Interview with Leon Byner, Radio 5AA, Adelaide
10 April 2015
Subject: Energy White Paper, country of origin food labelling.
JOURNALIST: Don’t you think we’re tempting fate by not storing three months’ supply, in case there is a ripple in the supply chain?
MINISTER: Well no, we’re not. And this is not to do with our own fuel security or fuel supply – that is covered through the processes that are currently run through the oil companies etc. This is an international treaty, it’s to deal with major oil shocks in the world, and so the first war in Iraq and things like that have triggered this. But, it is about an international treaty where if there is a shortage of oil in some place in the world, the signatory countries, of which Australia is one, will release oil from its stocks to cover the supply of oil to that country.
Now, as I say, it’s an international treaty, it’s part of us being global citizens, but because our oil production has fallen dramatically and our fuel consumption continues to grow, we are non-compliant. We’ve been non-compliant now since 2012. So, as you quite rightly said in your introduction, the previous Government got this problem and we’ve inherited it, but that’s not to say we don’t deal with it.
So we’ve really got a few choices. We can physically build storage across Australia, remembering that the fuel you put into that storage has to be taken out again at least every three months or it will just go stale and that is hugely expensive and some estimates, as you again quite rightly pointed out are in excess of $7 billion.
You can buy tickets, which is a bit like options, and you can use other countries’ storages to cover your international treaty obligation. Whilst that’s cheaper, again, you’re talking billions of dollars.
And then there’s the radical option where we say, well look, this is all well and good, but we could spend that money better on building schools and roads and hospitals and perhaps we don’t need to be part of this treaty any more. We are, as a country, a net energy exporter, we’re actually an energy superpower in the world. We are one of the few countries that has vastly more energy than we need.
JOURNALIST: And yet our prices are so damn high, aren’t they?
MINISTER: Well, they are in electricity and I’m sure we’re going to come back to that Leon.
JOURNALIST: Yes, we are.
MINISTER: But in terms of what we pay for fuel and oil and all those sorts of things, we pay world parity.
MINSTER: But in reality, this treaty is pre- large LNG production across the world, including in Australia, so it doesn’t take into account that we export huge amounts of LNG. And it doesn’t take into account the fact that we export uranium and coal and all of those things. It just says you’ve got to have this in oil. Now, we’re looking at this option. We do want to be good international citizens. But it is coming at a price and that price will ultimately be paid by motorists.
JOURNALIST: Alright, I need to point out, and I think you know this, but it’s fairly recent that we in South Australia and in other states had a shortage of diesel, because there was a small ripple in the supply chain. So, we’re still on a bit of a knife edge you know. You know that, don’t you?
MINISTER: Well, I do Leon, but quite often these issues are not as a result of not having enough fuel in the country or not actually having enough fuel at the depot, it’s actually in relation to transport difficulties and things like that. Train derailments and all sorts of things. Occasionally it’s due to a ship turning up that’s off-spec and we had a situation which combined with a rail derailment in Western Australia caused a shortage of distillate up-country, but it was actually more to do with a train derailing than the off-spec…
JOURNALIST: But, in the event of those things though, we are then subject to either increased prices, lack of supply or rationing. That’s not a good outcome, is it?
MINISTER: Well, we can do whatever people want to pay for, Leon. If you want to have an absolutely gilt-edged, guaranteed fuel supply and you want us to store fuel across Australia, we can do that. But it’s going to cost money. And at the moment, I would have to say in all honesty, whilst it’s not perfect, the system works pretty well. And it’s worked that way for literally decades.
JOURNALIST: So, are you telling us that, looking at all circumstances, Ian, you would say that we’re better off sticking with what we’ve got now?
MINISTER: Well, in terms of our own fuel security and our own fuel supply, absolutely. If the Government intervenes and it starts running these schemes, we’ll have all the inefficiencies, all the extra costs and only one person pays for that, Leon, and that’s the motorists.
