Has the government turned the corner on power prices?

Ross Greenwood speaks to Energy and Environment Minister, Josh Frydenberg, after he admits the government is keeping households and small businesses in mind with trying to lower energy prices, after energy company Origin announced its plans to reduce power prices in Queensland and freeze costs in New South Wales from next month.

Introduction: Has the government turned the corner on power prices?

Ross Greenwood: Great to have your company here on Money News right around the country. It is World Environment Day coming up. That’s interesting to note that the Minister for Energy is also the Minister for the Environment. That man is Josh Frydenberg. He’s on the line right now. Many thanks for your time, Josh.

Interview with: Josh Frydenberg, Minister for Energy and Environment

Josh Frydenberg: Good evening, Ross. Nice to be with you.

Ross Greenwood:  It is World Environment Day. It’s something that every one of us has to be conscious of and that we have to care and protect. Of course, some people have got different ideas as to what is the protection of the environment, which goes to your energy portfolio of course, but notwithstanding that. My observation as a casual observer is our cities in Australia, to me, the air quality, the water quality appears significantly better than what it was 25 years ago.

Josh Frydenberg: There’s no doubt about that. We’ve made improvements to ensure that people continue to breathe the fresh air, but we have seen greater urbanization across our country. This is putting pressure on the cities as they grow. Everyone who takes a tram or a train can see the congestion that they encounter. Australia has a complex and precious ecosystem. We have more than 150,000 different species, Ross, across our country.

We have the second largest marine reserves in the world, and we have some of the most world-renowned heritage sites, whether it’s Kakadu or Uluru, the Daintree forests or the Great Barrier Reef. We have an obligation to protect our precious resources. This year’s theme around World Environment Day is Beating Plastic Pollution. This morning, I was at Coles, who together with the other major supermarkets are phasing out the single-use plastic bag. Australians produce or use 5.7 billion of them each and every year, and when these plastic bags get into our marine ecosystems, they do a lot of damage.

Ross Greenwood:  Okay. What am I going to put my garbage out in the future then because right now, I use those supermarket plastic bags to put my garbage out as will most of my listeners. The question is, what are we going to put our garbage out in the future? Are we simply going to go and replace the free ones we get from Coles or Woolworths or Aldi at the moment, and we’re just going to replace them with ones that we buy from them.

Josh Frydenberg: Well, there are two options. One is we’re moving to recyclable bags as opposed to the single-use plastic ones which are not. The other is that people will be using the same bag and a more sturdy one to take home their produce from the market or from the supermarket.

Ross Greenwood:  I got that, but what am I going to put my rubbish in when I put it out in the rubbish bin?

Josh Frydenberg: Well, you’ll be using a recyclable plastic bag and our goal is to also reduce the amount of plastic that’s used in the supermarkets because we want all packaging to be recyclable, to be compostable, or to be reusable by 2025. That’s an ambitious target that which all states and territories have signed up to.

Ross Greenwood:  Okay. Let’s talk about ambitious targets because you have an emissions reduction target of 26% for electricity on 2005 levels by 2030. However, not all in your party are happy about this. Some want this to be brought back to the whole Coalition party room to be discussed again. One of those people is Tony Abbott. Another one is the Conservative MP, Craig Kelly. Now, Kelly’s own future appears to be resting on– His own political future is now resting on just how his colleagues are going to look after him in the future in whether he gets preselected or not. What is going to happen with your targets here? Are you going to go back to the Coalition party room or not?

Josh Frydenberg: The National Energy Guarantee is looking to reduce emissions in the electricity sector by 26% as you say by 2030 compared to the 2005 levels. It will require legislation at the federal and the state level and that legislation will come back to the party room. The next goal for me is to get the agreement of the states and the territories to this important reform which will drive power prices down independent modelling. Ross, you and I have discussed this in the past. We’ll see every Australian household $300 on average better off compared to what they would be under the Labor Party.

Ross Greenwood:  Hang on a sec. You’re only going to take this back to the party room once you’ve had a deal reached with the states, whereas some such as Tony Abbott, would like you to go to the party room before you go to the states, which way should it be?

