17
Aug
2018

Last Weekend for Turnbull?

Chaos Reigns Supreme

I suggested in yesterday’s Commentary that Turnbull’s proposals on NEG policy (sic) have created a chaotic situation in which changes now seem to be made almost every day in an attempt to persuade rebel MP’s to re-think their opposition to the policy and avoid resignations by some Ministers. These rebels are particularly opposed to any legislation which seeks to lock in the 26 per cent reduction in emissions under the Paris accord. It should be noted that, while 10 rebels have been publicly identified, there appear to be others who are also unhappy with some of the existing NEG proposals. Former Major General Jim Molan (now a Senator), for example, told Sky News last night that he did not accept any legislation endorsing the 26 per cent reduction in emissions.

However, today’s developments suggests that the Turnbull regime is concentrating on what will happen to prices under NEG (see Turnbull Attacks Big Three Gentailers). It seems that, despite Frydenberg’s repeated claim that prices have already started to fall, senior ministers now recognise that it is no longer accepted publicly that NEG would produce lower prices.  Instead, one of two promises today on policy is that action will be taken against the big generators/retailers (known as “gentailers” because they operate both generators and retailing) for ripping off consumers by unjustifiably raising prices and profits.

Ironically, these ministers claim that the very body which is supposed to ensure competition (the ACCC) should already have evidence to support taking such action and, according to Treasurer Scott Morrison, the mere warning that action may be taken will itself lead the companies to downward adjust their prices as happened with gas prices when export controls were threatened. But that seems unlikely with domestic electricity prices and there is no explanation as to why the ACCC (which recently published an extensive report on the energy “system”) has not already taken action against the companies and why it should not do so now – and immediately.

Just why these gentailers and other retailers have been able to get away with exploitative action is not clear. But the ACCC and the Turnbull government must be held responsible for the price increases which have occurred over recent years. The attached graph shows the increase in wholesale prices plus the addition to costs arising from the cost of renewable certificates which electricity suppliers have been required to pay. This shows that since around 2011 the total costs of electricity have doubled or trebled in the states, with South Australia’s increase being the highest (see Increase in Electricity Prices 2011-2018).

Thus, even before there is any NEG in operation, the regulations imposed under the renewable and emissions policies which Turnbull has operated have been the major contributors to this very large increase in costs born by consumers. As NEG legislation would continue such policies, it is virtually certain that prices will continue to increase unless controls are imposed on electricity prices, which may be under consideration (see Crowe on NEG).

But while Turnbull himself would doubtless be prepared to extend government controls on electricity prices, it seems unlikely that most of Coalition would be prepared to do so in circumstances where the general public has become more aware of the doubts about the usefulness of NEG. Now that a draft of the legislation has been passed to Labor but (amazingly) not to Coalition MPs, it is likely that those doubts will be increased.

Yesterday I  referred to adverse analysis made by The Australian’s political editor Dennis Shanahan on the situation facing Turnbull. Today he winds up his piece thus

Yet while Turnbull tries to placate MPs over prices, there is a growing, wider discontent over his political handling of energy and other issues, including his response to the by-election losses, an inability to put pressure on the ALP and the selling of the government’s tax agenda. Not enough time was spent earlier to address the concerns of the Coalition partyroom and so avoid what is now a sizeable revolt, as well as the impression of a leader being forced to capitulate to ­internal critics. MPs are frustrated that he did not act earlier on widespread concerns about energy prices and the advantage of being seen to embrace reliable coal-fired power. Instead, he left decisive action to the last minute and seems ­wedded to the idea of being the only nation to legislate Paris ­targets”.

Will this weekend wind up Turnbull’s Prime Ministership?

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