The Australian Federal Government released its Energy White
Paper today. Its focus is on ensuring that regulation is efficient
and that markets and pricing incentives are allowed to operate
properly to ensure efficient outcomes.
The White Paper's focus is on high consumer power prices; it
recognises that in large part these have been driven by
cross-subsidies embedded in fixed network charges that do not
adequately correlate with the demands placed on the network on peak
days by increased domestic air-conditioner usage, and households
which are required to pay for these peaks by their energy
consumption at other times, whether or not they have the same peak
Addressing this will require more flexible time-of-use tariffs
for networks and energy, the deregulation of existing tariffs, and
some changes to the network revenue setting process (such as the
review and appeals process). The paper also calls for privatisation
of power generation and networks where these are still in State
Government ownership (NSW, Queensland, Tasmania and Western
The challenge for the Federal Government will be that much of
the regulatory change required to implement the White Paper's
proposals is in the hands of State Governments. It is the States
that set regulated consumer tariffs (in those states that still
retain them) and control decisions such as whether to implement the
smart time-of-use metering which is required for flexible
For those States (such as New South Wales) where deregulation
and privatisation is currently being considered, the White Paper
will be added impetus and support for that policy direction. Other
States, such as Queensland, have more recently been moving towards
greater regulation of power pricing, and the White Paper is
implicit criticism of that path.
Industry will be watching the next meeting of the COAG Standing
Council of Energy and Resources (SCER) in December 2012, where
representatives of State and Federal ministers consider joint
policy, to see exactly how much of the Federal Government's
White Paper is adopted with enthusiasm by the States.
The Federal Government's proposals include:
there should be a regular four-yearly strategic review of
energy policy, commencing with this Energy White Paper;
the National Energy Customer Framework should be implemented as
a matter of priority by jurisdictions that have not yet done so
(NSW, Victoria, SA, Queensland);
considering developing an upstream gas trading hub;
updating the Government's offshore and production lease
arrangements to continue to promote transparency and domestic
supply outcomes (but without domestic gas reservations);
considering whether the Federal Government ought hold a liquid
fuel stockpile or strategic reserve, given that most liquid fuel is
developing national guidelines that provide a benchmark
approach to reasonable feed-in tariffs for micro-generation;
developing a national framework for the implementation of smart
calling for the NSW and Queensland Governments to allow uranium
mining in their States;
commencing a Productivity Commission investigation into the
regulatory and non-financial barriers to mineral and energy
reviewing and reducing the regulatory arrangements relating to
the liquid fuels industry;
preparing a nationally harmonised regulatory framework for the
CSG industry; and
reforming regulation of energy networks to better incentivise
We will provide more detailed discussion of the White Paper over
the next few days.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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