Urgent Review of Energy Reforms Needed: BCA

The Business Council of Australia today called for an urgent review of the nation’s energy reform agenda.

The President of the Business Council of Australia, Mr Campbell Anderson, said the energy reform process had some serious problems, due to inadequate implementation and commitment by key players.

“In the case of Australia’s energy reforms, the problems are not minor,” he said.

“They must be addressed or the realisation of the gains from reform will fall well short of their potential or worse, some or all of the current gains unwound.

“After three or four years experience, there needs to be an honest recognition of persistent problems and an appropriate forum established urgently to resolve them.”

Mr Anderson said some important steps had been taken, including the establishment of a national electricity market, separation of the old vertically-integrated monopolies, the removal of state-based barriers to the interstate trade in gas, greater integration of state electricity networks and moves to more cost-reflective pricing for transmission and distribution.

“The most tangible and sustainable gains have been made in electricity in Victoria. Regrettably, the gains elsewhere are patchy and, by and large, have not been enjoyed by consumers,” he said.

Mr Anderson said six major problems still existed:

1. Insufficient competition in electricity generation, where only Victoria has a sufficiently competitive electricity generation sector.

2. The interconnections between the states were insufficient and this reduced the reliability of supply and raised prices.

3. Gas competition is being inhibited through joint marketing arrangements and the lack of uniform gas trading standards.

4. It was inappropriate for governments (especially New South Wales and Victoria) to extract rents through setting high asset valuations or sector-specific taxation.

5. Transmission pricing is still not cost-reflective.

6. Moves to full retail contestability have stalled.

“The Business Council of Australia seeks concerted action from governments in recognition of the importance of energy reforms to improvements in the efficiency of Australia’s economy,” he said.

“I can understand the reluctance to address some of these issues. But the difficulties must be measured against the potential gains and, just as importantly, against what could happen if the current problems are not fixed.

“A globally-competitive energy sector, supported by the right industry structures and incentives, is fundamental to our economy’s competitiveness.”