Origin Energy CEO says 'emotive rhetoric' undermining policy debate
Summary: Origin Energy chief executive Frank Calabria has taken aim at kneejerk government measures to tackle electricity prices and appealed for a more "rational" response that covers all parts of the supply chain, reflecting the growing frustration within the sector that it has become an easy target for politicians ahead of next year's election.....
Writing in Monday's The Australian Financial Review, Mr Calabria calls for the "emotive rhetoric" around energy suppliers to be dropped in favour of a more productive discussions that addresses the root causes of higher power prices.
He takes issue with the federal government cherry-picking just a high-profile handful of the Australian Competition and Consumer Commission's 56 recommendations for reform in electricity supply.
Mr Calabria, who will give a keynote address on the first day of the AFR National Energy Summit in Sydney on Wednesday, says while the measures might provide some short-term price relief, they "do not get to the core of what drove up power prices in the first place". He urges the focus to be put as well on expensive solar subsidies and network costs.
"By just adopting five of the ACCC's recommendations the government would be missing a vital opportunity to regain Australia's comparative advantage in energy," he writes.
The power supply sector is bristling after being labelled "bandits" and "price-gougers" by former energy minister Josh Frydenberg in the dying days of the Turnbull government, a line of attack that has been continued under new Energy Minister Angus Taylor.
After the Coalition effectively scrapped the proposed National Energy Guarantee by dropping the emissions reduction element of the policy, the government has instead turned to the "big stick" measures and threats to try to force down power prices.
But Mr Calabria calls for "a productive discussion about all the issues across the whole supply chain, rather than emotive rhetoric that discourages a rational policy response".
'Everyone across the industry has a role to play'
After numerous reviews of the sector over the past few years, most notably a 14-month deep-dive inquiry by the Australian Competition and Consumer Commission, the threat of a royal commission is still handing over the industry as Mr Taylor ramps up pressure on retailers to bring down prices.
Mr Calabria agrees with Mr Taylor on the need to bring down power prices and the need for industry to stamp out "dodgy practices" and to communicate better with customers. But he adds that "everyone across the industry has a role to play if we want to make energy more affordable for the long term".
He has previously pointed to several different factors to blame for the rising cost of power, including high reliability standards imposed on networks, insufficient notice given on recent coal plant closures and green costs. Mr Calabria said in August that "sleeper" solar tariffs – including the small-scale renewable energy scheme and state-based schemes that support solar, now probably account for up to 15 per cent of a household's bill.
ACCC chairman Rod Sims last week underscored how unnecessary rooftop solar subsidies and excessive state solar feed-in tariffs are inflating power bills as he also called for a broader take-up of the watchdog's recommendations to achieve the 25 per cent cut in bills for households and business that the measures collectively are expected to achieve.
But Mr Sims also blasted retailers for "ripping off" their loyal customers with excessive standing offers and "outrageous" late payment fees and said it was "their fault" that government had intervened after they had failed to tackle the issues years ago.
Still, Mr Calabria notes Origin was the first retailer to deliver flat or falling electricity tariffs in most states from mid-2018. That required it to absorb $80 million of costs from green schemes and higher network charges in NSW, instead of passing them on to customers.
Mr Calabria joins EnergyAustralia chief Cath Tanna in voicing reservations on the idea of a "default" electricity retail price that was proposed by the ACCC and has been enthusiastically backed by the federal government. Mr Sims says such a tariff would provide a benchmark in each distribution area for discounts to be priced against, allowing consumers to compare offers, and would also eliminate standing offers, which are "ripping off" loyal customers.
While the default tariff is supported by some industry leaders, including Alinta Energy boss Jeff Dimery, others point to the risk of setting it too low, with the result that competition would be squashed as smaller retailers found it harder to lure customers away from rivals.
The Origin chief says such a complex reference price would take time to get right and would need to be regularly updated. He points to measures that can immediately be taken to help customers such as banning unanchored discounts that confuse customers and banning door-knocking, a practice that can target vulnerable customers.
The next chance the retailers will have to modify prices is in December when they will gazette new retail electricity and gas tariffs to apply in Victoria in the new year.