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Turnbull “eyeballs” energy bosses, kids himself on solution

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Prime minister Malcolm Turnbull “eyeballed” the heads of Australia’s biggest retailers over the scale of consumer bills on Wednesday and would like you to believe that they blinked.

Truth be told it was more of a knowing wink than a blink, and it is likely that all Turnbull achieved is to kill the size of discounts available to smart consumers. There is not a snowflake’s chance in hell (or a coal boiler) that the big utilities are taking a haircut on this.

Turnbull_Frydenberg_screenshot

The fundamental problem – the high price of electricity – remains unaddressed because the Coalition will not deal with issues such as long term energy policy, or the legal rorting of wholesale markets by an oligopoly of generators, some of them the same mob that turned up to look concerned and contrite in Canberra.

The heads of AGL Energy, Origin Energy and EnergyAustralia, and five other leading retailers along with their lobby group, met with Turnbull, federal Treasurer Scott Morrison and energy minister Josh Frydenberg, to discuss retail market practices that have padded company profits at the expense of consumers.

Top of the agenda were concerns that millions of Australian households were on electricity plans that were costing them “hundreds of dollars” – and potentially thousands – a year more than they needed to pay, due to a combination of customer confusion and inertia.

What was agreed fell a long way short of the sort of regulation vaguely mooted by the government, flagged by the head of the Australian Energy Market Operator, and promoted by the Greens.

Confusion is profit, as we reminded readers last week, and it appears to have finally sunk in with the government, once they had paused their relentless attack on renewables and battery storage.

“Complexity and inertia are the big energy company’s friend,” Morrison told reporters after the meeting. “We’re ensuring that there is less complexity, and working on this inertia issue,” he said.

“What we want to put in place is the ability of consumers to have an informed choice,” Turnbull said. “Many households and consumers are paying hundreds of dollars more, right now, than they need to.

“The biggest (bill) discount doesn’t necessarily mean the best deal… It’s that level of complexity that customers are not aware of, and they are effectively getting short-changed.”

The PM said the energy CEOs had agreed at the meeting to write to all customers who had reached end of a plan, and outline “in plain English” what new plans were available to them, and what it would cost them if they took no action.

“They will be required to write to you and say: ‘you are coming to the end of this plan, if you don’t do anything you will go back onto the standard rate, and it will increase your bill by x dollars,” Turnbull said.

“There will be clear disclosure at the end of a discount period, of the dollar impact if they take no action.”

Many energy experts say that is what the retailers are supposed to be doing already, at least in some jurisdictions, but are clearly not.

“The problem is they already notify customers of tariff changes and it isn’t working,” says Tristan Edis, senior analyst at Green Energy markets. “The sad thing is that the PM only had to push the reforms slightly further to make a world of difference.” Edis explains why in further detail in this article here.

Morrison said the changes would put millions of Australians – and namely those 1 million-plus currently on standing offer arrangements with their retailer – in a position to get a better deal on electricity prices.

He’s kidding himself. Adrian Merrick, a former senior executive at EnergyAustralia and founder of the feisty upstart Energy Locals, says the agreement struck misses the point: the big retailers will continue to extra healthy premiums for consumers and prices are too high to start with.

“The big retailers will be high fiving each other in the Qantas lounge at Canberra airport today,” Merrick says.

“These requests from the PM will do absolutely nothing to lower customer bills or the associated confusion and disgust with the market. The government would be well advised to ask former industry insiders to devise a plan that will actually force the right type of action from retailers.”

Merrick says the utilities can simply respond by increasing the headline price, even while a percentage discount remains the same. This increases the size of a customer’s bill. Or the discount can be gently eroded over time until it reaches the point where is no need to offer better value alternatives.

“We find it disgusting that in an area that is already misleading, confusing and deceptive, more focus is placed on the size of an apparent discount,” Merrick says.

“Instead of lowering the key components of higher prices, including wholesale costs and network charges, customers are led to focus on an area that already causes them to pay more than they should”.

Merrick says oversight of energy margins is also critical and was missed at the meeting. Large energy companies profit from both retailing and power generation. Profit can be shifted between the different parts of the business to present the right external picture.

He cited one recent example where one retailer said to be offering a new and substantial discount to customers, had actually increased its standing offer by nearly 10 per cent, or around $175 per year so that it can offer a higher percentage discount.

“This practice is simply unethical, deceptive and reveals a core problem with the market that will not be addressed by nice chats in Canberra. Retailers that can’t operate ethically should be suspended from selling to new customers until they can re-build the trust of the regulators and consumers.”

