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Transcript of joint press conference: Parliament House, Canberra: 20 August 2018: National Energy Guarantee; delivering lower electricity prices

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Monday, 20 August 2018

Press Conference with the Hon. Scott Morrison MP, Treasurer and the Hon. Josh Frydenberg MP, Minister for the Environment and Energy Parliament House, Canberra

SUBJECTS: National Energy Guarantee; Delivering lower electricity prices.



Well, good morning everyone. We are doing everything we can to bring your electricity bill down. Our priority is cheaper electricity.

Now today, we're going to announce a range of new measures that will drive down the cost of energy for Australian families and businesses, hundreds of dollars of savings, as I'll come to in a moment.

But first, let me say a few words about the National Energy Guarantee.

Now it is clear that in the absence of bipartisan support, the legislation to move forward with the emissions component of the National Energy Guarantee will not be able to pass the House of Representatives. Now in politics you have to focus on what you can deliver and that's what we’ve done and will continue to do.

Now, while the policy, the legislation, has the clear support of the Coalition Party Room, as well as industry, experts, consumer groups - in fact I've never seen an energy policy that has broader support - in a Parliament where there is just a one seat majority, the outstanding reservations of a number of our colleagues, combined with the absence of bipartisan support mean that as long as that remains the case we won't be in a position to take that legislation forward. Now, where and when we believe there would be sufficient support in the House of Representatives, and obviously in our Party Room, to progress this component of the scheme we’ll bring it forward once again.

Now, that in no way distracts from our primary focus, which is to bring power prices down.

No single measure can achieve this. You've heard me say many times before, there’s no single reason why power prices have been so high and there’s no single solution. So that's why we're taking action right across the board, with retailers, distributors, generators.

And together, our measures will deliver cheaper electricity.

Now, I've asked the Energy Minister to talk with the states on the reliability guarantee. The National Energy Guarantee, as you know, was primarily designed as a response to the South Australian blackouts and the need to ensure that there was greater reliability or assured reliability in the energy market. That's the most pressing issue and as the Energy Security Board has said, needs to be in place by July 2019. It’s not far away. Now, the absence - if that remains the case - of federal legislation on emissions intensity does not prevent the states from pressing on with the reliability guarantee. That in itself is also a very important tool to get power prices down.

Now, let me turn now to the other measures we're proceeding with.

Power bills are one of the biggest cost-of-living pressures facing Australian families and indeed expenses facing Australian businesses. They've risen over the last decade by 56 per cent above the rate of inflation. Rising electricity prices is causing families distress, which is why cheaper power has always been our number one priority when it comes to energy policy.

Every measure we've taken in the past year has been to lower electricity prices for you; whether it has been making it easier to switch to a cheaper offer - remember we brought in all the retailers to ensure that they alerted people who were on the wrong plans, to take up a better plan. We've ensured that gas companies make more gas available for Australians and lower prices, we are pursuing also with the National Energy Guarantee. Our measures are starting to work, with power prices falling for the first time in years in many parts of the nation. Now, that small relief was welcome, but we have to continue the work to drive down prices.

Now in March last year, we asked the ACCC to investigate the energy market - a market we knew was not delivering for families and for businesses - and tell us what more we could do to lower prices. The report, which was 15 months in the preparation Treasurer, was delivered to us last month. It confirmed what we knew, that the big energy companies were gaming the system to make huge profits - and you have seen those recently - at the expense of consumers. Indeed, that the energy market was no longer working in the interests of families or businesses big and small.

Now, the ACCC has given us a blueprint for new measures that would bring power prices down further. Some more radical than others, but all sensible and practicable.

The Treasurer and I have already indicated our support for several measures including the Government effectively underwriting investment in new, competitive, dispatchable generation; lack of competition is a big problem in this market. By stepping in to help our big industrial and commercial customers make long contracts, we will ensure new generation gets financed and by getting more new generation finance, of course, we get access to more energy at lower costs - making the market work.

So today, I’m announcing we'll introduce a range of actions that will shift the balance of the electricity market back in favour of families and businesses.

We're going to stop the rampant price gouging by the big energy companies.

We'll shine a light on the hidden practices in the industry that drive up power prices and hold to account anyone who stands in the way of a better deal for Australian energy users.

Now, while this work was already underway we've obviously listened to the concerns of our colleagues and our constituents, our communities, those on the frontline and we've listened to families concerned about their ability to pay their quarterly power bills and that's why we're accelerating this package of measures to ensure we can provide more relief to households.

