Showing posts with label federal government. Show all posts
Showing posts with label federal government. Show all posts

Thursday, 3 January 2019

Murray-Darling Basin Plan: a $13 billion fraud on the environment

Some home truth about the current Murray-Darling Basin Plan to remember as we enter into the morass of competeing claims in NSW State and Australian Federal election campaigns in the first half of this year....


MR R. BEASLEY SC, Senior Counsel Assisting:

….Commissioner, the Water Act and the Basin Plan have been hailed as ground-breaking reform. They are. What this Commission has learnt, however, from the evidence it has gathered, and from the witnesses that have informed us, is that it’s one thing to enact transformative legislation like the Water Act and the Basin Plan, it’s quite another thing to faithfully implement it. Sadly, the implementation of the Basin Plan at crucial times has been characterised by a lack of attention to the requirements of the Water Act and a near total lack of transparency in an important sense.

Those matters have had, and continue to have, a negative impact on the environment and probably the economies of all the Basin Plan states but the state that will suffer the most is the state at the end of the system, South Australia. The Water Act was a giant national compromise. At its heart was a recognition that all of the Basin states – Queensland, NSW, Victoria and South Australia – were taking too much water from the system and had been for a long time. That, as a matter of statutory fact in the Water Act, and as a matter of reality, has led to serious degradation of the environment of the Basin. The Millennium Drought of 2000s underscored the fact that, if nothing was done, over-allocation of the water entitlements in the Basin would inevitably and quickly lead to irreversible damage to the Basin environment.

The Water Act was a response to that. It was the statutory means by which the process of restoration and protection of environmental assets would begin. I say the Water Act was a compromise because the Act contemplates that water will be taken from our rivers and used consumptively for irrigation, the growing of crops and permanent plants. Of course, also for human water needs. But it sets a limit. That limit is that no more water can be taken beyond the point where key areas of the environment and its ecosystems might be damaged. In an environment that’s already degraded, that means the Water Act requires the environment to have both enough water to restore degraded wetlands and the like and also, of course, to maintain them.

That’s not just the right thing to do. It’s what Australia’s international obligations require. That task, setting a limit on the extraction of water, is to be based on the best available science. Not guided by the best science, not informed by the best science but based on the best available science. It also has to be achieved by taking into account the well-known principles of ecologically sustainable development. What the Commission has learnt from the evidence presented to it is that the implementation of the Basin Plan, at crucial stages, has not been based on the best available science. Further, ecologically sustainable development has either been ignored or, in some cases, in relation to supply measures, actually inverted.

 I want to read to you a peer review of the Guide to the Basin Plan from some international scientists in 2010 because it demonstrates that they were well aware, even back then, of what was actually going on in the early stages of drafting the Basin Plan. This is a peer review report by Professor Gene Likens of the Cary Institute of Ecosystem Studies, Mr Per Bertilsson of the Stockholm International Water Institute, Professor Asit Biswas from the Third World Centre for Water Management and Professor John Briscoe, Gordon McKay Professor from Harvard University. What they said was this, in reviewing the Basin Plan, at page 34 of what became exhibit RCE38:

It is a fundamental tenet of good governance that scientists produce facts and the government decides on values and makes choices. We are concerned that scientists in the Murray-Darling Basin Authority, who are working to develop the facts, may feel they are expected to trim those so that the sustainable diversion limit will be one that is politically acceptable. We strongly believe that this is not only inconsistent with the basic tenets of good governance but that it is not consistent with the letter of the Water Act. We equally strongly believe that government needs to make the necessary trade-offs and value judgments and need to be explicit about these, assume responsibility and make the rationale behind these judgments transparent to the public.

If all the MDBA had been done in the past eight years since that review was written is “trim the facts”, that would be bad enough. But it’s worse than that. The implementation of the Basin Plan has been marred by maladministration. By that I mean mismanagement by those in charge of the task in the Basin Authority, its executives and its board, and the consequent mismanagement of huge amounts of public funds. The responsibility for that maladministration and mismanagement falls on both past and current executives of the MDBA and its board. Again, while the whole of the Basin environment has and will continue to suffer as a result of this, the state whose environment will suffer the most is South Australia.

