Grievence Debate: Electricity Policy

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Published Thursday, November 16, 2017 | Share:

Mr BELL (Mount Gambier) (12:40): I move:

That this house notes the government's electricity policies have delivered the highest rate of electricity disconnections, the most customers on hardship programs and the highest average electricity debt per capita in the national energy market.

Let's see if this private member's motion has the same unanimous support as the previous one; somehow I doubt it.

According to statistics from the Australian Energy Regulator, South Australia had the highest proportion of disconnections in the nation. In fact, from January to March more than 2,500 South Australian residential customers were disconnected. This state also has the highest proportion of customers on hardship programs. There is no doubt that many households in South Australia are doing it tough, and I am going to focus on them for a minute and then move on to business and implications for our wider economy.

With summer here—but it will quickly turn back into winter again—the situation that South Australians face, those who are on either hardship programs or who have moved on to disconnection, is truly alarming. It reminds me of a time a number of years ago when I was an attendance officer for the education department and picked up a family every morning and took them to school. They had had their electricity cut off. The difficulty that those young, early primary school kids faced really brought it home to me that when somebody's power or water is cut off it exacerbates and accelerates the spiral down in terms of poverty and, from a parent's point of view, the ways in which they can escape the situation they are in; often, that can lead to substance abuse or other activities.

No running hot water in a house, due to the hot-water service being electric, meant that these kids were having cold showers, if indeed they were having showers at all. McDonald Park Primary School was fantastic in its response: the kids would rock up, a female staff member would organise hot school showers, there would be spare clothes at the school and, whilst the changeover of clothes occurred, the old clothes would be washed.

It is not an easy situation that the state government finds itself in—I understand that. We have rules and regulations around the energy market that limit some of the responses I am sure the state government would like to make in terms of getting power prices down. This is where I think some leadership actually needs to occur, not necessarily in the argy-bargy of this house, but certainly with AEMO and changing some of the regulations or mechanisms the energy market has put in place and getting agreement with other states. Some of those relate to generation of power.

The state government is concerned that if it enters the market as a generator, as a third or fourth provider of power, that can discourage other private investment in that market. I understand that. It is going to be interesting, now that the government has said that they are going to purchase these backup generators, how that is going to play in. In my mind, $110 million to lease generators for 13 months was a very expensive option. Of course, you can argue that when the lights go out across the state, the entire cost to the state will be more than that, but it is $110 million for these generators to sit there for 13 months.

They cannot be turned on to bring the price of power down. Even if it hits its cap of $10,000 per megawatt, these generators cannot be turned on and return a dividend to the state. We pretty much have to sit there and watch the other providers generate pretty sizeable profits when it comes to that. If there is no blackout, these generators are going to sit there for 13 months at a cost of $110 million and not even be turned on. That is $8.5 million every month for the 13 months. It is a very expensive backup option. Again, it takes funds away from other areas.

In terms of now purchasing these backup generators, which will run on diesel, I am led to believe that they will take 80,000 litres of diesel per hour. If that is correct, it is a sizeable amount of diesel going into these generators. I wonder whether the people who actually have an understanding of what 80,000 litres per hour would look like would want to live around the location of those generators at this point in time. After the 13 months, they are going to be taken out and relocated to a more permanent base.

Millions of dollars are being spent on the connection, the site plans for where they are at the moment and running the cables to connect these generators into the grid. It is a huge expense for 13 months to then relocate them somewhere else. I believe that the cost of the purchase is $360 million. We are going to lease them for 13 months at $110 million, and then we are going to purchase them after the 13 months for $360 million. If that is true, it is $470 million for these generators.

The questions I have go back to my original statement. If the rules prevent the government from turning these things on to lower the price of power, then it is not a power plan: it is a blackout plan. It is a blackout plan to prevent blackouts; it will do nothing to drive the price of power down. The only real way of driving the price of power down, in my mind, is to work with AEMO and COAG to get these rules changed so that we can have some autonomy around generating power in this state.

One of the very simple things that could be done would be to talk about bid-in price. To understand the energy market, these companies bid in at a certain price at five-minute intervals, but they know what the demand is. If the state gets close to its demand on what is produced in South Australia, it can very quickly work out that it can bid in at the highest capped rate and make a sizeable amount of profit for its shareholders, but that profit comes at the expense of South Australians, who are paying the price.

They know the system and they can game the system based on the usage versus the capability or capacity in South Australia at that time, and can bid in at certain intervals at a much higher price. Of course, within the five minutes they can withdraw an offer and resubmit it at a higher rate. Again, that allows some gaming of the system to maximise profits. Those rules need to be changed. We need to look at how South Australia, Victoria and Tasmania can work as one part of the energy market and actually start transferring electricity at bid prices equal to that as one jurisdiction.

One of the problems we have is that everyone thinks we have a national energy market, but we do not: we have five separate and individual markets. They come together with certain rules around it, but they are individual in their nature. We need to be looking at options within the rules to get that price of power down so that South Australia does not have the highest number of disconnections or the highest average electricity debt per capita. These are the real things that need to happen.

In terms of $470 million diesel generators, which will be converted to gas, this house needs some assurance and clarity about whether that can actually generate power for South Australia or whether the rules are going to prohibit it, or whether the state government is going to on-sell it to a third or fourth provider so that it can generate electricity and pay the state government a lease or rental fee for those facilities that the people of South Australia have purchased. These are the real questions we should be debating in here. We should be up-front and honest with each other and work together so that the people actually benefit.

At the moment, there are some question marks around the forward prospects of generating electricity in this state, and I am one of the very few who understand that we have to have more generation here. Some of the ideas around getting more generation in South Australia are the right things to do, because that is how you have a competitive market, but you cannot have the state government using taxpayers' money to have a very expensive blackout plan that does not put electricity into the grid to lower the price for everyday South Australians. With those final remarks, I conclude my comments.