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Electricity Supply Industry Amendment (Price Cap) Bill 2022


Cassy O'Connor MP

Cassy O'Connor MP  -  Wednesday, 17 August 2022

Tags: Cost of Living, Energy Efficiency, Legislation

Ms O'CONNOR (Clark - Leader of the Greens) - Mr Speaker, I am making a contribution on this bill as the Greens' Treasury spokesperson. Across all areas of household expenditure the cost of living is rising, from housing to food to petrol to power. We know that from our own experience but particularly from our contact with constituents who are really feeling the squeeze. We also know that around 120 000 Tasmanians live in poverty, at or below the poverty line, and for them every time there is pressure on those costs of living the stress simply intensifies.

So we have 120 000 people living in poverty and we have tens of thousands of people who are on low to moderate incomes who are also really feeling the squeeze. We talked about some of them in the House this morning when we were debating Ms Johnston's motion on rising rents. We all want to see cost-of-living relief for the people of Tasmania. However, I am not sure this bill does it. I have some questions for Mr Winter about how this bill would have effect. As we know, and as Mr Winter mentioned, about four years ago Mr Barnett introduced the -

Dr Broad - Gutwein, actually.

Ms O'CONNOR - Was it Gutwein back then? As Treasurer? Okay.

Dr Broad - It was such good news that he would not let Barnett do it - second fiddle.

Ms O'CONNOR - Okay. Introduced by former premier and treasurer, Mr Gutwein, four years ago, the Electricity Supply Industry Amendment (Price Cap) Bill 2018 made several amendments to the Electricity Supply Industry Act 1995. The bill made amendments to sections 48A and 41 of the principal act to cap maximum price determinations and standing offer prices. Labor's bill effectively extends these provisions. It is worth noting, however, that the Electricity Supply Industry Amendment (Price Cap) Bill 2018 followed the Electricity Supply Industry Amendment Pricing Bill 2017. The 2017 bill gave the minister the power to set wholesale electricity prices. This power expired in 2020 and Labor's bill does not introduce these provisions, and I think that is a question for Mr Winter.

If we are going to institute a cap on retail electricity prices, short of pulling the plug on our involvement in the National Electricity Market, how do you account for the cost of wholesale electricity, given that this legislation does not mention it and does not apply that power? I am hoping Mr Winter can explain that because it is relevant. The Aurora pricing determination is largely driven by a 37.4 per cent increase in wholesale electricity prices or the cost of wholesale electricity. In effect, as we understand it, Labor wants to cap the prices that energy retailers charge but has not put forward measures to deal with the wholesale prices that these retailers have to pay.

Adding to this is that Labor has been complaining about Tasmania's involvement in the national energy market, and I have some very strong sympathy for that grumbling. I do not know that life has improved for Tasmanian electricity consumers as a result of being a part of the National Electricity Market. Labor raises our connection to the NEM when this affects our wholesale energy price but does not directly affect pricing determinations, so I do not think Labor is addressing the problem in this legislation that they are complaining about but I am very interested to hear Mr Winter's response to that.

We are also six weeks into the 2022-23 financial year, and it is worth noting that the bill in front of us aims to set a price cap for 2022-23. This pricing determination has already been made. The principal act does not contain a mechanism for varying this and nor does Labor's bill propose any mechanism to resolve this. That is another outstanding question we have. How can you legislate a price cap when a determination has already been made for this year, and there is nothing in your bill that revokes that determination?

Labor's bill does not address or do anything to change the pricing determination they have been complaining about to the exclusion of almost any other policy matter in the state in recent weeks. As we all know, there is a whole suite of achievable, affordable and effective cost-of-living measures that are not being dealt with by this parliament, are not being resolved or put forward by government, and are not being raised as policy issues by the Labor Opposition. A cynical part of me thinks that this bill is a bit disingenuous because it will not resolve any of the issues I have mentioned previously. In fact, I am interested to understand the statements that Mr Winter and Labor have made about this bill and what it might be able to achieve because we cannot see that.

I am also interested in what Labor thinks would happen if wholesale prices go up by 37.4 per cent and retailers have their cap. So, retailers cannot increase the prices that they charge. As we know that ends up hitting the hip pocket of everyday Tasmanians. Wholesale prices, as they do, will go up and down but sometimes they can go up by more than a third. So, if retailers cannot cover the costs of their wholesale electricity purchases, something has to give in the system. From Aurora's position, would that be Aurora workers? How will Aurora cover the gap between the wholesale electricity costs that they have to bear and the retail costs that they can charge. Potentially, in some years the gap covered by this bill would be very wide?

I take on board what the former Treasurer said in Estimates about our GBEs making money but if you have pressure on your energy retailer and you are not dealing with wholesale power costs, then something has to give. A GBE like Aurora does not have many mechanisms for cutting costs, other than cutting staff costs. Perhaps Mr Winter could address that question because we would be very concerned if the effect of this bill was job losses at Aurora. It is particularly the case if Aurora, or any other retailer, is faced with potentially three years of not being able to recover costs associated with wholesale price increases. At some point something has to give and someone will have to pay. Ultimately, it will either be electricity consumers or tax payers who will have to pay. That is our reading on it.