The principal task of those implementing the Plan is to set the Basin-wide sustainable diversion limit. How much water can be taken from the rivers before the environment suffers? You’ve heard evidence that has been unchallenged that this task was infected by deception, secrecy and is the political fix. The modelling it has been said to have been based on is still not available seven years later. The recent adjustment of the sustainable diversion limit by raising it by 605 gigalitres, on the evidence you’ve heard, is best described as a fraud on the environment. That’s a phrase I used in opening. It was justified then. It’s re-enforced by the evidence you’ve heard subsequently. The so-called 450 gigalitres of upwater, the water that the then South Australian Government fought for, for this State’s environment, is highly unlikely to ever eventuate. The constraints to the system are just one major problem in the delivery of that water.

Like all aspects of the implementation of the Basin Plan, efficiency measures or infrastructure projects that form the basis of how the 450 gigalitres of water is to be attained, and which are funded by public money, lack any reasonable form of transparency and, as the Productivity Commission recently, and witnesses to this Commission, have noted, are hugely more expensive and less reliable than purchasing water entitlements. I will discuss this in detail but I will give you one quote from an expert who can talk with real authority about the extra 450 gigalitres proposed for South Australia under the Basin Plan. That’s the former Commonwealth Environmental Water Holder, David Papps. In his evidence to you said:

 I would bet my house that South Australia is not getting that water.

Mr Papps’ prediction seems safe when one considers the proposed amendments to the Basin Plan by the governments of NSW and Victoria concerning the 450 gigalitres that I will come to shortly. Everything that I have just said to you is based on the views of eminent scientists and other people who have given evidence and lodged submissions. However, neither the Commonwealth Department of Agriculture and Water, the Murray-Darling Basin Authority, or any Commonwealth government agency has provided any answer to anything I have just said or to the evidence before the Commission that I will refer to shortly. They have no answer. The submissions provided to you very recently by the Murray-Darling Basin Authority, and the DAWR, Department of Agriculture and Water Resources, demonstrate, as did their unwillingness to give evidence, culminating in proceedings to the High Court, that they do not have any answer.

The MDBA, you will recall, were even too busy to meet you. The States also have no answer, as demonstrated in their somewhat thin submissions to you, with the exception of the South Australian Government. When I say the MDBA has no answer to the expert evidence given in this Commission, I should emphasise also that it clearly has no answer to the maladministration and unlawfulness of its implementation of the Basin Plan. It is nevertheless a great pity that relevant persons from the Basin Authority, and other Commonwealth agencies, were not required to give answers to you under oath concerning the scientific evidence the Commission gathered.

The opportunity may have been there had the High Court decided those proceedings in your favour. I’m not going to speculate on what the High Court would have done but, regrettably, the South Australian Government chose not to extend your Commission in order to provide you with the opportunity that may have been available to you to question those relevant people. You made it clear to the South Australian Government that was your strong preference. You advised them that the Commission had potential witnesses that wanted to give important evidence, evidence relevant to the South Australian environment, but only if they were compelled by summons. In other words, they were too scared to talk about the implementation of the Basin Plan without the force of a summons. Why the Commission was not extended to explore these crucial matters is something upon which you can draw inferences as you see fit. I will only say that it’s a great opportunity lost……

Saturday, 8 December 2018

Quotes of the Week

“in the Liberal Party, the problem is intellectual honesty, intellectual capacity, courage and integrity. Liberal Party politicians are not even game to attempt ideological coherence in their public pronouncements. They prefer simplistic slogans, message manipulation, outright lies, and varying levels of verbal bullying [Academic and blogger Ingrid Matthews writing in oecomuse, 27 November 2018]

“I note, and accept, advice that there is nothing in the bill that would abrogate parliamentary privilege. However, the main issue with covert access in relation to privilege … is that there would be no opportunity for a parliamentarian who considers that material is protected by privilege to raise such a claim.”  [ Speaker of the Australian Senate, Senator Scott Ryan, quoted in The Guardian, 29 November 2018]

Tuesday, 20 November 2018

More reasons why establishing a federal independent commission against corruption is a good idea

The Sydney Morning Herald, 14 November 2018:

Australia is becoming more corrupt because successive federal governments have failed to create an effective national anti-corruption body similar to the NSW Independent Commission against Corruption, a leading jurist has argued.

