POWER PLAY: Turnbull announces new rules on gas exports to try to bring down bills

Image: Australia Pacific LNG

Prime minister Malcolm Turnbull has announced that the government will give itself the power to license gas exports in an attempt to bring down domestic gas prices.

In a joint press conference with energy minister Josh Frydenberg and resources minister Matthew Canavan, Turnbull said new regulations coming into effect from July 1 will force the gas sector to give Australian customers priority.

The government also plans to scrap an appeals process used by energy companies known as the “limited merits review”, after prices were set by the energy regulator.

Turnbull said the legal process had cost consumers $6.5 billion in additional electricity costs, after power companies disputed the regulator’s decision.

“We will stop big electricity companies from running to the courts to try to overturn the Australian Energy Regulator’s decisions. Companies have made 52 appeals and the courts have ruled against consumers 31 times. This will end,” he said.

Frydenberg said that network – “poles and wires” – made up half the cost of an energy bill and that abolishing the appeals process “would put downward pressure on electricity prices”.

He said he tried to get state governments to support the proposal at a COAG meeting, but failed because some state “have a vested interest in that they own some of the poles and wires”.

(Today the NSW government announced the biggest budget surplus in 20 years in the wake of selling off the state’s poles and wires network).

Frydenberg said the regulator will receive an additional $67.4 million to tackle the issue.

“We firmly believe that the Australian Energy Regulator is the best equipped body to make that decision,” he said.

Resources minister Matt Canavan said the government’s plan to restrict gas exports when there are shortages in the domestic market was a “significant action in response to a significant problem”.

“At the moment we have 65,000 Australians that work in industries that have gas input costs of 15% or more in their businesses,” he said.

The minister cited Uncle Toby’s and Incitec Pivot, the ASX-listed chemicals and fertiliser producer, as examples.

“Gas for these businesses is a staple, it is the bread and milk of their business and they can’t substitute away from it.”

Canavan said he wanted to bring down costs to protect jobs.

“It is unsustainable for our country to be the world’s largest exporter but to be paying some of the world’s largest prices for gas,” he said.

“That will erode support for a gas industry in this country if it is maintained and that is why we are taking action to be able to bring more gas onto the domestic market to help lower prices down to a more reflective international level.”

The minister said the plan was developed in consultation with the gas industry.

Turnbull said that with a number of old power plants that are expected to retire over the next five to 10 years, he will ask the Australian Energy Market Operator (AEMO) to investigate any potential losses to baseload generation and what support is needed for new investment.

While the government is still considering its response to the 50 recommendations of the Finkel report into energy security, including the proposal for a Clean Energy Target, Turnbull did not rule out government support for coal-fired generators upgrades, if the AEMO recommended it.

“We’d certainly consider that,” he said, adding that energy security has “got to be technology neutral”.

“We’ve got to do this in a way that focuses on consumer affordability and security of supply,” he said.

Turnbull said a new coal-fired power station was “a long-term commitment” and since Australian was the largest seaborne export of coal, “it would be good if we had a state-of-the-art clean coal power station in Australia”.

“But that’s not to say that the federal government should be building it or would be building it,” he said.