We’re adopting the ACCC's proposal to establish a default market offer; a price expectation that will give consumers a clear picture of how much they should be paying for their electricity.

For too long the energy companies have baffled consumers with confusing and complex offers, promising deep discounts to standing offer prices that bear little relation to the actual cost of providing electricity. By setting a default market offer from which all discounts must be calculated, consumers will be able easily to compare offers from different companies and recognise when they're being ripped off or when they're getting a fair deal. They’ll also be able to take up a default offer safe in the knowledge that they are not being gouged.

Now, the ACCC estimates that for average customers on an inflated standing offer, the savings on moving to a new default market offer of the kind they recommend, could range between $183 and $416.

Now we also think small businesses, many of whom are on equivalent rates to households have the right to the same protections and support. The ACCC's estimated gains for the average small to medium business on a standing offer, if they move to the default offer as proposed, could range between $561 and $1,457.

Now we're going to provide the ACCC and the Australian Energy Regulator with $31. 9 million in additional funding to better monitor the electricity market and pricing to ensure all participants are acting in the best interests of their customers.

Ultimately, this will secure lower power bills in the short to medium term; but we want the big power companies to know that we mean business.

So we will introduce significant new powers so the ACCC can step in where there has been an abuse or misuse of market power. In the most egregious cases of market abuse, where the warnings from the ACCC are not adequately addressed, additional powers will be conferred on government to issue directions on operations, functional separation and even as a last resort, divestiture of parts of the big power companies and we'll begin work on this now.

Now, some may say this is heavy-handed. People said that when I took on the gas companies to make sure that we had enough gas in eastern Australia. But you know, breaking up market concentration by ordering the separation of vertically integrated companies, yes, it is a power of last resort, but it's necessary to have it available and we'll make sure the Government and the ACCC has the strongest tools with all of the appropriate safeguards.

Now, each and every one of these measures is designed with just one purpose in mind - making sure you get the best deal on electricity, making sure we do everything we can to lower your electricity bill.

The ACCC, after this most comprehensive study says they believe these initiatives can reduce power bills by hundreds of dollars for households and small businesses. Now, the Minister for the Environment and Energy will work with his state counterparts to implement these measures recommended by the ACCC, but if necessary, if we can't get the cooperation we need, we will put them in place with federal legislation.

Now, this is our commitment to the Australian people. We are determined that your power bill will be lower. We are determined to ensure that you get treated fairly by the big energy companies. We're determined that the corner that we've turned on power prices is going to continue and we're going to

continue moving power prices down with these reforms, putting consumers and lower electricity prices first. Scott is going to say a little bit more about this and then we'll follow on with Josh.


Three things, safety net, second, a big stick to keep the big companies in line and thirdly, backing investment in new generation through the recommendations of the ACCC. Today, I will be extending the ACCC's powers again to ensure they can continue to put in place the monitoring of the electricity companies that they have had up until June 30 of this year. That will become a feature of the system. The ACCC will be given the resources to undertake that role. Some $18.9 million is estimated is what they will require to be able to perform that continuing cop on the beat function of monitoring those prices.

The big stick, as we've referred to it, involves a number of powers ranging everywhere from the initial warning up to divestment and everything in between. Enforceable undertakings, instructions, directions in terms of making supply available in the wholesale market. All of this is on the table based on the advice that we received from the ACCC and others for the Government to actually act. And, that's the big stick.

On the safety net, we will begin work on that straightaway. That safety net, as the Prime Minister has said, results in savings of between $183 and $416 for residential customers and between $561 and almost $1,500 for business. That safety net has a significant process of work to ensure you get the price right. You don't want to do things that actually exacerbate prices. You want to make sure it does its job of getting prices down.

Now, in terms of backing in new generation, we also commence work on that recommendation, recommendation four as it is known, to ensure that we have the model right that enables those companies with viable competitive commercial proposals to put new generation in place. It has to be additional generation capacity so that can apply to existing assets where additional generation is being invested in. Then those measures are in there to back that generation in.

And I should stress in terms of the other ACCC recommendations in there which we are embracing, is the power to ensure that the big companies can't go and gobble up other providers. That’s a strong recommendation in the report and we support that strongly, It is part of that big stick. The big stick is needed to make sure that these players stay between the lines because when they stay between the lines, then the prices come down. When they work outside them and think they can, well guess what happens? Your prices go up and so that's what those powers are designed to achieve.


