06 November, 2017

Mark Ludlow

Courtesy of the AFR

The Queensland Liberal National Party’s plans to demerge state-owned electricity generators would only drive down power prices if they are allowed to act like commercial enterprises, according to energy experts.

With the Australian Competition and Consumer Commission and federal Energy Minister Josh Frydenberg highlighting the lack of competition in the generation market in Queensland, Opposition leader Tim Nicholls has proposed splitting the two state-owned generators, CS Energy and Stanwell Corporation, into three companies.

Along with scrapping Labor’s 50 per cent renewable energy target and stripping $2 billion out of the regulated asset base of state-owned companies, Mr Nicholls claimed this would save $160 off the average household’s power bill each year.

CS Energy and Stanwell control about two-thirds of the Queensland market, with allegations the state-owned companies have been price-gouging to increase dividends flowing into state coffers. Before the 2015 election, Labor proposed merging the generators into one company, but this was later abandoned.

But Grattan Institute’s energy program director Tony Wood said the demerger would only work if the new LNP government did not follow the lead of the Palaszczuk government which earlier this year issued a directive to Stanwell to keep wholesale power prices down.

“It should help, but you’ve still got a single owner and you’ve got the possibility if the government continues to intervene,” he said.

“If they behave commercially then it should help, but if they continue to behave politically as a government-owned business it will not make much difference because the government will continue to tell them what to do. That’s the big problem with government ownership.”

Watermark Funds Management investment analyst Matthew Blumberg said the LNP policy was interesting because it highlighted the generation price manipulation by Stanwell and CS Energy.

Mr Blumberg said the changes should help lower wholesale electricity prices.

“On top of this, the LNP are proposing writing down the asset value of the network and modifying renewable policy, which should also ultimately add to the downward pressure on electricity bills,” he said.

A spokesman for the LNP reforms would increase competition.

“Labor had to direct Stanwell after it used its market power to drive up wholesale electricity prices to the highest levels since the National Electricity Market was established,” a spokesman said.

“The LNP’s reforms will increase competition and will lower wholesale electricity prices by an average of 8.3 per cent per annum.” With Angela Macdonald-Smith

Photo credit to the AFR and Regi Varghese.