Nevertheless, energy minister Josh Frydenberg said that a “very significant and substantive” set of reforms had come out of the “very frank discussion” between the government and the power companies.

“As a result of the commitments made today, you will see families being alerted to the fact that they are paying more than they need to for electricity. And that will happen now,” he said.

Turnbull didn’t manage to keep party politics out of the equation, telling reporters that some of the “most rapacious companies” in Australia had been the retailers owned by the Queensland government, who were “gaming the system to maximise profit.”

Anyone who has seen the practices of dominant generators in South Australia, and in NSW over the summer period, know that to be a lot of cobblers. It is rampant across the market, hence the push for the change from the 30-minute settlement to a 5-minute settlement.

The one thing that the Queensland government directive to generators to change their bidding behaviour did show was the power of regulation and direct intervention. Queensland has gone from having the equal highest wholesale prices over the last five years to the lowest in the last five months.

Federal Labor quickly seized the opportunity to bite back, with shadow energy minister Mark Butler warning that “another talkfest where Malcolm Turnbull wags his finger sternly at big energy companies is simply not going to cut the mustard.

“Australian households and businesses need real action. Now if change comes from this morning’s meeting that delivers a better deal for Australian consumers then Labor will welcome that change. But the proof in the pudding … will be when Australians come to open their power bills in coming weeks and months and discover whether they have come down or whether they are going to continue to spiral up, and up, and up.”

The energy bosses, in turn, were keen to point out that not all of the energy market’s ills were of their companies’ doing.

“Let’s be clear,” said Origin CEO Frank Calabria, in a statement after the meeting, “to deliver a genuine reduction in prices for Australians we must also find a way through on energy policy, including a Clean Energy Target.

“This is necessary to unlock investment in much needed new supply to replace our ageing coal-fired power stations, and transition us to a cleaner, more modern energy system,” Calabria said.

And in Tweets before the meeting, AGL chief Andy Vesey, said that while he agreed that energy affordability was a subject that required “urgent intention,” Australia’s energy prices were high right now “because we need more supply in the market.”

  

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  • Patrick Comerford

    So this is what strong leadership looks like. Who would have thought. Can’t wait for prices to fall.

    • Chris Fraser

      Just calling a meeting and looking cross just doesn’t seem to cut through ….

      • DevMac

        It’s hard to sustain a frown when it’s directed at your mates.

  • Eb

    Maybe a compulsory QR code on bills (as done in the UK) may assist with increasing competitive pressure in the market:
    https://www.uswitch.com/gas-electricity/guides/energy-bills-qr-codes/

  • Roger Franklin

    So the two biggest questions consumers have to make today is….
    1. How many solar panels can I put on my roof
    2. How big does the battery have to enable me to use as little Grid based energy as possible!

    If you are waiting for the Australia’s biggest energy retailers to be fair – I have a bridge for sale – one owner, well maintained and in a prime location!

    • Adrian Merrick

      Points 1 and 2 are the precise reason I founded my business

    • MaxG

      Exactly how it works!
      For a daily average consumption 10kW/h in panels and a 20kWh battery will do.

      • Roger Franklin

        Adrian,
        I really hope your business is going well.
        MaxG – Spot on – I have 5kw and 10kw of storage and is perfect for me as a very lower power consumer. Double that for an average house. Excellent advice

    • RobSa

      In Australia 30% of households don’t own a roof. Many people live in apartment buildings.

      • Roger Franklin

        RobSa – thank you for your comment. I did not know that the number was as high as 30%. Thank your for sharing that.

        My guess is that most apartment based households are smaller energy users too (under 10kw per day) so their real per kw rate (supply+per kw) makes energy quite expensive.

        High Density housing is an interesting challenge, however overseas there are examples where people have essentially bought a share of a solar farm and was able to offset their energy bill off against energy generated by their Solar. I do not know much more, however it might be worth investigating. In time I guess we will see solar windows and ways of building solar panels into apartments becomes main stream.

        Interesting and changing times.

      • Mike Westerman

        Check out http://greenstrata.com.au/ but there’s other approaches around as well

      • Alastair Leith

        Add to that many roofs in shade from glorious street trees and garden trees, I hope we don’t see an axing of trees just so people can cook dinner and shower in an affordable manner.

    • Joe

      …..hold the press on batteries. Rupert’s Australian Newspaper is running a report that Standards Australia might just be doing the unthinkable..bringing in the regulation of “Bunkers” for home batteries. That is going to kill the home battery industry before it has a chance to properly get going.