It is also worth noting that the current wholesale electricity price of 8.12 cents a kilowatt hour is lower than two out of the three years for which the Treasurer exercised their power to make a wholesale electricity price order back in 2017. Indeed, in the six years under the 2016 standing offer to termination the three highest wholesale electricity price years were in the three years for which a wholesale electricity price order was in place.

For some additional context the 35 per cent increase in the annual value of the wholesale electricity price in 2022-23 follows on from a 24 per cent decrease in the wholesale electricity price in 2021-22 and a 9 per cent decrease in 2020-21. I acknowledge that the average Tasmanian who is getting their power bill and sees only financial pain, these sorts of numbers are meaningless, but they are a hard, economic fact.

According to our research, in 2022-23 the wholesale electricity price is 6.5 per cent lower than the 2019-20 price, which was set under a wholesale electricity price order by the former Treasurer. This was matched by a 7 per cent decrease in all residential standing offer tariffs and 11 per cent for business standing offer tariffs by Aurora in 2021-22, and a 1.38 per cent decrease in all tariffs in 2020-21. In this longer-term context, the last financial year - 2021-22 - represented a significant price dip in the wholesale electricity price rather than 2022-23 representing a hike when you smear it across a few years.

This variability in costs also highlights a significant issue with retail price capping. If price increases are capped at the consumer price index, every time there is a substantial decrease in costs, like we saw in 2021-22, prices would be permanently lowered significantly with no regard for increasing input costs. We do not see that as a sustainable model.

Ultimately, this is a cost that someone has to pay. That is how money works. I am very interested in hearing Mr Winter's response to some of the issues that have arisen for us in having looked at this bill. To be honest, we very much want to support this bill because we want to see people's power bills come down. But, if we are going to, as a state, make sustained cost-of-living relief imbedded in government policy, why would we not be looking at expanding the rollout of energy efficient upgrades for low-income households and community groups.

The Labor-Greens government, which so often gets pooh-poohed by people in government now, rolled out 9500 free energy efficieny upgrades. As minister for climate and housing, I would talk to households about the effect on their electricity bills and, for some households, it added up to about $800 in a year. That is a massive saving. It is not just a saving that is made in one year or two; it is a perpetual saving on your household electricity because you have a house that is better insulated, sealed up, has power-saving devices in it. That is really good cost of living relief policy. It is tried. It is tested and it is affordable. It makes people's lives healthier. They live in healthier homes. It really does help the family or the individual budget bottom line.

We took a policy to the last state election, which had a suite of cost of living measures detailed in it, including a fairer rent setting system, which I have talked about in here earlier today and any number of times, so that we can rein in unreasonable rent increases. We talked about increased investment in brokerage funding for emergency accommodation, free public transport. We recently had a month of free Metro. Patronage goes up, even though people are very wary about getting on buses where people are unmasked. That is the feedback that I am getting from constituents and friends. But if you provide free public transport, you bring down the cost of living and you unlock enormous human potential.

In the city of Portland, Oregon, which is one of the most wonderful cities in the world, they have a complete commitment to a greener city. They have an inner-city free light rail system called the MAX. It has activated the city of Portland where there is a poverty and disadvantage issue, as there is in every big city. It has taken cars out of the centre of Portland. It has mobilised people and it has brought down the cost of living as well as being hugely popular.

They are those sorts of things we could be doing for sustained cost of living relief. But one of the problems with the approach in this bill, and the approach back in 2018, is that at some point, you are going to have to come back in here and deal with it. Or at some point, the provisions in a price cap bill end. The relief is so short term. I am sure it means a lot to people who get lower power bills in the years that they do, but in the end, they will pay.

We should be increasing concessions in Tasmania, particularly when we know 120 000 live at or below the poverty line. We can fund school costs for children and young people from households in poverty, and this could include levies, uniforms, stationary, excursions and textbooks. We can top up funding to those outstanding food relief organisations so that they can increase their outreach to households that really struggle to buy nutritious food or to people who live in parts of Tasmania where there are supply chain issues getting affordable food on the table. We can ramp up the capacity of our neighbourhood houses to provide that food relief and support. We can expand community gardens and education facilities, community houses and child and family centres.

As a state, we can afford to make TasTAFE free. We can afford to give people of all ages, particularly young people from rural and regional areas, a real crack at it by making TasTAFE free.

It is the choices that we make, and, ultimately, that the Government makes. As a parliament, we have a capacity to work together on some of these things and make a real, substantial difference. We should. It is our responsibility to do that. I am quite sure that everyone in this House is empathetic. It is part of the reason we go into politics, because we care about people and we want to help our communities so there are things that we can do and agree on. Surely, on the cost of living, there are things that are beyond partisanship that we know would make a difference.

We will listen to Mr Winter's response to the questions that we have raised. I will say, points for effort. We have some concerns about how it would work and we want to hear Mr Winter's response to our concerns.