Ministers for the Department of Industry, Science,
Energy and Resources

8 April 2015

Greg Jennett

Subject: Energy White Paper

E&OE

JOURNALIST: Well Minister this Energy White Paper had its genesis back in Opposition. You’ve delivered it today and you’re calling it a document of both policy and of action. Look, what does it mean for consumers? Is there any assurance in this document that they will have cheaper or more energy to access because of it?

MINISTER: Well it is a document about setting a framework around the future and dealing with the current issues that energy consumers and producers face. So we are putting in place an ACCC enquiry and we will be rolling out the detail of that next week to give greater transparency in the gas market. We are pursuing privatisation in terms of electricity generation and distribution because we know from experience that that reduces electricity prices. That’s the experience in Victoria and also in South Australia. We will be doing projects like rolling out smart meters to make energy overall cheaper for consumers. So it is about giving consumers the opportunity to save money on energy while at the same time….

JOURNALIST: And with those smart meters, what will they enable as far as flexibility and pricing? As I understand it they will open up the possibility of variable peak rate pricing etc.?

MINISTER: Well they will open up a range of pricing across the day. Electricity when demand is high is the most expensive and if we are to reduce the cost of electricity we need to do two things. We have to manage demand and that means householders and consumers have a role to play in when they use electricity. And secondly we need to make electricity cheaper when the demand is lower so overall the average price of electricity of a household goes down. That gives them the opportunity to save on their electricity bill, at the same time lowering the costs to distribution companies at the same time in terms of providing that electricity.

JOURNALIST: And when do you think that those pricing regimes will start to kick in and become available to consumers?

MINISTER: Well they are being rolled out across the states and we are not talking about a mandatory requirement for households, particularly lower socio-economic households, to use smart meters. But we want to be able to demonstrate to households how they can save on their electricity bill and if you talk to householders their electricity bill has now replaced their breakfast table conversation that they used to have about petrol prices. Electricity is the number one concern in terms of energy costs in the household and we want to find ways which we can use technology to make it cheaper for them.

JOURNALIST: Well funnily enough I did want to take you to fuel oil, not so much the pricing of it, but an unfinished piece of business thrown up by the White Paper is the fact that Australia doesn’t hold sufficient oil in reserve in the event of a crisis. How did it come to be that we slipped so far below the international standard that we are supposed to stand by which is 90 days of spare storage?

MINISTER: Well firstly let’s be clear, this is about compliance with an international treaty to deal with an international supply issue in relation to a shortage in another country. Secondly, it is not about Australia’s own energy security and fuel supply.

JOURNALIST: Why is that? Why does it not relate to energy security in some way?

MINISTER: Because energy security in Australia is managed through the supply, of particularly oils and refined products, through refineries and through importation and there is not a supply issue in Australia. There is however an international treaty and yes we are non-compliant. We are non-compliant because our own production of oil has decreased and our demand, in terms of transport in particular, has increased. That’s made us non-compliant. That non-compliance occurred under the previous Government.

And what we have committed to in the White Paper is to address that issue this year. Now that requires us to either buy tickets, that is basically options, or to build physical storage here in Australia. Either option is extraordinarily expensive, we’re talking billions and billions and billions of dollars, and ultimately…

JOURNALIST: And who is going to foot the bill for that?

MINISTER: Well ultimately motorists will pay the bill for that. And the impact on the cost of fuel at the bowser will be significant. So we need to look at this very carefully. As I say, it’s not a fuel security issue for Australia, it is an international treaty obligation and we are working with the International Energy Agency about ensuring that we resolve this issue this year.

JOURNALIST: But you are clearly signalling that this is going right down the line to motorists and fuel users, but what quantum, you are saying very expensive, but what might the motorist see on the litre price of fuel to try and build this back up again?

MINISTER: What we are talking about is numbers between half and two cents a litre. But any increase in the price of fuel is an impact on the household budget, is an impact on the cost of moving freight in Australia and therefore has an impact on the economy. We want to explore all the options to ensure that we do respect our international obligations but at the same time not put an impost on our economy which doesn’t affect the supply of fuel in Australia.

JOURNALIST: So that’s a half to two cents a litre, what - beginning later this year when you announce the policy fix or for how long would consumers feel this?

MINISTER: Well that’s what we have got to work out but it won’t be an immediate impact but it will be an impact over time. And once you reach whatever the number is, whether it is half a cent or two cents, then it will basically plateau at that give or take the price of oil. So we are talking, as I say, about a significant cost impost. A cost in national terms of billions and billions of dollars. We do need to make sure we get it right.

JOURNALIST: Do you think the public were alert to this? There hasn’t been a lot of discussion about it before the White Paper. How prepared are they, do you think, to go out and bear this cost that you are obviously flagging today?

MINISTER: Well that’s one of the conversations and discussions we need to have. It is an international treaty, as I say it doesn’t affect the supply of fuel in Australia and least of all at the bowser, so do Australians want us to remain compliant? Do they want us to actually be paying these billions and billions of dollars to be compliant with an international treaty? That’s part of the discussion we will be having along with…

JOURNALIST: Is that an option from your point of view? Just abrogating the treaty, walking away from it? Is that viable?

MINISTER: Well we are going to explore all options and it’s a discussion which involves the whole of Government and Julie Bishop, as the Minister for Foreign Affairs, has a very strong view and other members of Cabinet have views as well. So we will need to work through those issues. We will need to have that discussion with the motoring public and we will need to make a decision, but that is what we are setting out to do. As I say, we inherited this position from the previous Government and we will resolve it this year.

[Ends]

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