A gold-plated diversion from power pain?

The Senate's report on power prices is long on banalities and short on solutions, but it does highlight the lack of quantitative information on electricity price drivers.

I guess we will never know how many millions of dollars of taxpayers’ funds and stakeholder spending has gone on the Senate inquiry into power prices that Julia Gillard launched after her August 7 rant on the issue.

It involved five hearings across the country and scores of submissions as well as a wagonload of bureaucrats beavering away in the background – plus the efforts of several hundred corporate, association and NGO staff.

Was the exercise a waste of energy? Probably.

Has it added anything useful at all to the complex efforts to rejig the east coast power market rules?  If so, I can’t see it.

The sheer banality of the the review shines through in any number of places in the 144-page main report.

(The comments are bulked out to 210 pages by lesser diatribes from the Greens, the Coalition and Senator Nick Xenephon, who was not a member of the select committee but knows a populist issue when he sees one.)

One may be amused or incensed by senatorial hubris.

“In addition to this inquiry,” says the report, “there are a number of other reviews under way or recently completed.”

Or to put it another way, the Senate’s run at the issue is a gold-plated diversion from the main game represented by:

(1) The Productivity Commission’s major inquiry into electricity network operations, which has already produced a substantial draft report – it came out a fortnight ahead of the Senate effort – and will be completed next April.

(2) The Australian Energy Market Commission’s major inquiry into the causes of, and remedies for, ever-rising peak power demand, which is due to be published in final form in mid-November.

(3) The AEMC’s review of distribution network reliability requirements and performance, which is due to be published this month.

(4) The AEMC’s big review of transmission planning and development, which will be completed next March.

(5) The meeting of federal, state and territory energy ministers in mid-November to tackle the key issues – and the CoAG first ministers’ meeting in mid-December, which is where the premiers will tackle the “I have a big stick” prime minister.

The Senate committee wants us to know that, in the light of all this activity, “the timing of this inquiry is timely.”

And also, in the light of the real review process, “there is a window of opportunity for reform in the electricity market.”

Well, thank y’all for sharing this insight with us!

Leaving aside the necessary inclusion of “gold-plating” and other pejorative views of the causes of power bill increases, the senators do get around to acknowledging that prices are influenced by peak demand, dividend-taking by state governments (where the networks are publicly owned), retail revenue caps that cause prices to rise when demand falls, hedging arrangements to protect against volatility in the wholesale market, labour prices, greater use of underground cabling, the need to replace worn-out assets, the lack of competition in some places and the unwinding of cross-subsidies between business and household customers – but that is on page 57 and the media sherpas had all stopped climbing by then.

Credit where it is due – the senators make a useful point here: there is a lack of quantitative information about the exact contribution of all these factors. 

The committee suggests that the Australian Energy Regulator should produce an annual report with detailed analysis of the contributions to prices.

One of the more endearing sentences in the report is this senatorial complaint: “Many stakeholders argue that the price rises occurring in their components or factors are fair and logical, while the price rise of other components is the real problem.”

G’arn! Who would have thought it?

The committee “considers that there needs to be a greater collective responsibility taken for overall electricity prices.”

Yes, Mum!

Of course, despite acknowledging that the experts are beavering away on the key issues and that the effort is taking a great deal more time than the senators had available, the committee can’t resist putting in its tuppence worth on some of complex problems.

Its opinions and a little over a dollar apiece will buy each of us a fizzy drink.

The opinion that caught the media’s attention is the senators’ support for cost-reflective household pricing, which everybody and their cat knows is a big part of the answer to lopping peak demand.

The hurdle is the large number of consumers who, for one reason and another, will find it hard to change their pattern of use – and the even larger number who will be too thick or too apathetic to make changes and will go ballistic when the resulting bills come in.

The senators’ solution: “continue provision of a flat, regulated tariff for vulnerable customers.” 

Oh, how clever! Not.

Finally, there is a grudging acceptance in the report of the retort to a point that has been given lots of media attention in the past year since the major users’ sought to ride it to attract public support.

Australian household power prices were higher than the OECD average last year if you use a straight comparison of currency exchange rates, the senators note, but “by using the more meaningful comparison of purchasing power parity (what can actually be bought in different currencies), our prices are well below the OECD average.

Do you recall seeing that in your newspaper this past week?

Of course you didn’t – not a soul reported it.

Something else that should not pass unnoticed is that Julia Gillard’s August 7 rant gave heavy emphasis to “dividend extraction by state governments.”  This got large tabloid headlines, especially in Sydney

The committee majority report dutifully includes this in its list of contributions to price rises, but makes no attempt to prosecute the case.

Nor does it draw attention to the submission from Unions NSW – once the home of the committee chairman, Senator Mark Thistlethwaite – that the state’s dividend scheme was the invention of Labor and has extracted some $6 billion from network businesses in the past seven years, money used to fund a raft of government outlays.

That part of Gillard’s attack comes under the heading of “seemed a good idea at the time” and obviously is now best skirted around while hoping that the headlines will still resonate with marginal voters.

If the committee wanted its report to be treated with a little more respect, it might have done a decent job of addressing this issue.