AGL Energy has presented a poker-face like response to the Big Stick energy legislation being pushed by the Coalition Government, as the company looks to focus on policies that would actually support new investment in energy projects.
The Morrison Government re-introduced the ‘big stick’ legislation, officially titled the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill, into Federal parliament this week, with the legislation designed to provide the government stronger tools to crack down on energy market misconduct, including the ability to force the break up of large energy companies, like AGL.
In the second reading speech for the legislation, Treasurer Josh Frydenberg referred to unconscionable bidding practises by generators as an act that may trigger repercussions under the legislation.
“Generators will be prohibited from gaming the spot market. This can occur in a number of ways, for example by scheduling discretionary maintenance at high summer demand periods with the specific purpose of causing a spike in prices for their generators or by making low bids that were designed to discourage other companies from bidding into the market only then at the last minute increasing the price of their bids,” Frydenberg said.
While the legislation is designed to bring big energy companies to account, AGL Energy leadership appears to be relatively relaxed about life under the Big Stick.
Speaking to the media following AGL’s annual general meeting in Sydney, AGL Energy chairman Graeme Hunt said that he was confident that AGL would be able to make investment in new generation projects that would help to lower wholesale electricity prices.
The Big Stick legislation being proposed by the Morrison government, while a factor in the decisions around how AGL operated its business, was not seen as a substantial barrier to new investment.
“We’re not uncomfortable working under any regulatory regime that can be operated in such a way that it is practical”
“What we’re doing is continuing to investment in more capacity, because what will drive prices down is getting the supply-demand balance in a better place than it currently is. The way to substantially reduce prices is to have more generating capacity available to meet the market needs.”
“The [Big Stick legislation] is just another piece of information we need to take into account.” Hunt added.
AGL CEO Brett Redman said that potential regulations and policies that would support the construction of additional generation infrastructure was more relevant to AGL’s business planning, and was confident that the company would not face challenges as a result of the Big Stick reforms.
“While we’re actively engaging with the Federal government and others on how to implement the Big Stick legislation, my mind is much more focused on how stuff gets built, and what regulation supports stuff get built” Redman said.
AGL’s ambivalent position on the Big Stick legislation is interesting, particularly given the reforms being pushed by federal energy minister Angus Taylor and Treasurer Josh Frydenberg appeared to be motivated by a desire to prevent, or at least delay, AGL’s plans to decommission the Liddell power station.
AGL’s response to the Big Stick legislation is also in contrast to that of the Australian Industry Group, who sees the proposed legislation as a threat to investment in the energy sector.
“The so-called ‘big stick’ measures introduced into the Parliament today unfortunately have the potential to put at risk not only much-needed investment in the energy sector, but also the jobs and wages of ordinary Australians,” Australian Industry Group chief executive Innes Willox said.
“These measures would create considerable uncertainty and would set a dangerous precedent that would bear on investors in all sectors of the economy to the detriment of our ability to generate income and jobs for ordinary Australians.”
The Australian Energy Council, of which AGL Energy is a member, has said that it does not believe that the Big Stick powers will lead to lower energy prices for consumers and may in fact undermine customer confidence.
“The Bill will not lower the cost of electricity, and this was confirmed by both the Treasury and the ACCC at its Senate Committee hearing. It may result in more frequent price changes, leaving consumers confused and frustrated,” Australian Energy Council’s chief executive Sarah McNamara said.
“The Bill provides the Government with unprecedented powers to force a business to sell an asset. This represents a significant shift in Australia’s legal framework with economy-wide implications.”
The Australians Greens are also concern that the powers granted by the Big Stick legislation could be used to prevent the closure of coal fired power station, including AGL’s Liddell power station.
“We’re worried that this legislation is designed to stop the closure of Liddell power station and keeping coal in the system for longer,” Greens MP Adam Bandt said.
“Last time, the government shelved this bill because the Greens had the numbers to move an amendment to stop the government using public money to fund coal-fired power stations. The government was so wedded to bankrolling coal that it pulled its signature energy legislation. Given the government’s continued commitment to coal, we’ll be pursuing amendments to stop public funds being used to increase pollution.”
“The government needs to introduce a proper energy policy that has a plan for the orderly phase-out of coal, not to keep it in the system for longer,” Bandt added.
Upon being tabled in parliament, the controversial Big Stick legislation was immediately referred to the Senate Economics Legislation Committee, which will report on the bill in November.