COAG moves forward on energy resilience and pricing – August 2016

Filed under: Environment and Indigenous Affairs, Climate Change, Trade and industry, Energy,

The latest meeting of the COAG Energy Council, composed of Australia's energy and resources ministers, moved further towards creating a national approach to integrate energy and climate policies.

Federal Environment and Energy Minister Josh Frydenberg, as chairman of the council, secured a commitment from ministers to reforms in four areas.

To increase gas availability and reduce prices, the council agreed to establish two wholesale gas trading hubs and arrangements for the trading of pipeline capacity. A Gas Market Reform Group will implement these reforms.

Victoria was the only jurisdiction not to support collaborative efforts to increase onshore gas supply but this may change when the Victorian Parliament completes its inquiry into onshore unconventional gas and the current moratorium on new gas development.

The council had previously agreed to introduce network prices that directly reflect demand at different times to reduce peak demand and network costs. But progress has been slow and the council decided to seek advice from officials on ways to speed implementation.

Officials have also been asked to examine the way the Australian Energy Regulator's decisions on network prices are reviewed. At present, the Australian Competition Tribunal conducts a review of challenges to the regulator's decisions, which can then be appealed in the courts. In NSW alone, about $7 billion of consumer savings or business profits is in dispute over the current five-year regulatory period.

Ministers emphasised the need to integrate energy and climate change policies and officials have been asked to advise the council on the economic and operational impacts of state and territory emission reduction policies.

The council also recognised the scale and speed of the energy transformation now under way. It agreed to enhance its own strategic focus and to provide more resources to the Australian Energy Market Commission, the body that sets the rules under which the markets operate. These changes should expedite rule changes and improve the commission's capacity.

Tony Wood, energy program director at the Grattan Institute, commented: “The proposed reforms bring challenges. Some will be resisted by commercial or political vested interests, others by individual states or territories.

“Many stakeholders and observers will be disappointed that the council did not explicitly include policy reforms directly linked to climate change, such as specifically including it in national energy objectives. This was always a bridge too far for 2016.

“Realistically, the best outcome will be if the council's recognition that clear and credible climate change policy is vital in order to attract investment in reliable and affordable energy gives Mr Frydenberg a case to take to the 2017 review of federal climate change policy.”

Further Reading