Queensland's comical power price routine

In a throwback to the days of Joh Bjelke-Petersen, a submission to the power price inquiry from Queensland's energy minister offers plenty of words while barely addressing the core issue. It's a real worry that he seems to think the answer is the government building another coal generator.

This will sound weird, but I quite like reading over submissions to major government inquiries of policy initiatives. It’s a great way to learn who’s who in the zoo and what they think and worry about. Occasionally they can even be entertaining, due to being so bad they’re funny.

In reading through the submissions to the Senate Inquiry into Electricity Prices, one of the more entertaining was the submission from the Office of Queensland Minister for Energy and Water, Mark McArdle. It gets my vote for the best impression of Joh ‘build it and they will come’ Bjelke-Petersen I’ve seen since Max Gilles retired.  

Good old Joh had a wonderful way of talking forever and saying very little of substance. And of the 19 pages in this submission only one actually deals with the major driver of rising prices – the regulatory structure governing network expenditure. What’s more, when it finally gets to this issue on page 17 it pretty much says: ‘we’ll leave this complicated stuff to the Australian Energy Market Commission to sort-out’.

In fairness to McArdle, Gillard was rather late to the whole problem of how state governments have gamed network regulatory rules. And her timing seems awfully convenient now that Labor no longer holds power in most states. It’s not in any way the fault of the current Liberal administrations that we’ve got a huge network bill to contend with, and skewed regulatory rules biased in favour of adding new network capacity.  

But now they are in the driving seat and can meaningful contribute to fixing the rules. Yet instead the submission prefers to dwell on events stretching back even as far back as 1993 that have little to do with the considerable inflation in residential price rises that has occurred since 2007.

As an example take these statements from page 2:

“The true story behind the causes of Queensland electricity price increases, as with electricity price increases in other States and Territories, is partly found by looking at history – political history. …For example most governments, historically, have recognised coal-fired power stations offer the most affordable and reliable long-term source of power for Queensland households and businesses…. However for the last two decades there has been an increasingly pervasive political influence that has made it more difficult for governments to make decisions about how to secure the most affordable future electricity generation capacity.”

And:

“...Because the power generators … take so long to plan, build and come on line it is critical to plan for future electricity supplies to guarantee security of supply. It is just as important for governments to make timely investments in electricity generator capacity to meet the increasing supply and demand that comes with population and economic growth to avoid blackouts, brownouts and other supply disruptions."

Has anyone in Minister McArdle’s office taken a look at the supply-demand balance in the wholesale electricity market? Have they looked at what happened with wholesale electricity market prices while retail prices were skyrocketing?  

In case not, here is a straightforward chart even Joh could explain, taken from another submission showing average annual price changes in electricity charges across the NEM (which are highly reflective of what’s occurred in Queensland).

Average annual price trend in residential electricity price components – 2005-2011

Source: Bruce Mountain (2012)

Electricity generation prices are down, transmission and distribution charges are up. Yes, the carbon price has increased costs in generation, but that was just for the last three months, and doesn’t explain the far bigger price rises that occurred prior to this time.

If we look at the existing black coal generators in Queensland, a substantial number are running well below their rated capacity. Major Queensland coal power stations Stanwell, Callide B, Gladstone, and Tarong  are all operating on average at below 60 per cent of their rated capacity and this was happening before the carbon price came into effect. Yet McArdle thinks Queensland needs more of them?

If Minister McArdle would like to contain electricity costs and take care of Queensland taxpayers, the best thing would be an emphatic public statement that the Queensland government has no intention of building another white elephant coal generator.  In fact the Queensland government doesn’t need to plan or build another power station at all, because this is something the private sector is more than capable of doing.

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