JOURNALIST: Alright, now let’s talk inefficiencies and discuss electricity.
JOURNALIST: Now look, we’ve got a massive problem here in that the cost of living has been pushed up primarily by these utility costs, which are just out of control and particularly in South Australia. Are you seriously going to look at the option – because the power companies want this – to charge us more for peak power use and less for off peak? And of course the smart meter issue, we, Pat Conlon, bless him, in South Australia …
MINISTER: I remember Pat, he was a good guy.
JOURNALIST: Yeah, I know. He was fantastic. And he said, ‘you’re not going to get smart meters on my watch’. And indeed, in Victoria, the whole thing was a damn disaster. So where do you stand on this business of charging more for peak time and less for off peak, when already, we are paying the highest power prices in the world?
MINISTER: Well, two things. Firstly, Pat Conlon, towards the end of his time as a minister softened his position about smart meters, but I’m not going to distract the debate there. Secondly, in terms of time of use charging smart meters, because they go hand in hand, it’ll only be those who want it that get it. So you can continue on your current tariff Leon, and continue to watch that tariff rise, but if you’re a big household user of electricity, there is money to be saved in smart meters. Now, that is the reality of it. That’s the demonstrable fact from the experience in Victoria, yes …
JOURNALIST: Do you need to be a big consumer though, for that to be the case?
MINISTER: Well, not necessarily. But there are things that you have to watch and that’s why we wouldn’t be imposing smart meters particularly on people on welfare or pensions or...
JOURNALIST: Okay, but what I said, the price of gas has got a lot to do here. Because we’ve got this very rigorous debate at the moment where WA reserve 15 per cent for local consumers and the rest is exportable at any price. There’s been a resistance not to do this. The arguments are that if we do it, there’ll suddenly be a drop in investment – I’m not sure that that’s a story that’s going to stand up – but nevertheless, isn’t it odd that we are a major global energy supplier, as you said, an energy superpower, as you said, and yet our consumers are being treated as if this is something that’s very rare and therefore expensive.
MINISTER: Well, it’s not very rare and therefore expensive. It is expensive, but it’s expensive because that’s the global price for gas and in terms of Western Australia’s reservation system, there are endless reports that show their price is actually higher because of the distortion that puts in the market.
But rather than fight over the economics, the reality is that gas, like every other commodity we produce in Australia, like wheat, like beef, like coal, like everything else, is priced on an international market. Now, we don’t reserve a portion of the wheat crop for bakers in Adelaide to bake bread at a cheaper price for the consumer. We take an international wheat price and that’s the price that the bakers pay for their flour. The same with gas. It is an international price and it was actually Santos, a good South Australian company, in fact, a fantastic South Australian company, who decided that by building an LNG plant in Gladstone, they could have that international price reflected into the whole east coast market. And that’s what’s happened, Leon.
JOURNALIST: Yeah, well, see the problem is that as gas goes up in price, the electricity companies who use it to generate could actually make more selling it on the open market than using it to power electricity.
MINISTER: Well that’s if they’ve got a current long term contract. But your point’s right.
JOURNALIST: Yes. But what are we going to do to bring electricity prices down to where they’re realistic?
MINISTER: Okay, well what we’re going to do is we’re going to continue to have energy market reform, which is a very boring term, I know, Leon.
JOURNALIST: What does that mean?
MINISTER: It means basically …
JOURNALIST: I want to listen to what that means.
MINISTER: Basically it means privatisation and regulation by someone like the AER and rule setting by the AEMC. Now the Australian Energy Regulator is doing a fantastic job. They’ve got a new Chief Executive, and Paula Conboy is doing a fantastic job. She’s actually putting the price of electricity in New South Wales down. And along with the privatisation that Mike Baird is going to bring, it again is demonstrated by the experience in Victoria, that you will actually lower the rate of increase, or in fact in some cases, such as we’re seeing in New South Wales, you’ll actually lower the cost of electricity.