Josh Frydenberg: Well, what we’ve discussed with the states is entirely consistent which is what was approved by the party room earlier last year when we had this debate over the National Energy Guarantee. Let’s not forget that we have seen the broadest cross section of support for this reform of any policy in this space over the last 15 years. I’m talking about the Minerals Council and the Farmers’ Federation, the Business Council and the Australian Chamber of Commerce and Industry, the BHPs and Rio Tintos to some of our community groups.

Ross Greenwood:  What about the prospect of Craig Kelly crossing the floor because he said he will not rule that out if the policy that you bring forward, it is not necessarily to his liking. As you’re aware, Craig Kelly is one of those inside your own party room that is very much saying that Australia needs coal-fired power. It needs it long term. Really, some of the targets that are out there are too ambitious for Australia to achieve in such a short space of time.

Josh Frydenberg: A few points in response. Firstly, Craig is on the record of supporting the National Energy Guarantee. Secondly, he is right that we need an all of the above strategy, namely that coal, gas, as well as renewables will continue to play an important part in the system. Third, we do need to focus on reducing power prices.

Today’s announcement from Origin is a positive in that regard because they’re going to be reducing power prices in South Australia and Queensland and reducing gas prices in New South Wales. This is a big turnaround from what we have seen previously. Indeed, when the Labor Party was last in office at a federal level, power prices doubled and went up each and every year. We are turning this ship around.

Ross Greenwood:  Slowly. You’re seeing the first signs, and I’ll come to that very shortly. Just a final one in regards to Craig Kelly, is he likely to be preselected for his seat of Hughes, the Sydney seat?

Josh Frydenberg: I like Craig. I get on well with him. I would like to see him preselected again. He is the chairman of my backbench Environmental and Energy Committee. While we don’t see eye to eye on every issue, we do have a frank and constructive exchange. The issue obviously about his preselection is, like for all of us, one for his local members. With Craig, he, I believe, understands the importance of making up for some of the mistakes of the past in our energy system and the National Energy Guarantee will certainly help do that.

Ross Greenwood:  Okay. A couple of things we spoke about. The last time we spoke, we talked about the future’s price of electricity are in many states showing significant declines. The first signs of this have almost come with the boss of Origin Energy, Frank Calabria, saying households and small business will see relief from the world’s highest electricity prices in their bills from July 1 this year.

These households in Queensland, South Australia will see a 1% to 1.3% off their electricity tariff. Those in New South Wales and the ACT will get small reductions as well. This is, if you like, the first signs of it, but it’s not the big bonanza that people might hope for in terms of electricity, but at least it’s not continuing to rise.

Josh Frydenberg: We’ve turned the corner, Ross. We’re on the right track. Small business customers in south-east Queensland like in Brisbane will see a saving of more than $200 a year. In Adelaide, more than $100 a year. The business gas customers in Sydney will save $245 a year on average. This is not a small amount of money, but obviously we have got some way to go. That is why we are taking actions on every possible front. We’re reining in the power of the network companies, the poles and the wire companies.

We have intervened in the gas market to get more gas before it’s exported overseas. We’re reforming the pipeline, trading system, and of course, we’re building Snowy 2.0 which will be a game-changing project to help create the battery for the east coast of Australia. All of this is being done by the Turnbull government because affordability and reliability are our priorities.

Ross Greenwood:  Maybe, just maybe, some of them this time will listen to the ACCC chairman Rod Sims saying that those generator retailers have too much market power. As you and I have talked about it before, there’s an argument out there that maybe they should be split up and a generator should not be a retailer.

Josh Frydenberg: Let’s wait and see what Rod Sims and the ACCC report when they come back to the Treasurer at the end of this month, but certainly that is an important report. We have been concerned with the increase in the concentration of the market. If you look at the Big Three in any region across Australia, they control about 70% of the retail market. Their generation share has gone from about 15% in 2009 to around 50% today.

When you count the government-owned generators which are dominant in Queensland and having more than 60% of the market share, among them CS Energy and Stanwell, you get to see how concentrated our market is and this is certainly something that’s preoccupying our minds as well as the minds at the ACCC.

Ross Greenwood:  The Minister for Energy and also the Environment, Josh Frydenberg. As always, we appreciate your time.

Josh Frydenberg: Good to be with you, Ross.


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Image source: 2GB

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