or anti-coal, pro-renewables or anti-renewables.
Renewables do not need to be subsidised any longer. The latest long-term contracts are coming in at less than $65 a megawatt hour. It's below the average market price today.
Coal is forecast to remain 60 per cent of our generation mix in 2030. Portraying the future as an either-or is simply wrong.
The National Energy Guarantee, designed by the experts, reinvigorating markets and competition, and already contributing to lower prices by restoring confidence about the future, and is strongly recommended by the ACCC.
Energy Security Board modelling says the Guarantee will deliver savings of $120 on average across the next decade, the cornerstone of an estimated expected reduction of $400. It estimates the wholesale generation price, which is where its impact will most keenly be felt, will be 23 per cent lower.
And its greatest strength is that it's focused on delivering for consumers, not arguing about technologies.
Now, Andrew Richards from the Energy Users' Association of Australia said it very well last month, and I quote him, "We observe that there are those who criticise the Guarantee because it doesn't include explicit support for renewable energy, while others criticise it because it doesn't include explicit support for fossil fuels. It would appear that everyone is seeking a consumer-funded free lunch and because the NEG doesn’t provide it, they're critical. From an energy perspective, we see this as a significant positive of the National Energy Guarantee as it seeks to be technology neutral, ensuring all technologies can both play to their strengths, but also requires them to manage their weaknesses”.
On the other hand, Bill Shorten and Labor have no plan at all, other than higher prices and less reliable energy.
Labor's 50 per cent Renewable Energy Target repeats the mistakes of the past by making technology, rather than price, the focus of policy.
Continuing to force-feed renewables into the market through subsidies guarantees higher prices and less reliable energy.
And you don't have to take my word for it, Just look to South Australia where the households and businesses of that state suffered under a reckless renewable target that delivered blackouts, volatility, and to rub salt into the wound - the most expensive energy in Australia.
Now Bill Shorten has adopted this as Labor's national policy.
So the choice is going to be very clear, at the by-elections and indeed, at the general election next year, lower prices under our technology neutral customer focused National Energy Guarantee, or higher prices under Labor's reckless renewable energy subsidies.
As ACCC Chairman Rod Sims said just this morning, “Only a technology neutral approach will get prices down. Whenever Governments prescribe that the technology should be one thing or another, that’s when you get higher prices.”
Now, repairing the mistakes of the past means, obviously, planning to ensure that renewables are reliable, and clearly that was the huge oversight neglected in South Australia.
Now, Snowy Hydro 2.0 will help lay the foundation for the future of our more flexible energy system, providing a grid scale, 2,000 megawatt battery in the heart of the system; improving reliability and security across the grid; enabling new technologies to be safely integrated.
I've seen criticisms of the Snowy 2.0 project because it's Government owned, coupled with suggestions it's subsidised. Some commentators have discovered that you'll need more energy to pump water uphill than it will generate downhill - you lose about 25 per cent on the round trip. What a revelation.
Snowy Hydro, I hasten to add, has always belonged to government – always - and there are not many places in our flat, dry continent where you have two existing large bodies of water near each other, and 700 metres difference in elevation.
The price of electricity varies from hour-to-hour. For example, it has a very low value in the middle of the night, and a very high value indeed on a hot summer's afternoon. So as it does now, for its existing pumped hydro, Snowy 2.0 will buy when power is abundant and has a low economic value and sell when it is in high demand, and thus more valuable. These trades will reduce volatility and price spikes, and thus, contribute to lower overall energy costs.
The project is financially strong. With conservative assumptions it shows an internal rate of return of at least 8 per cent, and Snowy Hydro expects to fund it from its own operations and borrowings.
Here in Queensland, Genex is finalising its preparations for an expansion of its existing Kidston solar project with the addition of pumped hydro, using the pit of a retired gold mine for water storage. It is a clever combination of 270 megawatts of solar, 150 of wind and 250 of pumped hydro.
