18 October 2017
Transcript - #2017203, 2017

Interview with Steve Austin, ABC Brisbane

SUBJECTS: National Energy Guarantee to deliver affordable, reliable electricity

[AUDIO BEGINS] TREASURER:

We’re getting rid of the subsidies, that’s the key element of what was announced in the Energy Guarantee from the Energy Security Board yesterday...

STEVE AUSTIN:

Which subsidy?

TREASURER:

These are where your customers, your listeners who are paying for their electricity right now, are paying subsidies to renewable energy industries and companies as part of their bill…

AUSTIN:

Why not get rid of the subsidies on fossil fuels as well and have everyone on a level playing field?

TREASURER:

We don’t have subsidies on those.

AUSTIN:

There are no subsidies on fossil fuels in Australia?

TREASURER:

Not for your energy, no.

AUSTIN:

Alright.

TREASURER:

Not for producing electricity.

AUSTIN:

Not for producing electricity. Here in Queensland we own our generators, the people of Queensland own them.

TREASURER:

I understand.

AUSTIN:

And we have an excess of electricity which we sell into New South Wales and other places.

TREASURER:

Correct.

AUSTIN:

Queensland could arguably either use that excess to lower our prices independently here in Queensland. Would that be the effect if we did that?

TREASURER:

If you sold less into New South Wales and sold more into Queensland?

AUSTIN:

Yeah, just kept it for ourselves.

TREASURER:

Well it’s a similar case for gas. You have more gas in Queensland and that’s why your gas prices are lower in Queensland than they are in the southern states. A state that focuses on increasing its energy supply is doing a good thing. That’s why we’ve applauded the decision – it was done by the previous LNP government in Queensland – but sensibly wasn’t reversed by the current government when it came to gas. Now, the southern states have had very negative policies on gas and as a result, their customers are paying more for it. So, what the National Energy Guarantee provides is the investment certainty for people to invest in more energy supply, so there’s more supply, the prices come down.

AUSTIN:

So, you’re guaranteeing reliability and guaranteeing supply?

TREASURER:

That’s what the system is designed to do, that’s why it’s called a guarantee. It works like this, you walk into the shopfront of a retailer – put it in that context – Origin, AGL, whoever it might happen to be. What they have to do, they have to buy energy from the system from all the producers, the wholesalers and others – which a) delivers on a reliability standard which is set by the Energy Market Operator and provides a portfolio of energy that meets the emissions reduction target. So, when you’re buying your energy, you know you’re getting a product which meets both reliability and meets Australia’s environmental obligations. So, this actually does deliver on the trifecta of affordability, of reliability and environmental obligations. So you get rid of the subsidies out of the system – and the reason you can do that is they’re no longer necessary, the price of renewables has come down, they can now compete on their own two feet as they should. So the energy retailers will find that the cheapest way of getting that energy package together to provide to you the customer.

AUSTIN:

Exactly when will our power bills start to come down?

TREASURER:

Well, already customers are getting better deals from energy companies from the work that the Government has done…

AUSTIN:

But not as a result of the plan you announced yesterday?

TREASURER:

This is all part of the same thing. We’re the Government, we’re doing things on gas provision, we’re doing things on energy retailers, we’re doing things on getting rid of the free kick to power poles and wires companies jacking up prices by gold-plating their infrastructure, we’re building Snowy 2.0 to increase the supply of pumped hydro renewable, dispatchable power, and yesterday we announced the National Energy Guarantee which provides the certainty for investment in power and sources of power into the future. So, that specific initiative, the reliability guarantee, will hopefully kick in, we will move as quickly as we possibly can, but they may well be trialled in South Australia as soon as late next year.

AUSTIN:

We’ll have a reduction in our power bill of around $110 by the year 2020, according to the Prime Minister’s office.

TREASURER:

From this specific initiative based on the best assessment of the Energy Security Board, which I remind everyone, your listeners, this was the Energy Security Board set up by COAG – not by the Commonwealth – it was set up by the Commonwealth, the Queensland Premier signed off as did the South Australian Premier and New South Wales and so on. They said let’s get these people together. That’s what Finkel, the Chief Scientist, recommended and get them to work through that report and come back to us with the best way of going forward. Well, this is it…

AUSTIN:

So the independent Energy Security Board is essentially a state creation as far as your concerned – state and federal creation…

TREASURER:

Yes, it’s a COAG creation and the people who are on it might not be known to listeners in Queensland, but John Pierce was the head of the New South Wales Treasury under the state Labor government in New South Wales. He’s a respected public servant, he’s worked for both types of governments. You’ve got Kerry Schott who has run large utilities like Sydney Water. I mean, these people have been around the show for a long time, they’ve been frustrated by governments of all persuasions as well as implemented policies from governments of all persuasions. So they’re pretty frank and fearless in what they say and they’ve come forward in saying, this is the best way to go, guys.

AUSTIN:

The gold-plating of Queensland’s energy network occurred when Peter Beattie was Premier. How do you regard that decision – that gold-plating now? It’s been largely blamed for some of the costs of our network.