Writing in support of a national anti-corruption body, David Harper, a former Court of Appeals justice at the Supreme Court of Victoria, noted that in 2012 Australia ranked seventh in Transparency International’s global corruption index, but that today we were ranked 13th.

“The lack of a federal anti-corruption agency remains a reason why we have never come close to being corruption-free,” he has written in an opinion piece for the Herald.

Mr Harper writes that the lack of an effective federal anti-corruption watchdog had allowed corruption to flourish undetected and, in turn, allowed federal politicians to hide behind the myth that the federal sphere is free of corruption.....

One can see Mr. Harper's point. Allegations of federal corruption regularly surface and are never fully addressed.

Take the allegations that one Liberal MP when minister borrowed money to buy into a proposed coal seam gas field (a proposal he supported in the parliament) and another Liberal minister inappropriately handed federal funding to his mates.......

ABC News, 14 November 2018:

A Northern Territory consulting company that employs Country Liberal Party president Ron Kelly was awarded more than $1.4 million through federal grants intended to tackle Indigenous disadvantage.

North Australian Remote Management Consultants (NARMCO) was given the money by Indigenous Affairs Minister Nigel Scullion over a three-year period through the Indigenous Advancement Strategy and the Aboriginal Benefits Account.

The Indigenous Advancement Strategy is a $4.9 billion federal fund that was designed "to improve the way that the Government does business with Aboriginal and Torres Strait Islander people to ensure funding actually achieves outcomes".

NARMCO is not an Aboriginal-owned company, but has previously said it works with Indigenous companies.

It is unclear how the award of funds achieves the stated aims of the IAS fund.

Mr Scullion has recently faced criticism for his allocation of IAS funds, with Indigenous groups calling for an investigation into the awarding of hundreds of thousands worth of Indigenous grants to a variety of non-Indigenous groups to assist their legal opposition of land right claims.

The NT Amateur Fishermen's Association, the NT Cattlemen's Association and the NT Seafood Council received funds.

Mr Scullion told the ABC he issued NARMCO with a "show-cause notice" about how it intended to manage the perceived conflict of interest, but the company declined to comment on how it handled that and said it was following proper processes.

ASIC records show NARMCO was established by longstanding CLP member John Jansen in 2003.

According to Government records, the company received its first IAS payment in June 2015 — nine months after Mr Scullion assumed the role of Indigenous Affairs Minister.

Mr Scullion was president of the CLP until October when he was succeeded by Mr Kelly, who formerly worked as Mr Scullion's chief of staff.

Mr Kelly began working for NARMCO in February 2018.

He previously worked as former NT chief minister Adam Giles's chief of staff before being handed a lucrative role as chief executive of the NT Department of Mines and Energy in 2015.

NARMCO 'supporting regional and remote people'

NARMCO's first grant through the Indigenous Advancement Strategy was awarded in June 2015.

It received $385,000 for a 12-month project that was later amended by the Department of Prime Minister and Cabinet to $330,000 for a 36-month project in Katherine, under the heading of "provide employee management and support".

Later in June 2015, the company received $225,000 listed as money "to provide Indigenous employment and economic development and business support services to indigenous Australians".

It was later changed to a 13-month contract from a 28-month term, which is permitted under the grant rules.

On September 13, 2017, NARMCO was again awarded $251,453 for a 10-month project in Katherine, but this time through the Aboriginal Benefits Account to "deliver outcomes by getting adults into jobs, fostering Indigenous business and assisting indigenous people".

On December 7, 2017, the company received $289,300 for "VRD Quarry Enterprises — Indigenous Business Entity Establishment" to run until June 2018.

