Coalition promises to cut energy prices by 25%

energy bills

Minister for Energy and Emissions Reduction Angus Taylor. Source: AAP Image/Dan Himbrechts.

Energy Minister Angus Taylor has promised the Coalition will deliver power bill relief for small businesses by targeting a 25% reduction in the average National Electricity Market (NEM) wholesale spot price by the end of 2021.

The commitment, if achieved, would reduce the NEM spot price from the current $88.3/MWh to less than $70/MWh, Taylor said.

“If we can have a target for emissions, if we can have a target for reliability, we can have a target for the price,” Taylor told a NSW Business Chamber gathering on Friday afternoon.

Electricity prices have been a pain point for small businesses over the last 12 months, with COSBOA research finding 85% of business owners don’t believe they can absorb further increases.

Taylor said the target is expected to reduce retail prices for small businesses to about 25c per kilowatt hour (excluding GST), which ranges from slightly to significantly lower than recent average prices.

For instance, Canstar Blue research taken in August last year found average electricity prices in Queensland were 26.7 cents/KWh, while prices in South Australia were 42.8 cents/KWh.

Further savings on the retail side of the market have also been promised under the Coalition’s default market offer policy, which comes into effect from July 1.

Taylor claimed small businesses changing over to new default market offers will save $457 (annually) in Queensland, and more than $800 in New South Wales and South Australia.

Taylor had said back in March that savings of $1,000 or more were available for small-business owners who renegotiate their contracts after July 1.

The Coalition intends to meet its target through several already announced initiatives, including a plan to address undersupply issues by underwriting new power generation to the tune of 4,000-megawatt hours.

This underwriting policy includes Snowy 2.0 and Battery of the Nation, alongside a shortlist of 12 “reliable generation projects”, which Prime Minister Scott Morrison said includes a “range of gas projects” and an upgrade for one existing coal-fired power station.

Morrison also spruiked the Coalition’s Retailer Reliability Obligation on Friday, which was signed off by states last December and forces energy companies to guarantee enough energy to meet market demand.

Another “lever” within the Coalition’s energy policy stable is its divestment legislation, which would require energy companies to split up if they increased prices on purpose.

Labor doesn’t support those reforms though, and the Coalition was unsuccessful in passing them through Parliament late last year.

Australian Chamber of Commerce and Industry chief executive James Pearson said the Coalition’s target is a “positive response” to getting power prices down.

“Increasing dispatchable generation capacity so electricity is available on demand, making pricing more transparent through a reference price and encouraging new players to join the electricity generation market will make a substantial difference,” he said in a statement circulated on Friday afternoon.

Taylor’s Labor counterpart Mark Butler claimed the Coalition’s target wasn’t an improvement on prices under former Prime Minister Malcolm Turnbull.

In the 12 months to June 2018, the NEM wholesale spot price averaged between $73 KW/h in Queensland and $98 KW/h in South Australia, according to the AEMC.

The Coalition has focused on reliability and price in the creation of its energy policy agenda, but uncertainty over whether it will commit taxpayer funds to new coal generation has cast a shadow over its commitment to addressing climate change.

Prime Minister Scott Morrison says he remains committed to meeting Australia’s 2016 Paris commitments, to reduce 2005 emission levels by 26-28% before 2031.

However, Labor’s target is more ambitious, promising 45% reduction in emissions over the same period.

Opposition Leader Bill Shorten said on Friday his plan would “drive down prices” on the back of $5 billion in “energy modernisation” funding.

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