A Comment on the Political Discussion of Electricity Regulations

With her speech to the the Energy Policy Institute of Australia on Tuesday, the Prime Minister Julia Gillard has moved (or at least expanded) the discussion of electricity regulations from the roundtable meetings and conferences of industry, academia, and government to the political arena. Hurrah..?

A few points:

Are there problems with dividend policy, reliability standards, and peak demand? Yes.

Have the incentives in the existing regulations led some states to act in a manner that has unnecessarily raised prices for consumers (and thus led to increased profits for the states)? Very probably.

Has this been going on for several years, including under Labor governments? Yes – but so what?

Reforming energy industry regulations isn’t a particularly new issue for the industry itself, energy academics, or government bodies; the Department of Resources, Energy and Tourism (DRET) has been developing an Energy White Paper for a while now, with associated submissions and consultations. But even if you were to argue that the problems should have been addressed earlier, why shouldn’t we address them now?

To suggest, as Oppisition Leader Tony Abbott did this morning, that there can’t be a problem with electricity regulations, because otherwise the Federal Government would been telling us this for years, is facile. Opposition energy spokesman Ian Macfarlane might have been closer when he described the PM  as a latecomer, but again – so what?

Let’s accept, for the sake of argument, that Julia Gillard’s strategy is to a signicant extent motivated by political desires, chiefly to separate the effects of the carbon price from unrelated electricity price rises. If it leads to good energy market reform, I don’t care.

I might be disappointed that worthy reforms aren’t being undertaken because politicians don’t see any votes in it,  but if a political party uses a policy debate to make its opponents look bad while focussing on implementing good policy, then I’m riding that gift horse until it gets distracted and wanders off to chew a Newspoll. (When it gets to the point of using a policy discussion chiefly to attack your opponents rather than actually try and solve any problems – see e.g. asylum seekers – that’s a different matter.)

Has the carbon price made electricity prices rise this year? Yes. Yawn. Not that big of a deal. It certainly isn’t the primary cause of electricity prices rises over the last few years. Spot the carbon price effect in this graph:

So when Abbott says,

“the problem is not the regulation of power prices. The problem is the carbon tax putting up power prices”

well, the Australian Energy Regulator disagrees on the first bit, and state reports disagree on the last bit.

Regardless of why they’ve been raised, whose fault they are, and what other problems may be out there as well, can’t we just accept that these problems are real and talk about how to fix them? There’s no time like the present (especially in politics).