When the Labor Party was last in office, power prices went up each and every year. The Turnbull Government has taken serious action to reduce people's power bills. The intervention in the gas market has seen an up to 50 per cent reduction in the gas price. The legislation we took through the parliament to abolish the ability of the network companies to game the system. If the Labor Party had done that when they were in office, that would have saved consumers over $6 billion. And the Prime Minister bringing in the retailers and getting them to offer millions of Australians a better deal has seen 1.8 million Australians move on to a better deal.

Today, we're announcing the next stage of our energy plan. Now, for too long, the energy companies have made out like bandits. In fact, some of the companies have tripled their profits as struggling Australian families have tried hard to meet their power bills. So the work and the announcements today

by the Prime Minister and the Treasurer are important. We will see this default offer which will help straightaway 1.2 million Australian households. We will see the big stick that the Treasurer referred to which will ensure a permanent cop on the beat and we will progress with recommendation four and other recommendations to get more competition into the market and to ensure there is sufficient dispatchable power which is increasingly important in our energy system.


Are you confident this will quieten the dissent in the party room or has it gone too far for that?


Phil, this is all about ensuring people pay less for electricity and that's what it is all about. It is what all of our policies are about.


Has the Government given up on emissions reduction in the energy sector or is it still the Government’s policy and what actually is the Government's policy?


The National Energy Guarantee remains the Government's policy, but as you know, as John Howard said ‘politics is governed by the iron laws of arithmetic’ and in a House of Representatives with a one seat majority, even with overwhelming support, very strong support in the party room, if a relatively small number of people are not prepared to vote with the Government on a measure then it won't get passed.


What is the policy though? Is it the regulated or the legislated target?


Our policy remains to have the emissions intensity standard in the legislation. The addition that Cabinet has agreed to and that I flagged over the weekend, which came out of our discussions with colleagues I think is a very valuable one which would be that any establishment of an emissions standard or variation of one would require the confirmation from the energy regulators and the ACCC that it would not increase electricity prices. I think that would be a very valuable improvement, but of course, it is a moot point until such time as we have enough support to pass it through the House.


Prime Minister, don't you need that legislated benchmark in the federal bill in order to make the National Energy Guarantee work and if so, when will you put that...


David, we propose bills in the House when we believe we can carry them and so at the moment we don't have, because it is a one seat majority and that's a fact of life, we don't have enough support to do that. Although we do, of course, have overwhelming support in the party room. OK, Michelle, what is your question?


You're not going to do it by regulation in the meantime?


No, we have not changed our policy there at all, but there are arguments, there are views about legislation versus disallowable instrument, but they are all moot given the circumstances in terms of the numbers on the floor of the House.


The National Energy Guarantee, the key thing that is driving the reliability component is the reliability guarantee. That is the function of state legislation and they should proceed with that. If we want more reliable power in the system, in the National Energy Market then that should proceed without delay and it should continue.


Prime Minister, can I just ask, your presumption in all of this is that you will not get support from Labor in the House of Representatives. Have you actually spoken to the Opposition about this? Have you given them a chance to look at the legislation? Would you be prepared to negotiate with them or is that just too dangerous in the current environment of the Party Room?


Well, I have not discussed the matter with the Opposition myself but the reality is that Labor's position is quite clear. They want to push electricity prices up. They want to have a 45 per cent emissions reduction rate, as opposed to the 26 per cent that's in the National Energy Guarantee legislation.

So, you know, we are poles apart from Labor in terms of energy policy. They want to have higher energy prices. We want to make sure they are lower. We're applying some very strong measures to ensure that they are lower and that's the difference. Labor is for higher electricity prices.


Prime Minister, Laura’s point though is that Labor has not said publicly that it will vote against legislation. It said it wants a higher target, but it hasn't said it on the record. The only people saying on the record they would vote against your bill are your people. So this will be seen as a capitulation to the conservatives in your Party Room. At what point do you stand and fight? Will you cave on Paris next?


No, we are party to the Paris Agreement and the Government is committed to that. But the simple reality is that we need to have effectively all of our members in the House of Representatives to vote with the Government to carry legislation. Now you all understand the arithmetic of that and at this stage we don’t have, we have a number of people - it’s not a huge number, it’s a modest, it's a small number in the scheme of things - but nonetheless, it would be sufficient to prevent us from carrying the legislation.

So we continue to talk to our colleagues about it, but we are not going to propose legislation purely for the purpose of it being defeated.


Labor have given no indication whatsoever that they would support this. None.

Let’s not kid ourselves here; Labor are simply playing politics with people's electricity prices.

