Energy and cost of living crisis go hand in hand

Today Abigail initiated her first ever Matter of Public Importance - on the extremely real and pressing issue of the energy crisis and its impact on cost-of-living pressures.

Ms ABIGAIL BOYD (10:13): I move: 

That the following matter of public importance be discussed forthwith:

The energy crisis and its impact on cost-of-living pressures.

The east coast energy market is experiencing extraordinarily high prices. Wholesale prices are reaching eye‑wateringly high levels, with gas prices surging so much in recent weeks it has necessitated the extraordinary intervention of the regulator to impose a mandated price cap on wholesale gas prices at $40 per gigajoule. The mandated price cap is still in the order of magnitudes higher than the price consumers are used to, typically at $6 to $12 per gigajoule. The price cap expires tomorrow, 10 June. Electricity bills are one of the top three most concerning bills for all Australians, and that was so even before the current energy crisis and resulting bill spiral. Climate change impacts on temperatures and extreme weather events will, in all likelihood, affect the amount of energy required for households in coming decades. We need a whole-of-system approach to eradicate energy poverty as we transition through decarbonisation. We must bake in a holistic commitment to improving energy affordability through demand-side measures, to ensure that everyone in this State has a prosperous and safe future.

Misinformation abounds regarding our current energy price crisis. European conflict as well as falls in coal generation and insufficient wind and solar have all been at the receiving end of the finger-pointing, with gas industry representatives blaming the cataclysmic gas prices on an unusually high amount of gas having to be directed into power generation to bail out the shortcomings of other energy sources. While it is true that production from coal-fired power has fallen due to local physical supply issues related to extreme weather events and mechanical failures, the overwhelming majority of the trends toward reduced use of coal for our energy supply has been an uptake in wind and solar generation. That increased generation capacity from renewables has helped to shore up a degree of the unreliable coal generation. Coal generators have been suffering increasingly frequent, severe and long-lasting outages and breakdowns as a result of years of inadequate government oversight, and a lack of requirements to adopt best practice modernising upgrades.

Exposure to international market prices is the true reason for high prices. Coal and gas companies, which exist solely to operate at a profit, can and do charge domestic consumers international market prices for locally extracted resources. As in the late 2010s, the gas industry is spinning the lie that there is a shortage of gas in Australia that is driving up prices and that we must open up more supply to bring gas prices down. The demand for gas power generation in 2022 is not in any way unusually high compared to the past five years. May figures are still registering lower than those seen in 2017. All of the figures are within the bounds of what could be expected over the past five years. It is incomprehensible that the past few months have exceeded the supply capabilities of the gas industry. The only change is a tighter international energy market. With potential profits to be made overseas, the people of New South Wales are paying a premium to keep their lights on.

Since deregulation and privatisation began in the early 1990s, energy pricing and billing in Australia has become increasingly inequitable and complicated. From 1 July 2019, in response to spiralling energy prices through the late 2010s, consumers in Queensland, New South Wales, South Australia and Victoria were covered by new energy pricing laws and regulations. Default offers sought to cut power bills by protecting consumers from price gouging and by helping consumers to get a fair deal. Those protections were only necessary because consumers had been exposed to the deliberately inscrutable and opaque price-gouging and profit‑maximising predilections of the capitalist class through government decisions in the first place.

In New South Wales, South Australia and south-east Queensland, customers became covered by the Australian Energy Regulator's default market offer [DMO]. The DMO is the maximum price an electricity retailer can charge a standing offer customer each year. Its objective is to reduce unjustifiably high standing offer prices and to continue to protect consumers from unreasonable prices, which is a worthy objective. But not all default offers are built the same. The Victorian Government took a different direction and implemented a Victorian default offer [VDO], the price of which is set by the State's Essential Services Commission. The stated objective of the VDO is to reflect a reasonable or competitive price, providing an important safeguard for customers who may be on a standing offer contract and disengaged from the market.