The ABC asked Senator Scullion and NARMCO to explain how the grant money was spent for each project listed.

NARMCO said it supported "regional and remote people to establish and develop sustainable businesses and implement Indigenous employment programs", but would not release the names of which companies they worked with, citing confidentiality issues.

It said it could not comment on how it spent the money, and added that it does not distribute the funds to Indigenous companies on behalf of the Commonwealth Government.

ABC News, 31 October 2018:

The Indigenous Advancement Strategy was established in 2014 to improve employment, economic development and social participation in Indigenous communities, and has been funded to the tune of $4.9 billion.

Senator Scullion told the hearing the money would help speed up longstanding land claims in the Northern Territory by allowing non-Indigenous groups affected by the claims to submit "detriment" applications to the Aboriginal Land Commissioner.

The commissioner is due to make recommendations by the end of the year about 16 outstanding land claims which have previously been recommended for grant, but never finalised.

"I'm sure many Aboriginal people wouldn't be happy with their public money being used by third parties who are effectively trying to cease or alter an Aboriginal land claim," NLC chairman Joe Morrison told the ABC.

"I think it's a poor look."

But during the hearing, Senator Scullion rejected concerns from Labor senator Malarndirri McCarthy that the funding would be used to oppose land claims.
"It is about making their position about how they use the land at the moment and about how different determinations may affect their industry in different ways," he said.

"It certainly wouldn't be about opposing land claims … this is a process about establishing what detriment they will have.

"The land commissioner can then cross-examine or question or ask for more evidence about that, but it is a requirement under the act that the land commissioner take detriment into consideration."

Funding to educate members and represent interests

Senator Scullion pointed out that the Northern Land Council had received $7.5 million in federal funding to progress the claims, and that another $1 million had gone to the land commissioner.

But Mr Morrison said AFANT, NTCA and NTSC should not have received their funding from the IAS.

"There's a process under the Land Rights Act that if people require assistance to submit detriment claims then that's dealt with by the Attorney-General's department, not by the Indigenous Affairs Minister," he said.

The Australian, 16 February 2018:

Barnaby Joyce owns land near a coal-seam gas project he promoted as resources minister, despite admitting it could be seen as a conflict of interest and pledging to sell it 4½ years ago.

The land, at Gwabegar in central NSW, is covered by the same petroleum exploration licence as Santos’s Narrabri Gas Project, which could supply up to half the state’s gas needs for the next 20 years.

Santos is seeking approval to drill up to 850 wells on 425 sites in the Narrabri project area, about 25km to the east of Mr Joyce’s land. If approved by the NSW government, the project could make way for further LNG developments in the area including, potentially, on Mr Joyce’s property.

The Deputy Prime Minister and his wife hold the land in two blocks totalling 970 hectares. They paid $230,000 for the first, on Heads Road, Gwabegar, in July 2006. They purchased an adjacent block for $342,000 in 2008.

Mr Joyce is on record as saying he didn’t realise the blocks — in The Pilliga region between Coonabarabran and Narrabri — were subject to a petroleum exploration licence when he bought them.

He told Fairfax Media before the 2013 election that he would sell the properties, acknowledging it could be “viewed as a conflict of interest”.
But the register of members’ interests, updated in January, shows he still holds the blocks.
Mr Joyce’s office told The Australian the Deputy Prime Minister was open to offers on the land, but declined to say what steps he had taken to sell it.

Real estate agents in the area said the properties were not currently listed for sale. Mr Joyce grazes cattle on the land, but locals say it is marginal farming country.
Mr Joyce advocated strongly for the project to go ahead in September last year, when, as resources minister, he and Malcolm Turnbull met with Santos and other gas companies.