And among other places, there is pumped hydro being developed at Cultana in South Australia, as well as enormous opportunities in Tasmania where there is a powerful combination of highly efficient wind assets and a large hydro scheme with 14 sites already identified.
So that's what delivers lower prices - a mix of generation with a mix of qualities in a truly competitive marketplace.
Now, cheap energy goes to the heart of our economic competitiveness. And that's where the simplistic economics of Labor's harsh carbon taxes or trading schemes are laid bare. You cannot adjust to the future if you cannot compete now.
If you listen to our opponents, their view is apparently we have to shutter industries because of their emissions and drive them out of business by raising their energy prices.
Labor has not learned the lessons of the past.
When it rushed to impose the highest economy-wide carbon tax in the world, which drove up prices, as they intended it would. As I said in Paris in 2015, "It is innovation and technology which will drive stronger growth and a cleaner environment, not heavy-handed taxes or the force feeding of one technology or another”.
Now, we promised that we would take action on energy price rises. We promised that we would do everything we could to bring prices down.
We have turned the corner on energy prices.
Now, it is time to lock in that progress with the National Energy Guarantee.
Thank you very much.
Q&A
PRESENTER:
It's a pretty comprehensive report. All 380 pages, which me and many other people had to pore over this morning to get to. There's a lot of recommendations in there, and I know in your speech you were talking about you've had it for two weeks now and you will look at some and get back to some. There's been a fair bit of pressure for a Royal Commission into electricity prices. This is a pretty comprehensive review. Do you think this does enough to negate the need for a Royal Commission? And secondly, obviously, there's been big reviews or reports in the past like the Henry Tax Review and previous governments have cherry picked what they wanted from them. Do you think that you'll need to cement the majority of the 56 recommendations to take off the pressure of a call for a Royal Commission?
PRIME MINISTER:
I think that the most important thing, as Josh Frydenberg said today, is to read the report of this inquiry before you start talking about the need for another. This is a very comprehensive study. Rod Sims has been able, using the powers of the ACCC, to literally get into the books of all of the energy companies, including the retailers in particular, and has had enormous access and examined all of the issues relating to price. So, I think that this report is very comprehensive piece of work and what we should be doing is getting on with it and work on the very useful and valuable recommendations that have been made.
We received the report on the 30th of June, so we've had it for a bit over a week, seven working days. And Rod has met with and spoken with the state officials today. So, what we need to do now is work with our partners in the COAG Energy Council, or Josh's partners in the COAG Energy Council, obviously get a lot of feedback from industry as we work through the recommendations, but it is a really valuable piece of work. And look, I know you're probably all starting to think that you'll doze off with the thought of reading an ACCC report. Can I really commend it to you. it is very well written. There are parts of it that are highly technical, but most of it is really, very accessible.
It explains a lot about the energy market. You know, it explains what happened, for example, with the way the Queensland generators pushed up, gamed the system, to push up the price of wholesale energy in Queensland, and what the impact was of the changes to the rules and then following pressure from my Government and the ACCC, when the Labor government here, finally, stopped using their generators to fleece their citizens, and actually told them to engage with the market in a more fair way, a more even-handed way, and you saw a very significant reduction in wholesale costs.
So all of that is set out. It's a very, very good piece of work, very comprehensive, and I just want to thank Rod for it again.
PRESENTER:
OK, we'll throw to some questions from my colleagues soon. But obviously, it's a pretty damning report. It would be fair to say that it has shown there to be a colossal failure of the NEM in trying to keep prices down. There's a couple of key recommendations I did want to ask you, too. I know that your Government has done a lot in relation to trying to turn the blowtorch on retail companies and their various smoke and mirrors approach to offering discounts. There is a recommendation there saying that the Australian Energy Regulator should set a default price, scrapping the standing offers that a lot of power companies use, and setting a default price. What are your views on that? Would that be some kind of a re-regulation?
