Page 1358 - Week 04 - Thursday, 12 April 2018
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that the current proposal is illegal, nonsensical and non-transparent. He said that the only way to make it work is to require massive redesign of the national energy market, requiring huge administrative infrastructure, and make changes that would take many years and cost potentially hundreds of millions of dollars.
The problems with the NEG are many, but since Ms Lee claims that she and her Liberal colleagues are concerned about costs, let me elaborate on some of the ways that the NEG in its current proposal would negatively impact on ACT households. I will quote an opinion piece from yesterday’s press, written by several of Australia’s most noted experts in energy and environmental economics, including Professor Frank Jotzo from the ANU and local energy expert Dr Hugh Saddler. They write that the NEG “could strongly favour large market participants”, and that this means that “Prices could go up and innovation may suffer”. They go on to explain how the current design of the reliability obligation “does not bode well for consumers” and that “Billions of dollars of consumers’ money might be spent at the behest of regulators” on infrastructure that is unnecessary.
Dr Bruce Mountain supports this, writing that under the NEG:
The incentive to gold plate is huge.
Members may know that the gold plating of infrastructure in the electricity sector has been a key driver in the rise of electricity prices in the last decades. In fact, a recent study showed that infrastructure gold plating by Australia’s privatised electricity network was responsible for an almost 200 per cent rise in electricity prices between 1996 and 2016, costing the nation’s households up to $500 per year each. Yet the experts warn that the incentive to gold plate under the NEG is huge. We do not want to reinforce what has happened over the past two decades.
This is the design that the Canberra Liberals yesterday suggested I should blindly sign up to. I note that Ms Lee said yesterday that electricity prices are soaring. It is true that electricity prices have risen, largely due to the gold plating that I just described, but there has also been a recent spike. Why did that happen? The Australian Energy Market Commission, the AEMC, have been very clear that recent price increases were primarily due to the closure of the Hazelwood power station. It is this sudden removal of generation that remains one of the biggest risks to the grid, and risks rises in power prices. How does the NEG address this problem? It does not address the problem at all. I will again quote from the expert analysis done for the ACT, which dissected the NEG’s reliability obligation in detail as far as it could. The analysis says very clearly:
The NEG would not have helped in the case of the Hazelwood closure.
What we have currently in the NEG is a scheme that risks putting upward pressure on prices for consumers in several ways. Also, it fails to mitigate a key risk to both reliability and future energy price rises.
In case this was not enough, there are further elements in the design of the NEG that will harm the ACT and ACT electricity consumers. The NEG proposes a regional arrangement whereby emission reductions would need to be reported regionally. As
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