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NSW, Queensland seek to protect network revenues at COAG

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The two big states that still own all or most of their extensive electricity networks are standing in the way of reforms that the Australian Energy Regulator says will help put a lid on network costs and keep prices down for consumers.

Queensland, which retains its networks, and New South Wales, which will retain most of its while it leases some, have both resisted abolishing the limited merits review, a move designed to prevent network owners from automatically challenging AER decisions on network spending.

The AER has limited that all its attempts to restrict network spending have been frustrated by court appeals. It wanted to limit those appeals, but the process has been stymied by the two network-owning stakes, who critics say look to network revenue as a form of tax raising and want to keep them there.

According to the official release from the COAG Energy Council, the country’s energy ministers could not reach consensus on abolishing the LMR, even though they did agree that the arrangements were failing and that immediate reform was required.

The communique did claim progress on efforts to streamline the consideration of new interconnectors and reduce costs for gas users, by forcing quarrelling parties in the gas industry – pipeline owners and suppliers – to go to arbitration. This was a recommendation from the review by Michael Vertigo.

Improvements will be made to the Regulatory Investment Test for Transmission to ensure high impact, low probability events, like the South Australian blackout are taken into account and to ensure the consideration process is more streamlined.

Of greater interest, however, was a 45 minute briefing and discussion hosted by chief scientist Alan Finkel on his review of energy security. According to those present, it included a major focus on storage, both in the possibilities of pumped hydro identified by the ANU, and on battery storage in homes and businesses.

Finkel said the cost of battery storage was falling so quickly it was unlikely to need any subsidies, although South Australia and ACT have provided some initial incentives to kick start the deployment, and network owners and retailers are also providing incentives for various storage trials.

Finkel last week released his review, which identified the “unstoppable” nature of the energy transition, and how the technologies to deal with variable renewable energy were in place, but needed to be managed properly with decent policy settings.

Federal energy minister Josh Frydenberg said it was agreed by the COAG Energy Council to “fast-track for consideration in February additional measures to strengthen the National Electricity Market responding to security and reliability issues identified in his preliminary report.”

To do that, however, they will need to get the slow-moving Australian Energy Market Commission over the line. That may not be so easy, given its apparent prejudice and misunderstandings about new technologies.

In particular, Frydenberg said these measures to improve system security, like the use of storage to provide fast frequency response. Such measures have been proposed but fiercely resisted by the fossil fuel generators who fear losing their market power if their gas generators lose their dominant position in market price setting.

However, tensions still remained between Frydenberg and the “pro-renewable” Labor states of South Australia, Victora, Queensland and the ACT, over the lack of co-herent policy measures from the federal government.

Finkel told the energy ministers that with feed in tariffs offering an average 7c/kWh, and consumers facing a grid-charge of four times that much, “it made sense for consumers to have their own batteries.

A report by CSIRO and the network owners last week said that the anticipate high level of households battery storage would play a critical role in future energy security, providing load balance and grid security.

“There is palpable frustration from the states on the major policy focus,” said Shane Rattenbury, the new energy minister from the ACT, and the first Green to sit on the COAG energy council.

“There is real sense that the Commoneealth has left the states hung out to dry,” he said, referring to the attacks on state-based renewable energy targets and the lack of federal policy.

“We want to work together. The states and the territories do know that this change is inevitable and we know that this transition will be a hedge against future energy price increases.  

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  • trackdaze

    It was never a good idea for states to effectively underpin state finances by taxing electricity distribution. With the network cost representing 50% of the gross electricity price they have what amounts to the window tax london had that saw windows bricked in.

    The more they charge for the network the less it will be used. The less they charge the more they just have to get the electrons flowing.

    • Mike Dill

      Finkel said that batteries with solar was a ‘no-brainer’. The states will be losing that cash cow. Sadly they will probably pass a law that says you have to be connected, just like water and sewer where available.

  • disqus_gF5uXVTUbL

    Finkel playing an important advisory role to facilitate consensus and assist with network security.