Unlike the VDO, the DMO that applies in New South Wales is not designed to be a competitive deal. It merely acts as a guardrail to some of the worst excesses of price-gouging energy retailers, while still buying wholesale into the flawed logic of the markets. The VDO for 2022-23 was released a few weeks ago and has increased energy bills for Victorians by 5 per cent. Factoring in the most recent inflation figures, the default offer is close to unchanged in real terms. Compare that to the 18.3 per cent increase—or 12.1 per cent in real terms—that we are facing in New South Wales, it becomes painfully obvious that we are not being well served by our current regulatory regime. To reiterate, the logic of the regulatory regime under which New South Wales energy prices are regulated has no intention of setting a competitive or attractive cost for consumers. Rather, it is geared in an industry-facing manner to encourage competition between retailers. The logic of competition-driven improvements is clearly failing to protect the interests of New South Wales consumers.

A considerable portion of the price difference between the DMO and VDO is the retail margin that is baked into the price. The Australian Energy Regulator's chosen retail margin—that is, the legislatively baked in minimum profit margin for energy retailers—is 10 per cent for residential customers and 15 per cent for small business customers. The Essential Services Commission in Victoria, the Independent Competition and Regulatory Commission in the Australian Capital Territory and the Office of the Tasmanian Economic Regulator all use a retail margin between 5.3 per cent and 5.7 per cent for standing offer customers in their regions. This 5 per cent to 10 per cent difference in the price being paid by New South Wales consumers is impossible to justify, and it is clear that the DMO is failing in its stated objective of protecting customers from unjustifiably high retail prices, specifically unjustifiable retail margins.

Most customers are not on the DMO, and have instead signed up to some form of market offer with a retailer. But in New South Wales, around 10 per cent of residential customers and a little less than 20 per cent of small business customers are still on the DMO standard rate, which is to say that they are being charged at an uncompetitive but legally sanctioned rate. The Australian Energy Market Commission and Australian Competition and Consumer Commission have noted that many customers on the standing offer are supplied under a retailer's obligation to supply—for example, if a poor credit history means other retailers will not supply them. The system is designed in such a way that those who may be doing it toughest are forced into the most inequitable and unaffordable energy plans, locking them into a vicious cycle of energy poverty that only exacerbates these vulnerabilities in a destructive feedback loop.

The majority of customers on standing offers are served by the tier 1 retailers: AGL Energy, EnergyAustralia and Origin Energy. Coincidentally, these retailers also own their own generation resources and thus benefit from more favourable wholesale prices, granting them access to even greater profit margins. Information from the New South Wales Government's energy rebates annual report shows that between 8 per cent to 10 per cent of all people currently receiving financial assistance for their energy bills are on the standard offer, representing terrible value for money both for consumers and for this Government. That people suffering the highest levels of energy poverty are just as likely to remain on the standard offer as others also proves the failure in the logic of the DMO's objective to encourage plan switching for those paying the highest prices. There are certain systemic barriers that will prevent people from feeling informed and equipped enough to participate in the energy market, and the Government is not doing enough to assist people to access the least exploitative energy contracts.

There is a clear and present need for urgent intervention to assist people who are struggling with the overwhelming burden of astronomical energy price increases. Short-term assistance payments may be necessary, but they should be formulated in such a way that they do not just subsidise the windfall profits of the fossil fuel industry. In the medium and longer term, urgent work must be undertaken to build energy resilience back into our households. Studies suggest that between 5 per cent and 29 per cent of the Australian population experiences energy poverty to varying degrees and cannot access adequate, affordable, reliable, high-quality and safe energy services to support their development and capacity to lead a decent life. As our decarbonisation accelerates, without a just transition—both industrially as well as at home—we run the risk of widening the gulf of energy inequality.

A key factor in this equation is poor home energy efficiency, with a demonstrable difference in the amount of insulation in the homes of people who are financially comfortable and those who are not. There are also barriers to low-income households obtaining the benefits of solar. They are more likely to be renters and so cannot install solar and their landlords currently have limited incentive to install it. If they do own their own home, they are unlikely to have the spare money available to invest in purchasing solar. They are also more likely to live in a unit or apartment, where the decision to install solar is similarly not theirs to make.

Just yesterday, Australia's energy Ministers met to discuss potential solutions to the energy crisis. The result was a relief in many ways. While it is refreshing to no longer have a Federal Government that tries to solve every problem by simply throwing more money directly at the fossil fuel industry, the agreement appears to fall far short of what is needed to relieve the burden on Australian households caused by soaring energy prices. At the meeting there was recognition that it was a mistake not to have coordinated the transition away from reliance on fossil fuels to renewables—who knew?—and a commitment, at last, to develop a national transition plan. But that is as good as it got.