Thursday, 11 October 2018

Religious Freedom Review Report: a curate's egg in the hands of an Australian prime minister who doesn't understand the definition of secular or why there is a separation between Church and State

"Australia is not a secular country — it is a free country. This is a nation where you have the freedom to follow any belief system you choose.”  [Scott Morrison, 2007]

“Secular [adj] of or pertaining to the world or things not religious, sacred or spiritual; temporal, worldly.” [Patrick Hanks & Simeon Potter, Encyclopedic World Dictionary, 1971]

On 22 November 2017 then Australian Prime Minister Malcolm Turnbull announced the appointment of an Expert Panel to examine whether Australian law adequately protects the human right to freedom of religion.

The Panel’s Religious Freedom Review Report was delivered on 18 May 2018, accompanied by a statement that the report was now in the hands of the Prime Minister any government response was a matter for him.

The prime minister of the day is now the Liberal MP for Cook - a nakedly ambitious man who uses his public profession of Christian Pentecostal faith as a political tool.

Until this week the national electorate had no idea what the report might contain. It remained a closely guarded secret.

Which leads one to wonder if the leak which came Fairfax Media’s way is in fact Morrison preparing voters for what at best is highly likely to be proposed legislation which attempts to extend the exemptions religious institutions enjoy when it come to obeying human rights and anti-discrimination law and at worst an attempt to insert church into the heart of state.

The Sydney Morning Herald, 9 October 2018:

Religious schools would be guaranteed the right to turn away gay students and teachers under changes to federal anti-discrimination laws recommended by the government’s long-awaited review into religious freedom.

However the report, which is still being debated by cabinet despite being handed to the Coalition four months ago, dismisses the notion religious freedom in Australia is in “imminent peril”, and warns against any radical push to let businesses refuse goods and services such as a wedding cake for a gay couple.

The review was commissioned in the wake of last year’s same-sex marriage victory to appease conservative MPs who feared the change would restrict people’s ability to practise their religion freely.

The contents of the report - seen by Fairfax Media - are unlikely to placate conservatives and religious leaders, and will trigger concern within the LGBTI community about the treatment of gay students and teachers.

The report calls for the federal Sex Discrimination Act to be amended to allow religious schools to discriminate against students on the basis of sexual orientation, gender identity or relationship status - something some but not all states already allow.
“There is a wide variety of religious schools in Australia and ... to some school communities, cultivating an environment and ethos which conforms to their religious beliefs is of paramount importance,” the report noted.

“To the extent that this can be done in the context of appropriate safeguards for the rights and mental health of the child, the panel accepts their right to select, or preference, students who uphold the religious convictions of that school community.”

Any change to the law should only apply to new enrolments, the report said. The school would have to have a publicly available policy outlining its position, and should regard the best interests of the child as the “primary consideration of its conduct”.

The panel also agreed that faith-based schools should have some discretion to discriminate in the hiring of teachers on the basis of religious belief, sexual orientation, gender identity or relationship status…..

The panel did not accept that businesses should be allowed to refuse services on religious grounds, warning this would “unnecessarily encroach on other human rights” and “may cause significant harm to vulnerable groups”.

The review also found civil celebrants should not be entitled to refuse to conduct same-sex wedding ceremonies if they became celebrants after it was was legalised.
The review does not recommend any changes to the Marriage Act. Nor does it recommend a dedicated Religious Freedom Act - championed by several major Christian churches - which would have enshrined religious organisations’ exemptions from anti-discrimination laws.

“Specifically protecting freedom of religion would be out of step with the treatment of other rights,” the report found.

However it did recommend the government amend the Racial Discrimination Act or create a new Religious Discrimination Act, which would make it illegal to discriminate on the basis of a person’s religious belief or lack thereof.

The panel said it had heard a broad range of concerns about people’s ability to “manifest their faith publicly without suffering discrimination”.

This included wearing religious symbols and dress at school or work, communicating views based on religious understandings, obtaining goods and services and engaging in public life without fear of discrimination.

The report also recommends federal legislation “to make it clear” that religious schools cannot be forced to lease their facilities for a same-sex marriage, as long as the refusal is made in the name of religious doctrine.

Prime Minister Scott Morrison last month told Fairfax Media new religious freedom laws were needed to safeguard personal liberty in a changing society.