PRIME MINISTER:
Well, they're not, the ACCC is not saying that the Government should set the price of electricity. What they're saying is that there should be a default price, which is the benchmark from which discounts and deals are quoted. Because the problem is with the companies having different standard offers, you know, your 20 per cent discount may actually be much more expensive than my 10 per cent discount that I'm quoting.
So, it's really designed to put the customer first. I think we'll obviously need to talk with the state jurisdictions about it, and indeed, the industry – but you can see there that he's identified the way in which customers and consumers are not being looked after. And, in fact, as I said earlier – in fact, I'm really quoting the Treasurer Scott Morrison – that complexity and inertia have been the retailers' ally versus the customer because faced with a complex, confusing range of options many people just choose to take no action at all. And that's why the comparator sites and the action we've taken in getting the retailers to remind people of the opportunities to move to better deals has been important. You know, saving $500 on a $2,400 a year electricity bill, for example, is a lot of money. That's a very big saving, and savings of that kind are very available.
PRESENTER:
Just back to the original question though. Would you support the scrapping of the standing offer and putting in this sort of default price?
PRIME MINISTER:
Well, I think it's a suggestion that has considerable merit, but we are going to review the recommendations carefully and discuss with the jurisdictions. But it's certainly consistent with everything we've done in terms of taking action to protect consumers and deliver for consumers. As I said, the key for every single measure whenever anybody has a bright idea about the energy sector, terrific, my question is, “Will this result in lower energy prices? Will this support lower energy prices?” And that's the key.
You've got to get, they're too high, you’ve got to get the prices down. They're starting to come down, you know, particularly at the wholesale level, it's feeding through to the retail customers, we want to see more action.
Everything we're doing is aimed at that, and there have been a lot of mistakes made in the past and we don't think that we should be remaking them. So, we've got to be focused on the customer. Lower prices, put the customer first – that's my goal.
PRESENTER:
Just on to another key recommendation, talking about the Government underwriting long-term energy supply contracts to encourage the development of new dispatchable power generation. Obviously, if you do support that, would that include support for a new coal-fired power station? Or is that something that's completely off the agenda that if the market is not going to fund, it the Government is not going to be putting any money towards it?
PRIME MINISTER:
Well, it's technology agnostic. So, it certainly wouldn't exclude any fuel source. Again, we've got to stop, we've got to stop focusing on one technology or another. We've got to ask ourselves, “How do we get prices down?” What Rod has identified, and we've heard this from other parts of the industry, is that it is challenging for people who are not part of the big vertically integrated gentailers to get finance for new generation assets. And again, they could be a mix of assets. It could be some renewable, some gas and some hydro. It could be a coal-fired project. It could be gas. It could be biomass or a mixture of all of the above.
And the C&I customers, commercial and industrial, are not generally, so we're told, prepared to sign up for more than five years – and when they do, banks are not prepared to give that the same credit over the long-term.
So, what Rod has suggested is, and this is similar to the reverse auction concept that we've been working on with AEMO. Like all of these things, it's not an entirely new idea, but it's been framed in a very interesting way. So what the Government would do is say - alright, we will be, if you like, the buyer of last resort. We'll take a put but at a low price which would provide some security for a lender, obviously.
You know, if you've got a power project and your business model is based on selling energy at $65 a megawatt hour and you end up selling it for $45, your equity will be gone and you'll be a very unhappy, disappointed investor. But if that enables you to get the bank finance as a bit of a back stop, that will bring on more investment.
The thing we've got to make sure is that as we don't have any more of this phenomenon we saw and we've seen in recent times where older baseload generation goes out because it's old and, you know, it's owners think it's clapped out, for whatever reason. We have got to make sure that we maintain the level of dispatchibility. Now the NEG, by the way, is designed to do just that as well. So these two would have to work together.
But the National Energy Guarantee, you understand, is designed to ensure that we have a sufficient amount of reliable power, that's dispatchable power, so that would mean that a retailer would have to ensure that they had sufficient firming power to back up. They had a lot of wind and solar - terrific, congratulations. But you're going to have to have a specific percentage of firmed generation to be able to back that up so that you can be sure to deliver reliable power.