They are looking to cause trouble for the Government.

That's what has motivated them, not lower electricity prices.

So if the Labor Party supports it, they should come out and say so. They have not said that and as a result, I don't think there’s any reason why the Government would think anything other than that the Labor Party will continue to play the wrecker role and not seek to engage constructively on this issue.


And as you know, the states have to sign on to the National Energy Guarantee as well. And Victoria, because it has got a few hundred emails from Green voters in inner city seats, is saying that it has to be postponed until after their election, so.


Hasn’t the Prime Minister just admitted he doesn't enjoy the confidence of the House on a major policy issue? Isn't that what you're saying?


No look, the simple fact of the matter is that governments do not present legislation in the house of government, the House of Representatives, unless they are confident it will be passed.


By your own Party though Prime Minister, you're saying you don't have the confidence -


No, the policy has the support - as you know - of an overwhelming majority of the Party Room. But that, in a Parliament with a majority of one, a House with a majority of one, that is not enough.


Prime Minister, you've spent months creating a business consensus for this policy. You’ve had now, every major interest group in the country come out in support of this policy over many months. Haven’t you just stood up today in the Blue Room and announced Peter Dutton and Tony Abbott's energy policy for them?


No Katherine, our energy policy remains the same but we’re not going to present a bill into the House of Representatives until we believe it will be carried, right? Our energy policy remains the same. We've got the improvement that I referred to earlier, to the National Energy Guarantee. But we obviously need the support of sufficient of our colleagues to get it passed. That means, substantially, all of them.


How confident are you that you have the support of your colleagues to stay leader?




Prime Minister you’ve said today that you need to focus in politics on what you can deliver. In 2009, you famously said: "I will not lead a party that is not as committed to effective action on climate change as I am." Given what you have said today, it turns out you are. What do you say to your own colleagues who say it’s time for you to finish up as Prime Minister?


Again, that’s an interesting speech that you've made to me. Can I say, I enjoy the confidence of the Cabinet and of my Party Room.


If Labor came out subsequently and said: "We'll pass it through the House of Representatives and we'll have a fight in the Senate over the targets," would you put the Bill back in?


Well, let's wait and see what Labor does.


Prime Minister, you've made the argument for a long time now, that you needed to legislate this target so that you had an ‘investment horizon’. So aren't you now taking that out of the equation and how do people make investments in future?


Well, the National Energy Guarantee can operate to create investment certainty without an emissions intensity standard. I mean the crying need is about reliability. But at this stage, we cannot secure sufficient support to pass it through the House of Representatives. Now that begs the question of what would happen in the Senate, of course. But the important thing is, in addition to getting lower electricity prices to keep the lights on, so in the circumstances where there is a lack of sufficient political consensus on the matter of emissions, we think it would be very valuable to continue with a reliability guarantee.


Prime Minister, are you looking forward to the party room meeting tomorrow?




Prime Minister what are you actually asking Labor to support with this emissions reduction?


It is exactly what we stated, what Josh has been talking about. It’s essentially a 26 per cent reduction from 2005 levels.


To be changed only by legislation?


No, well yes it’s in legislation, so it could only be changed by legislation, that's right. And can only be changed after you have received confirmation that it would not increase electricity prices.


On the additional powers of the ACCC, do you intend to use them to keep the Liddell Power Station open?


I can't speculate about that. We’re focused on ensuring we have lower electricity prices.


Could you use it to keep it open?


Again, directions of this kind could be used to keep a power station going and in fact, there are many electricity markets in the world where there are rules that operate exactly like that. In the United States, it is called the "generator must run" rule, where a generator can be obliged to keep running in order to maintain the relevant level of supply and security.

But I think the important thing is to focus on price, getting those prices down.

I mean in all of the discussions we’ve had with our colleagues and indeed with communities, everywhere you go, people are focused on getting their electricity bills down. That’s what they want us to do. And we are delivering, as I said. We have seen in the last quarter, the first downturn in electricity prices in a very long time.

So we’ve got more to do and what we’ve announced today is measures that will succeed - I have no reason to doubt the calculations of the ACCC - succeed in reducing electricity bills by hundreds of dollars. Just one more, please.


Have you spoken to Peter Dutton today and do you have his support?


Yes, absolutely. Peter Dutton was at our leadership group meeting this morning and he was at Cabinet last night. He's a member of our team, he's given me his absolute support.

Thanks a lot.


Press Office of the Hon Malcolm Turnbull MP, Prime Minister, Canberra