The Age Article

‘This won’t reduce power bills’: Industry rubbishes forced divestment plan

22 November 2018

Energy groups say the government’s proposed powers to force generators to sell off assets won’t help reduce electricity prices and could be unconstitutional.

The proposed draft law will allow the Treasurer to issue “divestiture orders” forcing companies who carry out “prohibitive actions” to dispose of some of their assets and restrict who can buy the assets.

It is the latest ‘big stick’ by the government, which includes new electricity contract default prices, to try and lower power prices and improve behaviour in the energy industry.

The Australian Energy Council (AEC) said the draft law would fail to achieve anything at all and could be unconstitutional.

“It is not clear that the bill will reduce power prices, reduce customer confusion or operate as recommended in the consultation paper,” it said.

“There are serious unanswered questions regarding the constitutional validity of the bill, as well as significant practical questions regarding its interpretation and operation.”

“The bill appears to reflect the haste in which it was drafted and contains numerous other legal issues and uncertainties. This lack of clarity is made all the more significant in light of the enforcement powers contemplated by the bill.”

Power generators were unable to comment on their response to the bill due to the government’s confidentiality clauses within the proposed draft.

The new powers were first touted after the government failed to coerce energy company AGL to keep its NSW Liddell coal-fired power station open beyond 2022 in order to ensure there was enough electricity to meet continued demand.

Electricity retailer Energy Locals chief executive Adrian Merrick welcomed the new rules, saying they could change anti-customer behaviour in the industry.

“This will rattle the big energy companies,” Mr Merrick said.

“But we’ll have to wait and see whether this will change behaviour or if we’ll have another stand-off like we saw with AGL and the government over Liddell.

“If you’re going to act poorly then the government will bring a big stick and they’ll beat you with it.”

KPMG’s global head of power and utilities, Ted Surrette, said the proposed law would have a massive impact on investment into Australia’s energy landscape.

“This will add to more investor uncertainty on top of already unclear energy policy,” Mr Surette said.

“Australia is already competing for global capital in energy investments, so divestment powers will have to be factored in investment decisions. If it goes ahead it should be a last resort.”

The Grattan Institute’s energy director Tony Wood said the government was vague as to what constitutes prohibitive action by generators.

If they’re saying it is about energy companies using their assets in an uncompetitive way then that’s an anti-trust issue,” Mr Wood said.

“But for many, it’s not clear given that the Australian Competition and Consumer Commission didn’t see them acting uncompetitively, so I’m not sure what it’s going to solve.

“This is another example of a government that’s had to resort to threats to get companies to do what they want. It is not good policy or good politics.”

Mr Wood pointed out the only energy company the ACCC found distorting the market was a Queensland state-owned generator.

“It’s not even obvious where the teeth are in this policy,” Mr Wood said.

View the original article here

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