PRESENTER:
I'm sure my colleagues are going to start throwing bread rolls at me soon. But just finally on the NEG…
PRIME MINISTER:
They could write a question on the bread roll.
PRESENTER:
Exactly, I'll read it out. But there's been a lot of focus and you're talking about the National Energy Guarantee and pushing that through and you're saying it should be technology agnostic, although a lot of your backbench seem to be quite focused, or some would say almost obsessed, on coal fired power. Park that to one side.
PRIME MINISTER:
The thing to be obsessed about in this business is lower energy prices. That should be the obsession. The customers, citizens, businesses, want lower energy prices. That's what we've got to deliver.
PRESENTER:
Obviously, the ACCC has backed the NEG as the way to help solve some of the problems in the National Electricity Market. There's some unrest on your backbench about that. You have got to win over the state and territory governments and a lot of the recommendations from the ACCC report require action by the states and territories so it's a bit of a delicate balance.
Would you be concerned when it came to a parliamentary vote if some of your backbench cross the floor? Or are you more concerned about the end game about the NEG passing? And one final supplementary to that - is there a plan B if the NEG goes down in flames?
PRIME MINISTER:
Well, we're focused on putting the customers first and the National Energy Guarantee has overwhelming support. I've never seen an energy policy that has such broad support. From, you know, the National Farmer's Federation and the Minerals Council to social welfare groups and energy users. I read out a quote from the energy users in the course of my speech, it has very widespread support, and I am, I would say, quietly confident, that we will achieve the support for the NEG that we need, because Australians are crying out for an energy policy that is focused on them.
They want politicians to cooperate, to deliver an energy policy that is focused on them, and what that means is it's focused on them paying less for energy. So lower prices. I hope I'm not sounding like a broken record, but believe me. I'm bringing all of my many years of business experience to this task. The job is to get energy prices down. That's what we've got to do.
We've got to maintain reliability. We have got to meet our emission reductions commitments. We can do both of those. That's extremely manageable. But we must bring prices down. And that's where the market has got to start working for its customers. That's what our policies are about, and we are delivering outcomes. I mean, we are making progress. We have turned the corner, but we want to keep the good momentum in the right direction, which as far as prices are concerned, is down.
PRESENTER:
I might throw to some of my colleagues on the media table there. If you could stand up - back straight - announce where you're from and the microphone is yours.
PRIME MINISTER:
No slouching allowed.
JOURNALIST:
Hello, Prime Minister. Thank you for your speech. Amy Remeikis from the Guardian. Just further to Mark's questions there about the NEG, the Nationals now have been quite vocal about what they would like in exchange for their support – which does include coal subsidies, whether that be through a new power plant or through retro fitting existing power plants. And I know it's technology neutral, and I know what is in the report - I just need a yes or no answer - are you going to give the Nationals what they want?
PRIME MINISTER:
Well, there's a whole lot of assumptions…
JOURNALIST:
That's not yes or no.
PRIME MINISTER:
Well, there's a whole lot of premises in your question and assumptions in the question which I don't agree with.
JOURNALIST:
But they'd agree with it. I mean, they're public about it.
PRIME MINISTER:
Well, let me just say to you that every member of our Coalition party room is committed to lower energy prices. I recognise that there's often debates about how you get there, and interesting debates about technologies, but the object of policy is to get prices lower. And the one thing we know is that Government subsidising one technology or another, as Rod Sims said today, is only going to result in higher prices.
We want to be supporting lower prices. So that's what it's all about.
JOURNALIST:
Stefan Armbruster from SBS news. You were just talking about the free market and how it operates. You are about to sign further agreements with the Solomon Islands and Papua New Guinea for the cable that was announced in the budget - $136 million from the Australian side. Now, that's going into the Pacific market and the Australian taxpayer’s money that's subsidising that cable in the face of competition in Vanuatu and in other places. At what point do national security interests override your interests in the free market taking care of business in the Pacific, in the place of China? And won't this just encourage other Pacific nations to use the China trigger to get a better aid deal out of Australia?
