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House of Assembly - Fifty-Third Parliament, Second Session (53-2)
2017-07-04 Daily Xml
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Electricity Prices

Mr VAN HOLST PELLEKAAN (Stuart) (15:04): My question is to the Minister for Energy. After more than 15 years in government, and nearly six years as the minister responsible for energy, does the minister take responsibility for South Australia having the highest electricity prices in the world?

The Hon. A. KOUTSANTONIS (West Torrens—Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy) (15:04): My office asked Mr Bruce Mountain for his modelling, asked him for the way his assumptions were made to get to the recommendations that he claimed in his report and he refused. He refused to release all of them. I am saying he's wrong. So then we asked Danny Price from Frontier Economics to check the assumption that we have the highest prices in the world, and again it was false.

From my reading of the Bruce Mountain report, he is claiming that we are paying on average 50¢ a kilowatt hour for our electricity. That's not accurate. It is no great secret to say that electricity prices in Australia and South Australia are too high and governments need to do more, including us.

An honourable member: Why is that?

The Hon. A. KOUTSANTONIS: Well, they are high because the commonwealth government refuses to have—

Members interjecting:

The Hon. A. KOUTSANTONIS: No—including the Prime Minister says this. The Prime Minister commissioned the Finkel report. The Finkel inquiry has come up with a series of recommendations—50 of them. The commonwealth government has said it accepts 49 of them, but there is one that it is still debating, the most important one: the mechanism, the mechanism to incentivise new generation.

What has occurred across the national electricity market, since the abolition of the carbon tax, has been that retailers and generators have created scarcity by pulling supply out of the market in a disorderly way—in fact, over 5,000 megawatts—trying to create more value for the electrons they produce. That is what is occurring. This country, under government ownership of our electricity assets, had a policy of oversupply. We deliberately built more generation than we needed to keep costs down. It's a very simple formula.

Then successive governments across the country have been privatising these assets. Some have done it differently from others, but by and large, to maximise the sale price of these assets, they have sold them to monopolies and those monopolies have done everything they can to get the highest regulated return they can or, with a non-regulated asset, to try to create as much scarcity in the market to try to get the highest price.

For example, when Jeff Kennett privatised the transmission network in Victoria, then treasurer Stockdale put a very important amendment in that privatisation—that every new piece of infrastructure in Victoria must be contestable for the monopoly owners. Of course, that lowered the sale price of the transmission assets. There was no such clause in the South Australian sales because members opposite wanted to maximise the sale price of our transmission networks with no interconnector.

Governments are at fault, absolutely, and there is a solution: it is a market mechanism. What we need to do is to put the hysteria of a mechanism to one side, come together as a country and adopt the Finkel recommendations in full, not 49 out of 50—all 50. We have designed our energy security target to fold directly into any national mechanism.

We want our clean energy target that Dr Finkel has developed to succeed, but there are some members of the Coalition backbench who will not accept it. That is of grave concern to the entire country because, without a mechanism, there will be no reinvestment and the only investment we will get is more and more reduction in generation and introduction of unscheduled forms of renewable energy that cannot be scheduled. That is why batteries and firming are very important to make sure that we can make up that shortfall, and that is exactly what this government is doing through its energy plan, by incentivising the Southern Hemisphere's largest battery, bringing in more base load—

Time expired.

The SPEAKER: The member for Florey.

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