Energy politics will continue to spark in 2015

Privatisation and major decisions about long-term policy settings are on the agenda as various players stake their claims in Australia’s shifting energy market.

Whether stakeholders in the electricity business on Australia’s east coast are looking forward to 2015 depends entirely on where they are standing.

If their patch is power generation, they are an unhappy bunch with little expectation that the new year will bring them any real relief.

If their focus is power delivery, 2015 promises a roller-coaster ride, as new regulatory rules impact on network spending and revenue-raising in an environment where still-sliding demand and still-growing household investment in rooftop solar are critical factors. The appetite of politicians to embrace significant tariff restructuring also remains a big question mark.

If they are Coalition governments in New South Wales and Queensland, and therefore custodians of substantial power network assets, re-election in the first half of the new year will open the door to a major privatisation push capable of delivering tens of billions of dollars.

If they are energy retailers, deregulation of power prices in NSW and south-eastern Queensland is delivering fresh opportunities in a fiercely competitive east coast market where the three large players pursue bigger shares and a handful of smaller players chase fringe opportunities.

If they are householders, power bills seem likely to be marginally less of a pain but the challenge of pursuing the best deal in direct dealing with retailers remains a hassle for many.

For manufacturers, who still make up around a quarter of the power market, just about everything relating to supply costs remains an irritant. While the Abbott government’s removal of the carbon tax was a big plus in 2014, the likelihood of a major change to the renewable energy target is fading and agitation for major network surgery remains a priority.

For the substantial number of energy-intensive businesses with gas as an important fuel, the added threats of big price rises and (in NSW) winter supply shortfalls later this decade are a real and present danger to continuing operations.

For Labor and Coalition politicians, 2015 can deliver no escape from the heavy hand of energy politics.

Green games aside, with a RET decision high on the agenda of federal politics in the first half of the new year along with the need to address Australia’s carbon abatement ambitions ahead of the Paris climate change summit next December, the pressure is mounting for jurisdictions to deliver a coherent, bipartisan overall energy approach for the long term.

This applies equally to electricity and gas policies. The business submissions to the energy white paper task force contain a high level of demand for federal and state governments to put an end to the policy drift of almost a decade.

The pressure to lead this sea change, including promoting a new collective approach through the Council of Australian Governments, falls most heavily on the Abbott government, which needs to deliver a white paper in 2015 that is qualitatively streets ahead of its 2014 green paper effort.

For the trade union movement, meanwhile, 2015 may represent the final frontier in its war against power privatisation which began in the early 1990s.

Coalition victories in the NSW and Queensland state elections will bring on swift efforts to sell network assets, with the numbers in NSW’s Legislative Assembly the only barrier to completing a process launched by Bob Carr and Michael Egan a decade ago.

This brings us to the final stakeholder on our list: the money-lenders.

Nothing gets done in the electricity supply game unless the suppliers can find financiers willing to back them at bearable lending rates.

The Energy Supply Association, using research undertaken by PricewaterhouseCoopers, is pointing out that east coast electricity generation has become “almost unbankable as a result of ongoing policy uncertainty and intervention over the past decade.”

PwC says chronically weak wholesale electricity prices are the major inhibitor to any new thermal or renewable generation project obtaining finance today.

On the other hand, the banks are ready, willing and able to support network privatisation.

PwC reports that banks “express significant appetite to underwrite the expected $5 billion to $12bn of debt per (network) transaction” that will be required in NSW and Queensland.

Finally, as you settle down to turkey and pudding on Christmas Day, spare a thought for the employees of the NSW network businesses: as many as 4,600 of them face the axe, their employer says, if the Australian Energy Regulator perseveres with the draft revenue determination for 2014 to 2019 that it released at the end of November. The AER will make its final determination in May.