  • JoeR_AUS

    The superannuation liabilities of state governments have blown out almost 20 per cent over the past year to more than $125 billion.

    The NSW Auditor-General has reported the shortfall between the state’s public sector superannuation liabilities and the assets funding them blew out by $11bn last financial year to $71.2bn.

    In the same period, Victoria’s liabilities grew $5bn, Queensland $3bn and South Australia $2bn. Queensland maintains a fully funded superannuation scheme and the Palaszczuk government recently transferred out $4bn to prop up the state budget, arguing the scheme was over-funded.

    The state governments’ super liabilities are to public servants in now-closed defined benefit funds, who have to be paid the fixed benefit, irrespective of the investment returns the funds make. Members also include employees of government-owned businesses.

    The total value of the entire electricity network in the US, a country of 320 million people, is $US100 billion, while the value of Australia’s network is not far short — $100 billion or $US75 billion.

    It has been a boon for owners, whether they are private investors or state governments, and it has encouraged state governments to embark on massive, unnecessary spending programs to boost the regulatory value of their networks.

    “That was one part of the argument, but the bigger part of the argument was it was essentially a short way to raise income for the states!

    Now, tell me the two are not related….

    • Alastair Leith

      Comparison with US grids is eye opening… sure we have lower population and “thin, long NEM grid”, but the US population is less concentrated than ours which is mostly located in a few capital cities. They have many more people in the regional areas, probably as many as the entire Australian population or more.

  • Ken Dyer

    Just imagine if there was a carbon tax. Oh, that’s right there was until Abbott canned it promising a saving of $550 for every electricity customer. I am still waiting for mine, and in the meantime, we have the spectacle of Turnbull smacking the electrical retailers with a leaf of limp lettuce. Absolutely gutless and wedded to neo liberalism.

  • Chris Fraser

    I think vesey means more renewable supply. Hint hint Malcom.

  • DevMac

    Whilst I’m mostly unsympathetic to lazy consumers, the Liberals, under Abbott, pretty much won an election on the basis of cheaper energy due to the removal of the carbon tax. Asking nicely and saying “please” to the retailers makes the Liberal party’s entire “cheaper energy” campaign ring absolutely hollow.

    It was never about cheaper energy, it was about political division. Aussie Battlers be damned – but thanks for the votes suckers.

    (As if anyone reading Renew Economy wouldn’t know that already but, holy cow, this makes it so obvious even donkey voters could see it).

    • Jimbo

      All you hear on the ABC and other channels news is that the cause of the current dilemma goes back 10 years. It goes back to the day Abbott got into power.

  • Cooma Doug

    If the marriage law, snail mail plan goes ahead, best response could be 2.5 million votes.
    Roughly speaking on the governments own numbers, that is about 50 dollars per vote.
    This is something that will mean nothing other than stress for some, suicides and stupid stuff on TV news til after christmas.

    The same guy who caused the cost of power to go up, is the guy keeping the power cost up and prolonging the marriage issue with the help of the PM.
    This government cant provide investment certainty.

    • RobSa

      Meanwhile government debt keeps growing along with co2 emissions.

  • john

    If the generation and transmission was not sold that would help.
    Delivery of power is a government duty.
    Now we have this idiotic system where there are a whole lot of what retailers who do what exactly?
    Charge you to pass on that power from a generator to you an you have fallen for this idiot rubbish somehow some new identity who makes money off your stupidity to allow this.
    I frankly am not happy with this idiotic system it costs the same to set up the original retail system as it costs every other of the 12 or so what is the result a whole lot of rip off to the consumer.
    You pay more frankly.

    The reason for a rise in the price of you energy has been pointed out for years it was because of the guaranteed 10% return on investment in infrastructure plus the gouging by generators due to the poor governance of the energy market.
    Now the first can not be fixed but the second will be.

    And as a comment no a new ultra super critical coal generator will not result in lower price of power for those who are so deluded to believe the latest media release.

  • phred01

    Another talk feast followed after one of gas nudge nudge wink wink by Turncoat

  • bedlam bay

    Team Turnbull should immediately change the 30 minute block rule to five minute blocks over the opposition of the incumbents. Also here in Sydney both AGL and Energy Australia have pushed up supply charges to nearly $300 for electricity and over $200 for gas.