PRIME MINISTER:
Well it's a very practical form of foreign aid. I think it's a great initiative and I look forward to signing that with the Prime Ministers of PNG and Solomon Islands later today before we go to watch the State of Origin.
You know, we spend billions of dollars a year on foreign aid and this is a very practical way of investing in the future economic growth of our neighbours in the Pacific. It's a very good, practical example of foreign aid that's going to encourage economic growth in our region. That's is what it is all about.
JOURNALIST:
Chris O'Brien from the ABC. Just a specific correlation between the report and the NEG. Do you think the ACCC report firms up the case for the National Energy Guarantee?
PRIME MINISTER:
Yes, it does. And, in fact, they say that one of their recommendations, strong recommendations is that the National Energy Guarantee should be - the development should be - completed and it should be implemented. It is a key part of it. We need to bring together and integrate climate and energy policy.
The Renewable Energy Target, which obviously will be complete, it will be complete by 2020 in the sense that the target will be met and the price of the RECs, renewable energy certificates, will tail off to a very low number if not zero after that.
That target - whatever the arguments for it in the past may have been - was encouraging and subsidising a particular set of technologies without any regard to the need to maintain dispatchability or reliability, for example. So, it was not part of the energy market. It was operating, as I said in my remarks, from outside the energy market.
Now, I'll leave the historians to debate the pros and cons of past energy policies, it's a pretty dispiriting exercise for those who want to undertake it. My concern is from now, from here on, and since I've been Prime Minister, to focus on one thing and one thing alone, which is getting energy prices down. And we are having success in that regard.
Wholesale price of gas, as everyone in this room knows, has come down considerably over the last 18 months because there's more supply. The cost of the wholesale generation has come down. We've seen action taken even by the Queensland Government where they gave a direction to their government-owned generators to stop gaming the system, and, again, the technical details of that are all set out in the report. Prices came down.
We're starting to see it at the retail level. Yesterday, the Australian Energy Regulator reduced the rate of return that the owners of energy transmission assets, poles and wires, should be entitled to receive and that will, again, reduce household bills by an amount, between $30-$40 - a figure I recall being quoted.
But the point is, we've got to just keep that relentless pressure on. I want Australian consumers of electricity, whether they are businesses, whether they are households, whether their families to know that everything I can do, I and my Government are doing to bring downward pressure on energy prices. That’s our goal. That is the test.
So I'm grateful, all suggestions and ideas gratefully received, we welcome them. But the question is, the test is, the litmus test is: will this result in a lower electricity bill? And if it doesn't, then, frankly, we've got to look for some other alternatives so what we're focused on is bringing prices down. The National Energy Guarantee will bring prices down.
That's what we've been advised by the Energy Security Board. The ACCC has endorsed that approach. They have other reforms which can bring down prices. That's the key. Lower electricity prices. That's the object of our policy. That's what it's all about - making sure that we continue the good momentum we've got to lower electricity prices.
JOURNALIST:
Steven Scott from the Courier Mail, Prime Minister. There's a section of the report that's pretty scathing about the ownership structure in electricity generators in Queensland. It suggests that they should be split up and effectively a large portion of them sold off. Is that something that you would like to see the Queensland Government consider?
PRIME MINISTER:
Well, it's actually LNP policy to split the generators up. And you know, I welcome Deb Frecklington’s leadership there on that issue. But yes, you need to have a more competitive market. You know, people who say that privatisation of energy assets is a bad idea should consider what's happened in Queensland where the greatest pressure to push prices up was coming from state government-owned generators actually gaming the system. So, you know, you need to have I think everywhere a more competitive market. So yes, we would welcome a more competitive market in Queensland.