The Ministers also agreed to empower the Australian Energy Market Operator to procure gas on the open market and to keep it in storage facilities already in place around the country, to be released during shortages. To me, that sounds very much like a response that requires governments to bear the price and risk of securing more energy, while letting the energy retailers and wholesalers off scot-free. There is also no clear explanation as to how a capacity mechanism would have provided consumers with any protection from our current market conditions. As I have already said, there is no actual shortage of gas supply, and generators will still seek to recover short-run costs—costs that will be elevated while market-wide fuel costs are also high.

European capacity markets provide an exact example of this problem. European consumers are still left exposed to escalating prices due to international market prices. Creating a capacity market, essentially big fossil fuel batteries, will likely only serve to prolong the life of dangerous fossil fuel industries while stymying further penetration of renewables. The Labor-Greens Government in the Australian Capital Territory has—unsurprisingly—led the way when it comes to transitioning away from a reliance on fossil fuels and has now achieved its long-term vision, powering the Territory with 100 per cent renewable energy. The average electricity bill in the Australian Capital Territory will actually fall this year, unlike in New South Wales. The quicker we follow suit, the quicker electricity prices here will fall.

Of course, much of this current crisis could have been avoided by not selling off the State's energy assets. As The Greens have said countless times, when you privatise an essential public service, you put the people of New South Wales at the mercy of private corporations when it comes to fulfilling their most basic needs. This misguided delirium for privatisation, demonstrated not just by this Coalition Government but also by the Labor Government before it, has left us in a position where we have to navigate complicated market mechanisms simply to ensure that people in our State have enough heat to warm themselves. In Queensland, they have offered an energy rebate of $175 available to all households in the State. The Queensland Government is able to do that because it is the owner and operator of its own coal-fired power stations, and so it is benefitting from the windfall profits of surging wholesale prices. Because the generators remain in public hands, this windfall profit can be recirculated back into the economy to directly assist the people of the State.

Compare that with the situation we find ourselves in with entirely privatised energy generation and distribution in New South Wales. If we were to attempt to make similar support provisions available to the people of this State, we would, in effect, be paying for it twice and lining the already deep and well-lined pockets of major fossil fuel companies with further profits. Until we break the unholy matrimony between governments hell‑bent on selling off every public asset we own and a private sector that greedily jumps on every opportunity to snatch up our essential infrastructure for its own profits, we will keep seeing crises like these. We should never have sold off our energy assets. The smart thing to do now, in the interests of generations to come, is to take back control of this essential service.

In the meantime, we must urgently address the additional cost-of-living pressures created by the energy crisis. Energy poverty is a real and pressing concern in New South Wales. In extreme heat and cold events, those without air conditioning or heating are at extreme risk, with more people dying in Sydney from cold temperatures than in Sweden. Inefficient building design, lack of insulation, obstacles to accessing rooftop solar and the use of standard offer contracts, particularly for those less likely to be able to pay their bills, all contribute to energy poverty in our State. With one in five renters on very low incomes unable to afford to keep their homes warm in winter even before this latest energy crisis, we are looking at significant numbers of people dying or turning up to our hospitals with health issues caused by the cold this winter.

The New South Wales Government's energy rebate and assistance schemes are far from adequate and fall well below the assistance being provided by governments in other States. The New South Wales Government's Energy Accounts Payment Assistance [EAPA] scheme has been publicly touted by the New South Wales Liberal‑Nationals Government as the centrepiece of its financial assistance to households, but this voucher scheme fails to address the true scope and longevity of this crisis. EAPA vouchers are currently provided to fewer than 60,000 households in New South Wales due to the strict accessibility criteria—namely, that you must demonstrate that you are either already disconnected or on the brink of disconnection as a result of failure to pay an energy bill, or that you are going without basic needs in order to pay your energy bill.

The cost of providing energy relief and acting to solve this crisis and preventing it from ever happening again should be borne by those who have benefited from the policy mistakes of successive Australian and State governments—that is, the fossil fuel companies. A windfall gains tax on the extra gas profits being raked in by gas exporters would be one appropriate measure to build future resilience and curb some of the worst of this exploitative wealth transfer from public hands into the private purse. There is no quick answer to this problem of the Government's own making, but we must urgently act to apply an energy equity and resilience framework to all our decisions if we are to have any hope of navigating this crisis in a way that works for the people of New South Wales.