  • Mike Westerman

    You get the impression at times that this troop of clowns never looks in the mirror

  • MaxG

    It is beyond me that anyone would vote for these clowns; but then, people don’t care about their bills, pay through their noses, are happy with being told they do not need Super, as they die before that anyway (Hockey), build some coal burners, let’s privatise some more, until we are completely run by corporations — good night planet (which includes humans by the way).

  • Alastair Leith

    ““What we want to put in place is the ability of consumers to have an informed choice,” Turnbull said. “Many households and consumers are paying hundreds of dollars more, right now, than they need to.”

    Oh yeah, it’s all just about choice, because taking a neoliberal philosophy to the NEM has played out so well. AEMC and AEMO can’t even work out who’s responsible for the mess ups.

    • Mike Westerman

      I reckon after Turnbull’s performance this week my informed choice will be to order 10t of chicken sit to be dumped on his driveway

      • Alastair Leith

        That sentiment would assume that he actually has a desire to do a single effective thing for anybody other than wealthy Australians while he preens himself in the PMs office. 🙂

  • Alastair Leith

    “As a result of the commitments made today, you will see families being alerted to the fact that they are paying more than they need to for electricity. And that will happen now,” [Frydenberg] said.

    Translated:
    ‘See it’s all those silly consumers getting it wrong — nothing wrong on the NEM other than ignorant consumers who need this stuff spelled out to them like little children’ Frydenberg said as he left for his home in Caulfield/Toorak.

  • Alastair Leith

    “The one thing that the Queensland government directive to generators to change their bidding behaviour did show was the power of regulation and direct intervention. Queensland has gone from having the equal highest wholesale prices over the last five years to the lowest in the last five months.”

    This.

    Turnbull and Frydenberg are all tip no iceberg to rehash a phrase.

  • Steven Zilm

    Well how’s this one…. I have two residences in SA next door to each other with the same retailer …. our new rates notice is delivered on the same day with two very different rates, one at 34c kWh and the other property at 42c kWh. (WTF) I thought? So I called them up only to be told it wasn’t them it was my network (SAPN). I explained our power is fed from the same pole, in fact the same phase! Only to be told again it was not their fault….. Well, I’ve got the answer…. 20kW of solar PV and a 15kW hour lead acid battery bank (and a small generator) on both properties …. goodbye retailer…. hello energy independence!

  • Grpfast

    What is really scary is we are possibly going to be drawn into a war with North Korea and we have this pathetic excuse for a leader!
    How in the hell did he acquire funds to be a “millionaire”? Did somebody give it to him?

  • Chris Baker

    In Queensland we have a small glimmer of hope: the Greens will wind back the privatisation of electricity retailing by reverting back to a government owned retailer. Which luckily the qld gov still owns in the form of Energex and Ergon energy, which both used to do the billing back in the days when electricity was cheap. There are at least three seats where the greens stand a real chance of getting an MP in parliament. If they got the balance of power maybe we’d see some change for the better. We just need to get a few rusted on LNP voters to realise their supposed representatives are just looking after their mates in the big electricity business. When one third of the bill is just for sending out the bill there’s a lot of scope for a big reduction in charges.

    https://greens.org.au/qld/powerpeople

  • Robert Comerford

    Pathetic, what a joke that talkfest was! Who does he think he is kidding?
    The sooner essential services are back in government hands the better. Nothing has come of privatisation except to make a few people rich..

  • Mike Westerman

    This morning’s news suggests building construction could be in for a major tumble. Since it contributes almost half of the $180B construction industry in Australia, you would think the masters of business would be looking for a substitute to boost growth. A few facts might help their thinking you’d think:
    – 90% of black coal is exported, so destroying coal consumption in Australia will scarcely be noticed in the national accounts, and reducing brown coal dramatically reduces the unseen external costs of the industry
    – 45% of oil products are imported so anything that reduces that will help the balance of trade
    – 38% of energy consumption is oil, mostly in transport, which is about the same size as electricity production in consumption terms

    So even a moron could see that promoting less coal doesn’t hurt, promoting EV instead of ICE improves our balance of trade and doubles the size of the power industry, thereby by itself creating demand for >$100B in investment, apart from what would come from say, a gigafactory for batteries. But the doubling of the power industry thru electrification of the transport sector also solves the problem of underutilised distribution assets, and RE at that scale reduces wholesale prices by pushing high cost gas out, pumped hydro increases security and provides alternative investments for construction companies.

    You would think the “business friendly” side of politics would jump at this, but they are resisting it. I can only conclude they are either corrupt or plain stupid, tho’ I’m not ruling out both.