State government ownership and privatisation is not necessary. That's a matter for the state government to determine, but the critical thing is to ensure that there is real competition and that the generators and participants in the market act responsibly and don't take advantage of the concentration they have and the market power that they have to game the system. And again, I encourage you to have a look at the report.
But what is the focus? What's the objective? Lower prices.
JOURNALIST:
Michael McKenna from the Australian. There's been a lot of talk about methods to bring down power prices over the last couple of years and you've been quite laudatory of this report. Josh Frydenberg said we had to move on it now. Can you give us a time frame as to when you think your Government can act on these recommendations, respond to these recommendations? And is it possible that, if needed, legislation would be introduced into the Parliament in the next session?
PRIME MINISTER:
Well, Michael, firstly there are 56 recommendations. They don't require, at least for the vast majority, they don't require any federal legislation. Most of it involves changes to the National Electricity Law, which is, as you know, essentially a COAG instrument which actually involves changes to law by the South Australian Parliament, is the way that it operates. But again, that's getting into the arcane business of the National Electricity Market.
We will move swiftly but with due consideration. It's very important to make sure that any further government intervention, if that's the right term, is not counterproductive. I'm very attracted to the put option that Rod has proposed because it works in a similar way to a reverse auction concept that we've been looking at with AEMO, which is another way of essentially calling for the - whereby AEMO would say, for example in New South Wales, the forecast by 2022, a gap in dispatchable power.
One way to resolve that would be for AEMO to say - we want to see bids to fill that gap and then have, in effect, a reverse auction. It's a technique used in many other markets around the world, but it does require that intervention to support the bringing in of new firmed or dispatchable power. When I say firmed or dispatchable power, for everyone's benefit, what we're talking about is energy that's available on demand.
So, that could be many different types. That could be coal, it could be gas, it could be hydro, it could be battery, it could be biomass. There's no doubt others as well.
But as distinct from an intermittent source like solar or wind, which, for all of their enormous attractions, particularly as they get cheaper all the time, you know the solar panel doesn't work when the sun isn't shining and the windmill doesn't work when the wind isn't blowing. So, that’s the difference between firmed or dispatchable power and what we call intermittent power.
So, I think that that is very worthwhile looking at. But the critical thing is to be technology agnostic and just focus, with a laser-like focus, on the customer and getting the prices down for the customer.
JOURNALIST:
There's a summer coming again. It comes every year and it's pretty hot up here.
PRIME MINISTER:
It does.
JOURNALIST:
So there is urgency. There's people businesses, people are going out of business. And there's a real cost of living pressure. So what sort of urgency is this Government bringing to it?
PRIME MINISTER:
We've had the report for seven working days. It's been released and we will be responding to it in collaboration with the States and Territories. Michael, it's very important to understand that the responsibility for energy policy is shared between the various jurisdictions in the National Electricity Market and the Federal Government.
And, of course, Western Australia and the Northern Territory are not even part of the National Electricity Market.
JOURNALIST:
Prime Minister, thank you for your speech. Jackson Williams from Sky News just touching on some of the earlier questions. As we know, the report backs the NEG, which has a guarantee of reliability, but it also says Government money is needed, is necessary, to underwrite baseload power. Does that mean there is not complete faith in the NEG for reliable power to be delivered?
PRIME MINISTER:
No, it doesn't mean that at all. It's a discreet observation by the ACCC about a particular problem they've perceived, and it may be that we don't need – let's assume we were going to go down the route that Rod Sims recommends, it may be we don't have to do a lot of it. Or do it for very long. You know.
We just have to be very focused and very pragmatic about this. This is all about getting results. I mean, again, I came into Parliament at the ripe old age of 50 from a career in business. I'm a practical person. I like to get things done. I want to solve problems, and the problem is, right now, energy in Australia is too expensive. We've got to make sure we get it down, get prices down.
