Canberra
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Introduction
Good morning and thank you for the invitation to address this forum looking at energy in the home and current issues for consumers.
Cost of living pressures – with increasing electricity prices chief among them – are a growing concern for Australian households, businesses and of course governments.
Some of the actions we have taken as a Government to support households include:
- increasing pensions,
- cutting tax rates,
- increasing the child care rebate,
- introducing the education tax rebate, and programs like the teen dental plan and paid parental leave.
And of course we continue to focus on energy market reform – because getting the regulatory frameworks right is a process of continuous improvement.
Energy costs
As you correctly note, energy is critical to the ordinary functioning of our society and economy.
It is an everyday necessity we rely on.
Recognising this, the Government is committed to ensuring that consumers have reasonable access to energy supported by an appropriate framework of consumer protections.
This is particularly important in the current climate of continuing rises in the cost of producing and delivering energy.
Rising network costs, primarily in distribution, and the big investments needed in infrastructure, are responsible for around half the total electricity price rises of the last few years nationally.
And network costs will remain a significant driver of electricity prices in the years ahead.
So what can and should the Government be doing about this?
First and foremost we are strengthening protections for consumers.
Collectively, the Australian, State and Territory Governments are in the process of applying the National Energy Customer Framework – to help consumers facing increasing energy costs.
The Framework’s price comparator and requirement that retailers have the Australian Energy Regulator (AER) approve hardship policies, are key features of the new energy laws and rules.
More generally, in an environment of rising energy costs, we must ensure consumers do not end up paying more than they need to for their electricity.
Energy market frameworks
The current energy market frameworks are aimed at ensuring that our institutions are able to examine why these price rises are occurring and ensure that they are kept as low as possible within the Law and the Rules.
There is more work to be done in this area.
For example, the AER has been undertaking an internal review of the regulatory arrangements around network determinations.
The AER has indicated that it is likely to propose a number of rule changes to the Australian Energy Market Commission (AEMC) based on the outcome of this review.
The AEMC will then consider the proposed rule changes on their merits.
I also note recent comments made by the new Chairman of the ACCC, Rod Sims indicating an increased ACCC interest in energy issues.
This includes a desire to ensure the network regulatory regime delivers a balance between investment and cost to the consumer.
Further work to ensure this appropriate balance in our network regulatory regime was outlined in the Government’s carbon price package announced on 10 July 2011, including:
- bringing forward the statutory review of the current network merits review appeal process to ensure it is delivering effective outcomes that are both fair for consumers and network businesses; and
- commissioning an independent review to benchmark distribution network efficiency to assess whether the incentives in the existing regulatory framework are delivering improved efficiency in these businesses.
Our aim is to help identify opportunities to improve productivity in a way that complements work being done by both business and the market institutions.
I have previously discussed the need to test whether some network businesses are delivering outcomes more efficiently than others – and in particular the suggestion that privately owned network businesses are more efficient than publicly owned businesses.
This is just one example of the many complex issues that consumer groups need to be involved in.
A mature approach to confront the challenges
Consumer groups should remain absolutely engaged in these debates.
We need outcomes that are based on sound policy formulation and proper cost benefit analysis, rather than dogma and ideology.
In this sense, I respect the work of energy market consumer groups, and the way you seek to engage with policy makers and the energy market institutions in a mature manner.
I think we all recognise that there are no easy solutions in the face of increasing electricity prices.
Keeping prices artificially low is not the solution.
History has shown that this only leads to more concentrated periods of price increases.
I note that some attendees here have previously sought, on a number of occasions, for there to be further consideration of the adequacy of the objective in the national energy laws.
I am satisfied that to date the objective has played an important role in anchoring the independent operation, regulation and development of the national energy market throughout the recent reform process.
In fact, Energy Ministers have recently considered the objective again in finalising the National Energy Customer Framework and agree that it remains appropriate.
Therefore, while I am not inclined to propose change on this issue in the absence of valid reasons, I can assure you that my Department will be considering the adequacy of the objective in developing the Energy White Paper.
This is intended for release in draft form at the end of the year.
Empowering consumers and Energy Efficiency
We also need to examine the potential opportunities for consumers that come with new technologies.
Two weeks ago I launched the Smart Grid, Smart City information centre in Newcastle as a new point of community engagement in the Australian Government’s trial smart grid project.
Smart grids have the potential to empower consumers with new ways of managing their energy consumption and bills.
It is a technologically exciting area – but the technology needs to be matched with proper testing of the efficiencies, business, technical and operational arrangements.
Currently, we have only limited information about how these technologies can be used by consumers.
Demand side opportunities also offer benefits – as well as posing costs – and it is expected that the AEMC’s Demand Side Participation review will inform policy makers.
Reducing peak demand could pose significant benefits to consumers; however this is another complex policy area that needs to be addressed in a proper and considered manner.
Encouraging greater energy efficiency is also important and associated measures were part of the 10 July announcement, including a commitment to undertake further work on the possible introduction of an Energy Savings Initiative.
Again, this work will be undertaken thoroughly and in the interests of consumers to ensure that any proposal is properly tested from a cost and benefit perspective.
On transparency more generally, our carbon price package also included a commitment to undertake a scoping study for the establishment of an energy-information hub.
This could improve energy-information disclosure by providing consumers with easier access to their energy information.
Conclusion
We know that there can be no quick fix to these complex issues that consumers face in our energy markets.
On the whole, governments have prosecuted a bipartisan agenda over the last two decades that - through greater competition - has benefited consumers.
Our work program when it comes to energy remains robust, to say the least.
It’s one that I trust you will remain very much a part of and I wish you well for today’s discussions.
Thank you.