We then heard from the Liberal-National Government through several Ministers, who all (as expected) shifted blame and refused to take responsibility for the crises facing the people of NSW. The full debate can be found in Hansard, here.

Ms ABIGAIL BOYD (11:44): In reply: Members stayed fairly to type during this debate, unfortunately. I thank everyone for their contributions. I will start with the contribution by the Hon. Penny Sharpe, who rightly pointed out that this issue is about actual people. It does not matter how much the Government crows about headline rebate figures that do not seem to actually make it to anybody. It does not matter how much the Government crows about the success or the greatest energy road map that Australia has seen—blah, blah, blah. It does not matter how many times those things are said. People who are wondering whether they are going to eat or heat their house tonight do not care what the Government is saying. They care about what they can feel, and it is cold right now.

As we debate in what has been another disappointing level of politics, people are anxious and wondering how they will pay their next energy bill. I thank the Hon. Penny Sharpe for bringing those real-life stories to the debate. There is a disconnect between the headlines, the announcements and the show business, as the Hon. Adam Searle said, and what people are experiencing in their homes. I encourage Government members to go outside of their little bubbles and visit people who are not as lucky to be on the same high salaries or live in houses that are built to the best design standards. I encourage them to visit people who are unable to insulate their homes in the same way and ask them if the relief package is of any value to them.

In response to the Hon. Peter Poulos, the energy assistance package that was announced the other day includes $330 million. I believe the 2020-21 amount was $293 million. That is an additional $37 million through the Energy Accounts Payment Assistance scheme. Factoring in inflation, that is only about $30 million. Queensland has $585 million. That highlights what a State Government can do when it has some control over its energy assets as opposed to how boxed in it can be when it has sold off all of its energy assets and infrastructure.

In his contribution, the Hon. John Graham drew an analogy between this issue and tolls. The Government has boxed itself in so that whenever it wants to provide cost-of-living pressure relief to people who are suffering from high tolls, it also has to line the pockets of Transurban because of the privatisation deals it has made. It is the exact same thing when it comes to energy bills. In order to provide relief, we are lining the pockets of fossil fuel companies that have already handsomely profited from the extraction of fossil fuels, the destruction of our climate and now from playing in a market that has increased the cost-of-living pressures for the people of New South Wales.

As Mr Justin Field commented, that was entirely avoidable and absolutely foreseeable. I take the Hon. Adam Searle's point that Labor has had policies on this issue. The Greens have been banging on about this for a good 30 years. I really wish that some of what I said went into the Hon. Mark Latham's head. I do not know if he was not listening or if he was simply saying what he wanted to say anyway. Clearly I never said in my original contribution that this issue is caused by supply. The whole point is that there is not a lack of supply. That is not the problem. The problem is the price issues in the market, due mainly to a decision to allow the eastern seaboard to be connected to international gas prices as well as our failure to transition towards renewable energy in a much quicker way. The issue has nothing to do with supply.

I will not labour on the Hon. Mark Latham's contribution, in which he misrepresented much of what I originally said. I encourage him to read today's Hansard so that he can be more accurately informed about what has led to this energy crisis. I will comment on the contribution from the Hon. Ben Franklin, who said the discussion is about politics. I love that comment. The Greens get that criticism quite a lot. We are talking about the issues of the day in Parliament and being accused of making something political or talking politics. My goodness! I, for one, do not apologise for talking politics in Parliament, and I would encourage any member who wants to express their political views in this place to continue to do so. We are not talking about the energy crisis and its impact on people across the State—who, again, are really struggling—because we are 10 months away from an election. We are talking about it because it is happening now and it is the responsibility of this Government to deal with it now.

Again, all the headlines in the world will not to help if the people who need support most are not feeling it. They are feeling this crisis because of this Government's policy decisions over the past 13-odd years, particularly the decision to leave us completely at the mercy of the private market when it comes to our energy sources. It is very simple. I think I have covered the comments of most members who contributed to the discussion. I thank all those members for their contributions. I introduced this matter of public importance because it is political and because there is a political solution to it. That requires this Government to stop with the headlines and make sure that the relief it announces is getting to the people who need it, because that is not happening.

Discussion concluded.

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