JOURNALIST: We’ve got to do something about this silly nonsense where companies can spend whatever they want. The more they spend, the better. They then go to the regulator and get it back and they still add the price of electricity on top of that.
MINISTER: No. You’re dead right Leon, and yes, we are. And Paula again is wreaking havoc amongst that. And it wasn’t the corporates who were doing it, it was the state-owned distribution system in particular, so New South Wales and Queensland are particularly guilty in that regard. And so she has cut a swathe through that. I don’t want to build her up too much, but she has done a great job in the short time she’s been in.
JOURNALIST: So, are you, when can we expect power prices to come down then, Ian?
MINISTER: Well, it depends. I mean, South Australia is going through a privatisation process and you’re right, the increase in the price of gas is impacting on that market. But, generally what we’re seeing is savings being achieved through tighter regulation. And the AER is taking a very tough approach. How soon that reflects in the South Australian market, Leon – I’ll have a chat to Paula when I see her next week and ask her about that. But, I can tell you that in New South Wales, and to a lesser extent in Queensland, she is making a difference and the AER is winning those cases, which, you’re quite right, in the past, they could take …
JOURNALIST: Well, they lost and it cost a billion dollars.
MINISTER: Yeah, I know, but that’s not the case now. We’ve got, we’re taking, she’s put real teeth into the system and she’s out to regulate.
JOURNALIST: Good. Okay, I need to quickly ask you about alternative and renewable energy.
JOURNALIST: Where are we going with this?
MINISTER: Well, look. When I signed up to the second tranche of the Renewable Energy Target with Penny Wong, we agreed that there would be a 20 per cent target and that equated to 45,000 gigawatt hours. The Government has put on the table a proposal where we maintain 45,000 gigawatt hours and, in actual fact, because energy consumption nationally is falling, that equates to 23 per cent. Now, that is a sound policy basis. And it also is going to be very difficult to achieve. What we’re saying in the next five years, you’ve got to build as much renewable energy generation that you built in the previous 15 years of the renewable energy scheme.
JOURNALIST: We need to get solar to the battlers though, Ian. Don’t we?
MINISTER: Well, absolutely. And that’s why we’re not touching the household scheme, or the SRES, as it’s called, the Small Renewable Energy Scheme. And battlers, as you term them, can go out and they can have energy solar panels fitted to their roof at quite a reasonable price and a pay-back period of less than five years these days.
JOURNALIST: Okay, listen, before I let you go, I want you to put your other hat on, because I know you’ve had – you know Barnaby Joyce has told me a few things about these talks you’ve been having about labelling and how the big fat cat corporates have been really hammering you. When are we going to get some good country of origin labelling?
MINISTER: Yeah look, it’s coming. And can I say, in all honesty, Barnaby and I were in Sydney and we sat down with some of those corporates as you call them and they are succumbing. They are succumbing to common sense.
JOURNALIST: I’m being polite in calling them what I’m calling them.
MINISTER: Yeah I know, I know. But, so we’re working through that now. We want to get an accurate costing. We want to market test – so we want to go out to consumers and say ‘is this what you want?’ Barnaby and I are taking back a proposal to cabinet, a second proposal.
JOURNALIST: And when they push the nonsense about oh, it’s going to cost us more to tell you it’s from China, say ‘well what do you do when you do a promotion with your figures and figurines and you change your labelling, do you put the price up then’?
MINISTER: Exactly right, Leon. I don’t buy it. I just don’t buy it. Look you’re talking half a cent a bottle or can, or something like that, but we want to establish that cost just so we can push back on that argument. But look, we are being meticulous, we are knocking down the opposition to this and the overwhelming support from consumers on this means that we’re not going to let up and we’ll take another submission back to cabinet in August and then we’ve just got to get the States on side, Leon, and that might be a bit of a task.
JOURNALIST: Well, it shouldn’t be.
MINISTER: It shouldn’t be at all. It’s just common sense.
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