Supply cheaper power, not cheap promises
NEW Prime Minister Scott Morrison’s suggestion of a royal commission into power companies might or might not be a good idea. But it won’t deliver cheaper electricity prices anytime soon and it won’t help the government win the next election.
Those two things – winning and cheaper power – pretty much go together. The debacle over the late and unlamented NEG, or National Energy Guarantee, should have seared that into Morrison’s mind.
Even though, somewhat bizarrely, the debacle which took out a PM and put him and his partner on a plane to New York, delivered Morrison into the Lodge and the NEG’s creator and enthusiastic sponsor (John Frydenberg) into his deputy’s job!
There were three big problems with the NEG. It was incomprehensible. It didn’t provide clear and obvious differentiation from Labor and in particular its leader, Bill Shorten. And most critically, it wasn’t going to deliver quick, significant, sustainable, and so believable, power price cuts.
Now, I used that more general word “power” deliberately. Morrison, his deputy, Frydenberg, and new Energy Minister Angus Taylor need to think about cutting both electricity and gas prices.
Yes, electricity is the big one, but higher gas prices are also important. This is not only in their own right – and gas prices are critically linked to actual supply – but because the gas price plays a big role in setting the price of electricity.
Take South Australia (please, someone might respond): when the wind’s not blowing, they have to fire up their gas generators. You then get a double impact on electricity prices – the loss of wind supply and the greater demand for gas.
So the trio needs to focus on especially the last two of those three NEG problems.
They must offer a clear alternative to Labor and its mad, bad pursuit of even more useless wind, while simultaneously at the state Labor level making it ever harder to find and develop gas. The new policy trio must also actually deliver lower prices, not promise them, perhaps, on the other side of a royal commission.
The government needs to project a very clear alternative to what a Shorten-led Labor-Green government would impose. They want to cut emissions of carbon dioxide; we want to deliver cheaper power and eliminate any fears of blackouts, to say nothing of actual blackouts.
“Going first” with a RC into power companies is understandable after the government, and Morrison as treasurer in particular, was left flat footed on the banking RC. But backing one into power companies is also a two-edged sword – if, as is likely, it blurs the differentiation with Labor.
While it might seem politically appealing to add power companies to the “banks are bastards” category, the two situations are politically very different.
There was no percentage for the government in defending the banks; after the RC that position would now be suicidal. But with electricity, it’s not about defending them but getting them to actually deliver lower prices and deliver lower prices quickly. Regulatory action through the ACCC can play a big role. It could also be destabilising.
The critical short-term key is to get increased (theoretical) supply of wind working towards cutting prices not, as is the case today, cutting supply of base-load power, which then forces prices higher.
The government also needs to get clever: to get power companies working towards significant, sustainable and immediate price cuts in their own enlightened self-interest rather than battling to survive or to make monopoly profits by screwing the customer.
It’s a big challenge. But it’s the only path to election victory.