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Energy debate: ‘Big stick powers should be last resort’

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Energy debate: ‘Big stick powers should be last resort’

Mark McKenzie

The chairman of the Council of Small Business Organisations has penned an open letter to Australia’s SMEs regarding soaring business energy costs, which he said for many have “more than doubled over recent years”.

In the letter, written following COSBOA’s recent energy summit with industry and politicians, chairman Mark McKenzie said that successive governments have developed many draft policies but have failed to implement any real change because of hard-line pushes within the major parties.

According to Mr McKenzie, the debate around energy has “now degenerated into an ideological debate about whether ‘coal is good’ or ‘coal is bad’”, with neither side looking in any meaningful way at how to address soaring costs and its impact on economic growth.

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He also said that the government’s so-called “big stick” powers are more valuable as a threat to major energy companies than in their full implementation.

Mr McKenzie’s full letter has been republished, with permission, below.

It comes a week after federal Greens MP and the party’s energy spokesman, Adam Bandt, announced a six-point plan aimed at reducing SME power bills through the use of renewable energy.

COSBOA chairman Mark McKenzie’s open letter on energy policy

Those of us who are old enough to remember will recall that the national energy and greenhouse emissions debate started nearly 30 years ago. Over that time, successive Australian Governments developed numerous draft economic and other policy instruments that sought to strike a balance between Australia’s economic and environmental aspirations.

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Sadly, all these actions failed to secure bipartisan support of the Australian Parliament and are now just history.

Worse still, the prospect of an early resolution of this important issue does not appear to be close.

If anything, we seem further away with the whole debate having now degenerated into an ideological debate about whether “coal is good” or “coal is bad”.

While some might take comfort in the proposition that a new government will resolve this 30-year impasse as a new wave of national community concern about climate change peaks, the powerful interests of the resources unions like the CFMEU suggest that a new Labor Government will face the same internal challenges that the Coalition government has faced from the small band of climate deniers that exist within its own ranks.

We know that the majority of Australians want the environment to be better managed and they also want a healthy economy.

As respected economist Brian Fisher has pointed out in his latest report, Labor’s policy to reduce emissions beyond our commitments to the Paris Agreement will push wholesale energy prices up by 58 per cent, cost the economy $502 billion and wipe out 336,000 jobs by 2030.

The Coalition, which promises to adhere to the Paris Agreement, will also cost the economy $89 billion and 78,000 jobs.

So, why would the small business community in general want to buy into this highly contentious debate? The answer is simple: it is costing us dearly.

Electricity costs for many small business owners have more than doubled over recent years. Few can simply pass on these increases to their customers due to price competition from their big business cousins (who have been somewhat protected because of using their buying power to secure good supply prices), or because of the strong competition coming from the ever-increasing consumer use of online shopping.

Unlike households, many small businesses operate from leased premises, which means that even if they could find funds to invest in things like solar panels, such a move would simply be improving the premises of the landlord and give the landlord an excuse to charge more rent.

And so small businesses are effectively sandwiched between rising electricity costs on the one hand and an inability to pass on costs to consumers on the other.
It is for this reason that COSBOA is supportive of the Coalition’s proposal for the introduction of the so-called ‘big-stick’ legislation.

Small business understands, and has sympathy for, the arguments advanced by the energy retailers about the risk to future business investment that is inherent in such legislation. But, in the absence of any other solutions, the threat of such action provides one of the few mechanisms available to government to address what is essentially a failed national market.

Those who understand the mechanics of competition law will tell you, however, that if the full force of the big stick is ultimately used, we will have all lost, as any such action must clearly demonstrate that damage has been suffered by consumers.

In other words, action can only be taken if the regulator is able to demonstrate that small businesses have ‘gone to the wall’ because of high energy prices.
The big stick must therefore be considered as a last resort mechanism.

That said, it is not just government that can deliver solutions to the current challenges. Small business owners also have a responsibility to take control of their own energy use, but will need to be supported by their electricity suppliers, given obvious time and capacity constraints.

The nature of this opportunity was discussed at an energy summit convened by COSBOA recently and attended by federal politicians, representatives of the electricity industry, small business and consumer bodies.

Delegates agreed that an improved relationship between small business customers and their energy retailers would go some way to empowering small business owners to take control of their energy use, through ready access to detailed energy use information and the implementation of co-operative and practical actions that improve the energy productivity of individual businesses.

Thankfully, the foundations for these actions have been provided by recent announcements by the Australian Government, which include the establishment of a Business Energy Advisory Programme and a new programme offering capital grants of up to $20,000 for investment in energy efficiency improvements.

Another area for immediate focus is the better harnessing of Australia’s abundant and indigenous natural gas reserves for power generation (i.e. gas fired peaking to support renewables), as opposed to just shipping it all to international markets.

Summit delegates noted that these two actions alone could deliver significant improvement – and all without even mentioning the word “coal”.

Delivering affordable, reliable and low carbon energy use is not hard. It just takes goodwill and vision on the part of all stakeholders.

It would be great to see the same spirit of endeavour applied to the early development of a bipartisan national policy on climate and energy.

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Energy debate: ‘Big stick powers should be last resort’
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