Interview with Elysse Morgan, The Business, ABC News
11 December 2018
ELYSSE MORGAN: The government has committed to bringing down power prices for consumers - but what does the Energy Minister, Angus Taylor, consider a fair price for power? And what about profits? The government has slammed power companies for making too much - but its own energy firm, Red Energy, has been making hundreds of millions of dollars too. I spoke with Minister Angus Taylor earlier. Angus Taylor, as I understand it, the divestiture legislation allows the government to force divestiture if it forms the view of excessive profit making. So what's an excessive profit?
ANGUS TAYLOR: Well first of all, Elysse, it's much broader than divestiture. This is actually about dealing with bad behaviour that we've seen historically in the retail market for electricity, as well as in the wholesale markets - both the contract market and spot market. We have seen bad behaviour in the past, and this is about an escalating series of penalties if you like, actions that can be taken by both regulators, courts, and in some cases the Treasurer, in order to respond to those outcomes.
ELYSSE MORGAN: Does profit have anything to do with divestiture?
ANGUS TAYLOR: Well, competition is what drives it. I mean I've got no problem with companies making profit. What I've got a problem with is anti-competitive behaviour.
ELYSSE MORGAN: You've accused the big energy companies of taking record profits from the wallets of hardworking Australians. What level of profit would you be happy with?
ANGUS TAYLOR: Well, what I want to see is competition. What's clear - let's go through this - is that we've seen a doubling of profit - a doubling of profit aligned with a more than doubling of wholesale prices in the last few years, Elysse. Now, if that had been happening in a highly competitive market where there were many, many players jostling for market share, and the profit had come because they were selling new products that were loved by consumers, that would be a very different situation. That is not the case.
ELYSSE MORGAN: The average household bill is around $1500 to $1600 a year. What do you want to see it at? What's your end game here? What does success look like to you?
ANGUS TAYLOR: Look, I've been in business for long enough to know that markets will determine that. But I want competitive markets to determine that and I know it's going to be lower.
ELYSSE MORGAN: Why is this not competitive? You have many retailers out there competing for customers.
ANGUS TAYLOR: So we've got 70 per cent to 80 per cent market share sitting with three players. That is a red light for any competition regulator. On top of that, we've seen behaviour which is clearly reducing competition. We saw Hazelwood withdrawn from the market with substantial increases in prices resulting that.
ELYSSE MORGAN: That wasn't an anti-competitive move, NG just didn't think it was economic to keep it open.
ANGUS TAYLOR: When Northern and Hazelwood were withdrawn from the market there was a significant loss of competition in those markets and we saw that in the bidding behaviour laid out very clearly by the ACCC. We've seen loyalty taxes imposed on customers. In Victoria the premium of standing offers over market offers, which is the loyalty tax, it's the extra that's been charged to those loyal customers, doubled. Doubled, Elysse, in four years - went from $250 to $500 for your average customer.
ELYSSE MORGAN: Minister, I'm still unclear about what you're trying to achieve here. The average household bill is about $1500 to $1600 a year. You've said it's all about bringing prices down for customers. How much do you want them down by?
ANGUS TAYLOR: Well, look, at the end of the day competitive markets determine that Elysse. The ACCC laid out [inaudible]…
ELYSSE MORGAN: But you're bringing in legislation to say you want those prices down, so what price are you trying to achieve?
ANGUS TAYLOR: I'm trying to achieve more competition which I know will lead to lower prices. The ACCC made clear that there were substantial price reductions up for grabs, and we want to see that competition in the market place. I've got to tell you, the politicians, the parliamentarians in the Federal Parliament have all got to decide, the Labor Party in particular, who's side are they on here.
ELYSSE MORGAN: On the competition front, the government owned Snowy Hydro, has gentailer Red Energy, it has around two-thirds of the customers of EnergyAustralia, but it makes bigger profits than EnergyAustralia who you've accused of being a bandit and gouging customers.
ANGUS TAYLOR: Well, you know, we want to see good competitive behaviour from all the retailers and generators in the marketplace. We've made clear [inaudible]…
ELYSSE MORGAN: Do you think perhaps you should speak to your own energy company before you go and look at the private sector?
ANGUS TAYLOR: Well, Red Energy has reduced its standing offers by 10 per cent, Elysse and we're pleased with that, that's a good move. It's actually made more significant reductions than EnergyAustralia.
ELYSSE MORGAN: That's already for only a very small number of customers, those on particular types of benefits.
ANGUS TAYLOR: Well, we want to see competition driving down prices across the board, Elysse. We want to see energy [inaudible]…
ELYSSE MORGAN: So if Red Energy, with 1.1 million customers, cut its prices, do you not think the rest of the industry would follow?
ANGUS TAYLOR: We want to see it all come down. We want to see it all come down, right. That is the crucial thing now. It's a matter of responsibility. Look, the business community - and I worked in the business community for decades before I went into parliament. It's unusual these days for that to be the case. But I know, from my experience, when you're in an essential service you have a special responsibility. You have a special responsibility to your customers, and you have a special responsibility to the country.
ELYSSE MORGAN: As the minister responsible for Red Energy, will you be applying pressure to it to lower its prices as soon as possible?
ANGUS TAYLOR: We already have. We already have and we've seen substantial reductions in this [inaudible]…
ELYSSE MORGAN: Only for a very small number of its customers, a couple of thousand. Why not for all of its energy customers?
ANGUS TAYLOR: Well Elysse, we will be asking all energy companies to do the things that are going to bring down prices across the board in the coming months and years. We've been clear about that. What I asked for from 1 January was a reduction in standing offers, Red's done that, and most of the other energy companies have done that. That's a good thing. It's good to see.
ELYSSE MORGAN: Minister, thank you for your time.
ANGUS TAYLOR: Thanks Elysse.