“Just because things haven’t been a problem in the past doesn’t mean they won’t be a problem in the future,” he said.

While the panel accepted the right of religious school to discriminate against students on the basis of gender identity or sexual orientation, it could see no justification for a school to discriminate on the basis of race, disability, pregnancy or intersex status.

“Schools should be places of learning, not breeding grounds of prejudice. This looks and feels like a vindictive attempt to punish LGBTI people for achieving marriage equality."  [just.equal spokesperson Rodney Croome, 2018]

As is usual for this prime minister, Morrison fronted the media with half-truths and misdirection about the Religious Freedom Review Reportimplying that the contentious matters within the report were already uniformly codified in law across all the states.

This is far from the truth.

Sunday, 19 August 2018

Once more a Coalition federal government is promising savings on household electricity bills

“Throughout the 1980s, '90s, and most of the 2000s, electricity prices tracked fairly closely to general consumer price trends. In the past decade, however, electricity has shot off the charts. Since 2008 power prices have risen 117 per cent, more than four times the average price increase across sectors.” [ABC News, 18 July  2018]

All three major NSW political parties - Liberal, Nationals and Labor - along with their federal counterparts drank the Kool-Aid when it came to the alleged desirability of privatising state assets in the electricity and gas sectors of energy supply.

Here is a brief outline of the how and why...... 


"The completion of this first tranche of the energy reform process meets the government's objectives – we have exited electricity retailing, we have created a competitive market structure approved by the ACCC and we have received a strong financial return for the taxpayers of NSW,” he [NSW Treasurer] said…..

Earlier, the shadow treasurer, Mike Baird, said: "Whatever they finally announce, it is clear from the ongoing speculation that the receipts will be at the lower end of the $5 billion to $7 billion range, which is about half what these assets are worth – and that is before you take off the $2.3 billion in inducements for the new coalmine needed to get the deal away.

'The end result is billions of dollars lost forever."

A UBS analyst, David Leitch, said: "NSW households are in for higher electricity tariffs and more people at their front door, trying to get them to change electricity supplier."


"When this bill is passed, this Government estimates that power prices will go down by 9 per cent, gas prices will go down by 7 per cent, and that means that the average power bill will be $200 a year lower and the average gas bill will be $70 a year lower," Mr Abbott said on October 15.

JUNE 2014

As of 12 May 2017, two government assets have been privatised in 2017. The most recent privatisation is the 99-year lease of a 50.4% share of Endeavour Energy. On 11 May 2017, the NSW [Berejiklian Coalition] Government announced that a consortium led by Macquarie Group's infrastructure arm had been successful in securing the tender for a price of $7.6 billion. Along with Ausgrid and Transgrid, the lease of Endeavour Energy represents the final of the three “poles and wires” sales – a key policy of the Liberal/National government in the 2015 State election. Announcing the sale, NSW Treasury stated:

The NSW Government will retain a 49.6 per cent interest in Endeavour Energy and will have ongoing influence over operations as lessor, licensor and as safety and reliability regulator.

June 2017

Electricity is now management heavy with a blow out in the number of managers relative to other workers. In addition electricity now employs an army of sales and marketing and other workers who do not actually make electricity. In addition the reforms seemed to encourage profit gauging on the part of companies in the industry who are able to inflate the asset base used in calculating the permitted return on assets. More than half the asset base appears to be ‘goodwill’ and retained earnings. There is a weird circular process in which high rates of return are capitalised in ‘goodwill’ and other fictitious or notional items while high profits guarantee high retained earnings which also feed into the asset base. In that way the unproductive capital base is allowed to increase and we are charged for capital that has no real function in producing electricity….

A host of factors have been blamed for the increase in electricity prices relative to other prices but we would point out that the main departure from the rest of the price index happened post privatisation and corporatisation.

JULY 2017

Origin, EnergyAustralia and AGL have all announced price increases for electricity and gas starting from July 1….

In NSW, residential EnergyAustralia customers will see electricity prices increase by up to 19.6 per cent. Origin Energy customers will get a 16.1 per cent rise.