But we've also got to make sure that in our efforts to do so, we don't undertake measures that turn out to be counterproductive. So, the design of all of this will be very critical, but I think the idea of a put at a low price, and it may be that 45 is not the right price, maybe it is 40 or 37.5. But you want to hit that mark that would enable more of that dispatchable power to come, more of that investment to come, forward.
I think the NEG, I'm confident that the NEG will provide those signals in the future, but there is concern about, and Michael McKenna asked about the summer, but there are concerns who say that in the short-term, there are concerns too about medium term gaps in dispatchable power.
As I said, this should not be a debate. We've got to put the ideology and the slogans aside and just focus on getting the outcomes that deliver lower prices. That's the test. So whatever is proposed, my question is, “Will this help to deliver lower prices?” And the answer better be “yes” if people want us to be paying close attention to it.
JOURNALIST:
Thank you for your speech, Stewart Late from AAP. How strongly do you think that the regulators should be shaken up? Given that they allowed the situation to occur in the first place? And if you accept that customers have been gouged, would you consider a levy similar to the bank levy in the power sector?
PRIME MINISTER:
I don't want to go beyond the recommendations that are in the report. The word ‘gouging’ is not used anywhere in the report, though I see it referred widely in the media.
The most important thing is that we get genuine competition in the market. That the market works for customers. There are some very practical recommendations made here. What they have recommended is the regulator be given more powers but there's a lot of things that need to change in the electricity market. The rule-making process, for example, is very long and laborious. That's got to be sped up. It needs to become a system that works better for customers, and the object, in case I haven't mentioned it earlier, is lower prices.
JOURNALIST:
Sounds like a slogan, Prime Minister.
PRIME MINISTER:
Well, it's where the rubber hits the road in this business, I can tell you. That's what it's all about. You know, when I'm out and about, whether it's in western Tasmania or western Queensland, people are talking about energy prices being too high. And that's what they want us to get on with and that's what we're focused on and that's why we've got this big report done by the ACCC with their powers. It's a very good read. I encourage you. I'm not getting a commission from Rod Sims by the way for encouraging it. It's all free. It's all on the Internet.
PRESENTER:
We probably have time for one or two more quick questions.
JOURNALIST:
Felicity Caldwell from the Brisbane Times. The ACCC recommended the governments from Queensland, New South Wales and Tasmania should take steps to remedy their over investment in the network businesses to improve affordability.
But that this would happen with appropriate assistance from the Australian Government. Are you willing to offer some support? And if so, how much money?
PRIME MINISTER:
Thank you. Well, again, that's one of those things that we will need to discuss with State Governments. Just so that everyone knows what we're talking about - the largest factor in the increase in energy prices has not been green taxes or the RET or feed-in tariffs, some of which were absurdly generous when you look back with hindsight. It hasn't actually even been the cost of generation. It's been the poles and wires - nearly 40 per cent across the National Electricity Market.
And what happened was that the regulatory regime encouraged the owners of the poles and wires to invest in them because they got a markedly higher return – their regulated return, i.e. what they could charge the customers – than their actual cost of capital.
So, it really encouraged gold plating. And that is what has happened and it's been done by state regulation, and I imagine State Governments will be reluctant to come to terms with that recommendation, but it's certainly something that we're happy to discuss. But it would involve, in effect, moving a cost from energy consumers' shoulders, if you like, on to taxpayers’ shoulders. So again, it's something that we'll have to work through with them. But we really should, we have a lot to reflect on in the way in which this gold plating of network assets was allowed to develop.
And this is why, by the way, we've got to be very careful about mandating one type of investment or another. Because one way or another, if you're a government, either the consumer pays for it or the taxpayer pays for it.
You know, I don't see any politicians offering to personally underwrite infrastructure investments, so you know, one way or another, the customer will pay or the taxpayer will pay. That's why we've got to be, again, focused on getting a result that delivers lower prices.
PRESENTER:
Prime Minister, we probably have time for one last question.
