Angus Taylor fails to get price cut commitment from energy retailers
Power retailers have advanced a proposal to standardise comparison rates for all customers but have given no undertakings they will lower prices by January, during a roundtable with the energy minister, Angus Taylor.
Taylor has claimed Wednesday’s Sydney talks as a win because retailers had proposed voluntary action during “constructive discussions” by offering up a standardised rate, making it easier for consumers to “compare apples with apples” when they shop around between retailers for the best deal.
The energy minister told the retailers at the roundtable he would follow up on the voluntary offer, spearheaded by the Energy Australia chief executive, Catherine Tanna, with a letter to them next week in which he would ask them to spell out what steps they would take to lower prices by 1 January.
Guardian Australia understands Taylor told the retailers their response to that correspondence would determine how hard the government would go in pursuing price regulation over the coming months.
The energy retailers were warned by their legal advisers not to provide any undertakings about pricing behaviour during the meeting because of the risk of contraventions of competition law, and some say privately any concrete action on pricing by 1 January is a very tall order given the way pricing cycles work in the energy sector.
Some of the retailers warned Taylor on Wednesday to tread carefully on regulating retail prices given heavyhanded actions or interventions could disrupt new investment in power generation, which is one of the factors required to bring prices down.
After Wednesday’s talks, the energy minister told reporters standardising comparison rates would make it easier for consumers to get the best deal, which would lead to an effective reduction in power prices for people prepared to switch, but he continued to demand a “downpayment” on price reductions from 1 January.
He said the government would continue to pursue a number of regulatory actions to reduce power prices despite Wednesday’s conciliatory gesture, and he declared breaking up power companies remained a live option if they didn’t play ball. “If we have to use the big stick, we will,” Taylor told reporters.
The energy minister also continued to hold open the option of the Morrison government indemnifying new coal-fired power plants against the risk of a future carbon price, which would see taxpayers carry the risk of private proposals.
Taylor revealed that was an option during an interview with Guardian Australia in late October, saying the government would look to absorb the risks required to secure new investment in “reliable” power generation.
Before talks on Wednesday afternoon about the proposed government underwriting of new power generation capacity, Taylor said the government was prepared to “take what steps are necessary” to ensure sufficient quantities of dispatchable power were available to the grid.
The government wants a rapidfire process to resolve the parameters of the new underwriting program, with guidelines settled within weeks and expressions of interest under way during December and January with an eye to the timing of the next federal election.
The reaction from the energy sector has been less than enthusiastic, although there is speculation in the industry that the government might pursue proposals with ERM Power or Alinta Energy.
On pricing, the government is intent on pursuing regulatory changes such as introducing a default market offer for energy prices for households and small businesses by next July. With election timing front-of-mind, the government has demanded the companies lower the cost of their standard offers by 1 January in preparation for the new regime.
The government has been threatening the retailers with a so-called “big stick” – new divestiture powers to break up energy companies engaged in price gouging – in the event concessions are not forthcoming. That threat has alarmed business and the proposed divestiture regime is unlikely to be backed by Labor.