The key supply chain cost components examined in the report include wholesale electricity purchase costs, regulated network costs and environmental policy costs.
Annual electricity prices for the representative consumer on a market offer in New South Wales:

* increased by 10.2 per cent from 2016-17 to 2017-18 due to higher wholesale electricity costs, driven by the retirement of Northern and Hazelwood generators and increasing gas prices

* are expected to decrease by an annual average of 6.6 per cent in 2018-19 and 2019-20. The expected decreases are largely attributable to decreases in wholesale electricity costs driven by expected new generation (approximately 4,100 MW across the NEM) and the return to service of the Swanbank E generator (385 MW in Queensland). In addition, in NSW, regulated network costs are uncertain in the two years to June 2020 due to the AER being required to remake revenue determinations for the NSW distribution network providers for the 2014-19 regulatory control period.


The most significant price rises were electricity, up 12.4 per cent, fuel up 10.4 per cent, domestic holiday travel up 6.3 per cent and fruit up 9.3 per cent. 

Across New South Wales, we found theaverage annual electricity bill to be just over $1,667. However, we found that bill-payers aged in their 40s reported the highest average bills in NSW at $1,911.76. Those aged 70 or over reported the lowest average bills at $1,466.40.

JULY 2018

This was comprised of $120 due to the [national energy] guarantee and $280 due to new investment in renewable energy that was already planned, mainly because of the Renewable Energy Target, which will run to 2030….

The ESB [Energy Security Board**] proposal increases the annual average saving to $550 on 2018 prices, of which $150 is due to the guarantee and $400 due to renewable energy.


After reading the National Energy Guarantee Consultation Paper as well as the 1 August 2018 Final Detailed Design and listening to statements made by the Turnbull Government, I personally find it hard to believe this change in federal government policy will significantly limit the rate of increases to household energy costs over time when this is based on an assumption that the market will respond by lowering prices across the Australian wholesale and retail sectors of energy supply.

Talk of money 'saved' by households is illusory as It will certainly see no reduction in the actual amounts listed on 2019-20 household electricity and gas bills once this guarantee comes into effect.

*KPMG Economics, November 2017, NEG and Electricity Pricing

Network charges represent on average about half of the electricity supply chain costs, with generation and retail costs (combined into the ‘competitive market’ category) accounting for 42%, and environment policies adding the remaining 8%, based on the latest AEMC Electricity Price Trend report.

The make up of the total average retail cost is shown in Chart 6 which reveals the single largest component of the price of electricity is distribution costs, which represented about 40% of the average cost of electricity. Over the AEMC forecast period to 2018/19, these costs are still expected to represent by far the largest component of the electricity cost stack, albeit fractionally lower in a couple of years’ time.

The next largest component is the wholesale price of electricity, which in 2015/16 represented about 28%. Under the AEMC Base Case scenario – which includes the retirement of the brown coal fired Hazelwood Power station in Victoria – this cost component had been anticipated to rise steadily over the forecast period to represent about 30% of the cost of electricity by 2018/19.

As shown in Chart 7 below, these three jurisdictions experienced higher than anticipated wholesale electricity costs in the order of between 30% and 80% when compared to original forecasts for FY2016/17. When considered on a weighted average basis, using the same methodology applied by the AEMC to estimate the values for the National Summary, wholesale electricity costs have therefore been about 17% to 20% higher than anticipated.
This increase in wholesale electricity costs pushed the bundled cost of electricity to rise by about 5% higher than anticipated by the AEMC, and shifted the relative importance of wholesale prices in the cost stack from about 28% to 31%.

Formed out of the Independent Review into the Future Security of the National Electricity Market (the Finkel Review), the Energy Security Board comprises an independent chair and deputy chair along with the expert heads of the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO).

The current Board membership is Chair Dr Kerry Schott AO,  Deputy Chair Clare Savage, Australian Energy Market Commission Chair John Pierce, Australian Energy Market Operator Chief Executive Audrey Zibelman, and the Chair of the Australian Energy Regulator Paula Conboy.