JOURNALIST:
Prime Minister, Rob Morrison from Nine News. The ACCC did recommend privatising two of the state-owned energy generators, after it was split into three. You said that privatisation wasn't necessary. Would you change that position if an LNP government won the state election in 2020, given that the words ‘asset sales’ is a fantastic way to lose the election beforehand?
PRIME MINISTER:
Well, what I was saying was, a business does not need to be privately owned to operate in a pro-consumer and pro-competitive way. Obviously, from the Liberal side of politics, the LNP side of politics, you know we prefer free enterprise, free markets, more competition and so forth.
Equally, government ownership doesn't mean that a utility will run in the interests of consumers and I give you Stanwell for example, and again, all of the sorry history of that is set out in the ACCC report. You talk about gouging - I mean, that was, that is a good example of gouging. But it was done by Queensland Government-owned generators.
So, this was not some rapacious private company. This was a rapacious government using its monopoly position in the generation business to gouge its customers.
Anyway, we intervened in respect of that conduct. The ACCC called them out and they changed their way, and you saw a significant cut and drop in wholesale energy costs in Queensland. I think that this is very much the privatising or not of assets is very much a matter for State Governments, even if they're state assets, of course, and State Oppositions to debate that.
But the critical thing is to make sure that market behaviour is competitive. So you're right, the ACCC has recommended that the two be split into three and two of them be privatised. At the very least, they should be split into three and be genuinely competitive. That has to be the object because again, what is their job? Their job should be to work to deliver lower energy prices for Queenslanders.
Obviously, they've got to make a margin, they've got to be able to cover their costs and fund new investment and all of those things but they shouldn't be run as, in effect, an arm of the Queensland revenue to gouge money, super profits out of Queensland customers, which is basically what was happening.
PRESENTER:
Prime Minister.
JOURNALIST:
Billy Slater.
PRIME MINISTER:
I was going about to say, are you going to run on tonight?
JOURNALIST:
No, I'm a soccer player. Conservative governments in Canberra have relied in past decades on the generosity of Queensland voters. It's usually about two-thirds of the seats in Queensland are owned by the Liberal Party or the National Party.
PRIME MINISTER:
Well, they're not owned. You know, they're owned by the people, by the voters.
JOURNALIST:
That's right. Thank you.
PRIME MINISTER:
The people who expect us to get lower electricity prices.
JOURNALIST:
That's right, well done.
PRIME MINISTER:
That's what you should be focused on!
PRESENTER:
Did you get that?
PRIME MINISTER:
It's very interesting. None of the media questions have asked about lower electricity prices. I don't recall that. You get out of the Press Gallery, you know, you get out to Charleville or Boulia, down to Zeehan in western Tasmania where I was earlier in the week, that's what people are talking about. They're not talking about politics as much as you'd like.
They're talking about what the Government's going to do for me - is it going to lower taxes on my business so I can invest more and give an apprentice a start? They’re talking about getting a new mine going and what the energy prices were.
JOURNALIST:
Mr Speaker, Mr Speaker...
PRIME MINISTER:
I was at a mine in Zeehan that's going to get started up, have 200 new jobs. What were the owners talking to us about? Energy prices!
JOURNALIST:
Relevance, Mr Speaker!
PRESENTER:
OK, Mickey, hurry up and ask the political question!
JOURNALIST:
20 or 21 of the 30 seats in Queensland are held by the LNP, and this has gone back decades. Since the last election, our Newspoll results shows that the Conservative Coalition is down nine points on the primary vote. Are you doing something wrong in Queensland since your election? What are you doing wrong? And how can you fix it?
PRIME MINISTER:
Well, we're focused on delivering for Queenslanders. And one of the things, Michael, we're going to deliver, is lower electricity prices.
PRESENTER:
You finished?
PRIME MINISTER:
I have.
PRESENTER:
That's the shortest answer we’ve had all day. Congratulations!
We really appreciate you coming up to Queensland yet again. Ladies and gentlemen, please thank the Prime Minister Malcolm Turnbull.
PRIME MINISTER:
Thank you very much. Thank you.