Let’s start with the obvious. When it comes to soaring energy prices, Labor is in a tight spot.
During the election campaign, and in the months before, Anthony Albanese said Labor’s powering Australia policy would lead to lower power prices. More renewables in the market would reduce household energy bills by $275 by 2025.
Powering Australia was released in December 2021. Since that time, things have gone south for energy users around the world. In February 2022, Russia invaded Ukraine, sending the global energy market into a tailspin and triggering a sharp increase in oil, gas and coal prices.
Closer to home, 10 years of policy uncertainty in the energy sector was creating havoc. Ageing coal generators were now so clapped out they were causing domestic supply disruptions, and the combination of global factors and local conditions increased wholesale prices.
The outgoing Morrison government then chose to delay releasing an important electricity pricing update due in March until after the May election. When that information was finally released to the public on 26 May, we learned many energy consumers would be hit with double-digit increases in their power bills from July.
Post-election, the trend intensified. Alinta Energy predicted power prices would rise by 35%, and the Australian Competition and Consumer Commission warned consumers to assume the brace position. Tuesday night’s budget contained grim new forecasts – retail energy prices would increase by an average of 20% nationally in late 2022, and by a further 30% in 2023-24. Treasury also noted that domestic gas prices remained more than double their average before Russia’s invasion of Ukraine.
Let’s track back now to December 2021, and Labor’s pledge that power bills would be $275 cheaper by 2025. This figure came from Reputex – the firm engaged to examine the greenhouse gas emissions and economic impacts of Labor’s powering Australia plan. Given this figure is going to get a massive political flogging for the remainder of budget week, it’s useful to understand what was being measured.
The analysis, conceptually, is simple. Reputex found if more renewables could be bolted into the grid through new high voltage transmission lines, then power prices would come down, because renewables are the cheapest form of energy.
Nothing has actually changed to alter the fundamentals of this calculation. Renewables are still the cheapest source of energy, and if we look to the current international challenges, the faster we can execute this transition, the less vulnerable Australia will be to global supply shocks, and local generation disruptions.
In terms of specifics, Reputex said if Labor was able to roll out its plan, average wholesale prices in the national electricity market would probably reduce by 18% from today’s levels (today being December 2021) and by 26% by 2030. The estimate of the saving for residential customers was $50 a megawatt hour by 2025 and $69 by 2030. Annual electricity bills for average households were therefore projected to be $275 lower by 2025 (and $378 by 2030).
The caveats in this work are obvious. These forecasts assume the transition rollout goes to plan. And the prices assessed are “today’s levels”. The today of December 2021 is not only a different country to today of May 2022, it feels like a different planet.
But fair cop. Labor did utilise the $275 figure front and centre in its election messaging, often without the Reputex caveats or hedging, so the Albanese government put itself on the hook politically for the specific figure.
The treasurer, Jim Chalmers, also managed to fluff an answer to a question about the price commitment at the National Press Club on Wednesday, which gave the opposition some joy when question time rolled around shortly afterwards. Chalmers was asked whether or not Australians would still see the $275 saving. He replied: “Yep, it’s in the budget.” Chalmers said later he’d misheard the question.
In politics you live and die by the aggressively simplified soundbite, and that Reputex number is currently sailing past Peter Dutton, beckoning like a political liferaft.
Understanding this, and understanding (more pertinently) that a 50+% increase in energy prices will cripple many households and businesses, the government is now working up what some people characterise as a significant regulatory intervention covering both gas and electricity.
After downplaying the need for prices caps or other serious interventions for several weeks, the public signalling from senior ministers began to change in the week before the budget, presumably reflecting the updated forecasts and advice from energy regulators. It was too late to land a preferred intervention in the budget, but I suspect we’ll see what the government has in mind reasonably soon.
In the interim, let’s return to Dutton and his political liferaft. The Liberal leader hit the airwaves early on Wednesday morning as empathiser-in-chief.
Having read Tuesday’s budget, Dutton felt there were a lot of families “who really feel deceived this morning”. Somewhere between his parliamentary office, the budget lock-up, the television and radio studios of the press gallery and his Canberra accommodation, Dutton detected shock across the Australian community.
Shock, because people had heard the prime minister promise on 97 occasions that power prices would come down by $275. Now the same prime minister was telling them prices were set to increase by 56% over the next two years, and gas prices would be up by 40% – and Labor was doing nothing about this.
Not content with casting Albanese as the Marie Antoinette of power prices, Dutton then noted the government was happy “to fund all sorts of energy activists in this space to oppose new gas fields, for example, when one of the biggest decisions that the government could take is to bring more gas online, to try to increase that supply so that we can meet our international commitments, but also to provide that support domestically”.
This was stirring stuff. Gaslighting (excuse the pun) and walking humbly in the shoes of the betrayed. As I said a minute ago, Labor created a political rod for its own back with its price prediction, and soaring energy prices are a genuine problem for the new government to manage.
But before things get totally hysterical over the next few days, with Dutton leading j’accuse, let me tell you a story about betrayal.
Betrayal is being part of a government that failed to disclose an electricity price increase to voters before the May election.
Betrayal is occupying the highest office in the land for nine years and doing everything you possibly can to turn Australia’s energy market into the rolling debacle we see today. Betrayal is knowing full well that fundamental things need to change and telling voters, election after election, that things can remain exactly as they are. Betrayal is making Australia’s energy transition harder and more expensive than it needed to be.
Betrayal is sitting on the government benches and doing two-fifths of bugger all to lower domestic gas prices. Betrayal is failing to think deeply about getting the right balance between earning export income on Australian resources and safeguarding domestic supply.
Betrayal is playing politics, all hours of the day, all days of the week.
So when you hear about betrayal over the coming days, take a moment to consider the whole picture.