TREASURER:

That’s what Rod Sims, the Chair of the ACCC, found in the report that I asked him to undertake, and that just didn’t happen in Queensland, it happened in New South Wales as well as a number of states where state governments basically dividend stripped out of these utilities for years and years to prop up their budgets and then these organisations, poles and wires companies, went and gold-plated their infrastructure and passed that cost onto consumers using what was called the Limited Merits Review provision which meant that when the Energy Regulator said, “no, we won’t let you pass those costs on”, they got a second bite of the cherry. Well, we’ve abolished that.

AUSTIN:

States like Queensland are still taking the returns from the generators that we own – that dividend – and putting it into consolidated revenue to pay down debt. Is that a wise plan for Energy Minister Mark Bailey to do?

TREASURER:

That’s a matter for the Energy Minister and the Treasurer in Queensland. They can make those judgements but what the experience has shown is that where there’s a – what I’d call – a dividend stripping sort of process going on, which is a highly enthusiastic process of driving dividends out of public utilities to prop up your budget, the people who end up paying for that at the end of the day are electricity, water users, gas users because those companies then go and borrow more money and they go and bring their infrastructure up to standards sometimes which are overcooked and they’ve got to get their money back and they get it off your listeners.

AUSTIN:

This summer, Queenslanders are being asked to voluntarily turn their air conditioning up to 26 degrees, instead of the traditional 24 as a voluntarily means of averting a possible blackout or a brownout here in peak periods when we’re selling our power interstate but will your plan guarantee that we won’t have power blackouts in Australia this summer?

TREASURER:

The very situation you’ve just described is the product of how we’ve been running energy policy as a nation for the last decade. That’s what happens when you run it like this and that’s why it needs to change. These things…

AUSTIN:

So the answer is no, you can’t guarantee that we won’t have…

TREASURER:

Well, no, what I’m about to say to you is that the Energy Security Board and the other team of advisers have already identified that you will need a specific plan which we are working with the Queensland government – just like we are in Victoria and New South Wales, South Australia – where the summer is going to present these problems on everything from a strategic energy reserve to other initiatives which will ensure that we can get through the summer. But let’s not fudge about this, the exact circumstance that you’ve just described is why the current system is failing and is why it needs to change, and that’s why the Energy Security Board has come back and said you need to make these changes, strip out those subsidies, get all energy playing on a level playing field, make sure the energy retailers are tasked to deliver power to customers in the least cost way which delivers on reliability which currently there is no obligation in the system for. It’s all been about renewables, has not been about reliability and that’s why we have this problem. So if people are having to turn down their air conditioning this summer in Queensland…

AUSTIN:

Turn it up…

TREASURER:

Turn it up, I should say. Then that is because of the failure of how state governments and energy policy has worked on climate ideology for the last decade.

AUSTIN:

Queensland has a renewable energy target – which you have decided not to do – our renewable energy target is 50 per cent of our power will be generated through renewables by 2030…

TREASURER:

Yeah, that’s nuts.

AUSTIN:

Why is it nuts?

TREASURER:

Because it means people have to pay more and the system we’re proposing means that we hit our 26 per cent emissions reduction target without the need for any of those subsidies. It’s not necessary. If Queensland does that and follows that policy, they are forcing Queenslanders to pay more needlessly for their power and under this system it would probably mean they would be subsidising emissions reduction in New South Wales. I think it’s a muppet of a proposal.

AUSTIN:

A guaranteed 50 per cent renewable energy target by 2030 and you think it’s nuts and a muppet of a proposal by the state government?

TREASURER:

Yes, because it’s not needed. It’s all driven by worshipping at the altar of subsidising renewable energy which is no longer necessary. You don’t need to do it to meet your environmental obligations. That’s an industry subsidy program. It’s about welfare for renewable industry that no longer needs it. Why would you do that?

AUSTIN:

How would we be subsidising or underwriting New South Wales’ power through this strategy?

TREASURER:

Because under the National Energy Guarantee, the national emissions reduction target is national. So if Queensland wants to go it alone and try and beat its chest on these issues, then all that means is that Queensland will have a higher emissions reduction which means they are making a bigger contribution to the overall national job which means other states won’t have to do as much.

AUSTIN:

We own our power generators here in Queensland, is that an advantage? We have total ownership and total control, we get the money from them and the electricity from them. Does that put us at any sort of an advantage as far as you’re concerned?

TREASURER:

I don’t think it’s helped Queensland consumers necessarily but I’m not advocating that they should change it either. That’s a matter for Queenslanders and the Queensland government. We’re not prescribing who should own it. What we’re saying is how overall the system should work, whether it’s a private operator or a public operator. But as you probably know, the Queensland government owned energy providers got caught out playing the system and driving up prices for Queenslanders and got called out and they had to change their policies. Public owners game it and private owners game it. The system we’ve adopted from the National Energy Security Board is one that I think would significantly diminish the opportunity for that gaming to be done.

AUSTIN:

Federal Treasurer, Scott Morrison.