You are here
Press Conference with the Treasurer, and the Minister for the Environment and Energy
I am here with the Treasurer and the Minister for Energy to talk about the outcomes of the meeting we had with the energy retailers together with the Deputy Prime Minister, but before we move on to that, I want to restate how Australia welcomes the new and harsh sanctions imposed on North Korea by the Security Council, supported by China and Russia, as you know.
The North Korean regime's conduct is as illegal as it is reckless, as provocative as it is dangerous.
It threatens the peace and stability of the region, of the world and they have to come to their senses.
Every economic pressure that can be imposed, must be imposed and Australia is playing its part. While every nation should be united in bringing this rogue regime to its senses, we note especially the importance of China's role. As North Korea's major economic partner, China has unique leverage and we welcome in particular, China's support for these strong and much more harsh sanctions imposed by the Security Council.
The regime must come to its senses and stop its illegal provocations.
Now, let me move on now to the meeting we have just had with the energy retailers who provide a vital essential service to over 8 million households and businesses.
Now, what we have sought to do is to cut a better deal for Australian families. And we have some very good outcomes from the meeting. More work to do, but very good progress. I will come to that in a moment.
But it is important to understand this is just part of our program of supporting energy affordability and reliability.
One of the biggest factors in the increase in energy prices recently has been a very big rise in the price of gas, as you know.
We have taken decisive action with the gas industry to limit exports to ensure that there is enough gas for the domestic market on the east coast. That was a very tough call, very strong action on the part of the government.
We have already seen spot prices, or prices for gas in the spot market, come down in response to that.
In terms of a medium term response we have also, as you know, Josh has taken action to abolish Limited Merits Review which basically is designed to prevent the companies that own the poles and wires, the network companies, from gaming the system and appealing against the decisions of the regulator as to how much they can charge for those assets.
Of course, we have got the ACCC, at Scott's direction, investigating the way in which the retailers are operating in the electricity market and also of course, examining the gas market.
We have also made important reforms to the way in which the gas pipeline market operates and Josh can say a little bit more about that if you wish to follow that up.
So right across the board we are taking action.
And on the longer term, we are going to build the largest single energy storage in the Southern Hemisphere. Snowy Hydro 2.0 as you know, will be the biggest battery in the Southern Hemisphere. Renewable energy making renewables reliable.
So this is a comprehensive approach.
Now, with the retailers, we know that millions of Australian families are paying more than they need for their electricity. They are on plans that have run out, discounted plans that have run out and they are now on a standard offer and paying too much for their electricity. They have got people that are on the wrong plans.
But the complexity of the various offers makes it very difficult for many families and businesses to understand what is the right deal for them.
Now, we are determined to protect those Australian families and we are determined to ensure that they pay no more than they need to for their electricity, that they will always have the best plan for them.
We have met with the retailers today and I can confirm now what has been agreed at the meeting.
The retailers have agreed that they will write to their customers who have reached the end of a discounted plan and outline in plain English alternative offers that are available.
This could for instance be included in the next household bill and it would include directing them to the Australian Energy Regulator's Energy Made Easy comparison website or another objective independent comparison website.
They are going to outline to the government and to the ACCC the steps they are taking as individual companies to help customers to better offers. Particularly, what they are doing for families and individuals under a hardship program, including a commitment that those customers will not lose any benefit or discount for late payment.
They have committed to producing clear user-friendly fact sheets on terms, late payment penalties, early termination payments and to work with us and the Australian Energy Regulator on key components of this including comparator rates.
This is very important that people can understand what the alternatives are.
They have agreed to regularly report to the Australian Energy Regulator of how many customers are on offers where the discount period has expired.
Very importantly, they have supported us expediting a rule change - and this can be done within around six weeks - under the national electricity law which will require a clear disclosure at the end of a discount period or a benefit period of the dollar impact of not doing anything based on past consumption.
So what that means is, they will be required, when a customer is coming to the end of their discounted plan or a benefit plan, to write to them and say: ‘You are coming to the end of this plan. If you don't do anything, you will go back onto the standard rate. Based on your past consumption, that would mean you would be paying ’X’ dollars more. Here are some alternatives’.
In other words, we are determined that that they provide as much information as they can to the customers to ensure the customers can make those choices.
So this will ensure that Australian families, thousands of Australian families, hopefully millions of Australian families, are better informed and will then be paying less for their electricity because they will be on the plan that works best for them.
Now, they are going to report back to me by the 18th of August on progress and they will hold a subsequent meeting with us later in the month.
I will now ask the Treasurer to talk about the work he is doing and then Josh will continue and then we will take some questions.
THE HON. SCOTT MORRISON MP, TREASURER:
Thanks Prime Minister. In this year's Budget in response to what are flat household incomes and the struggles that many Australian families are presented with we made two very important pledges. That was, we were guaranteeing the essentials Australians rely on and the action we’ve taken, whether it is on Medicare, on schools funding, on the NDIS, and all of these areas we are following through on that.
And we also said that we would be putting downward pressure on the rising cost of living and that was the business of today's meeting.
This is the Turnbull Government following through on the commitments that we announced in this year's Budget and a key part of that has been to maximise the pressure that exists for energy retailers to ensure that millions of Australians get a better deal on their electricity prices. That was the outcome of today's meeting, that we are putting millions of Australians in the position to get a better deal on electricity prices.
Now, the strongest markets are the markets where the consumer has the maximum possible strength in that market and the tools that the Prime Minister and the Energy Minister, and I commend Josh on the work he has done here, the tools that we are putting in place here for customers to be stronger in the market, to take control over things that I know Australians feel frustrated about, that they have no control over and that they are at the mercy of big energy companies.
What we are doing here is giving them more power back on their power prices and I think that is one of the key issues that needed to be addressed - consumers having more opportunity to get a better deal but also better understand how they are using energy themselves and how they can reduce their energy bills and have the tools and the decisions that they can make to give effect to that.
This is why I asked, as part of the Prime Minister's energy plan, to get the ACCC, our competition watchdog to make sure that these tools and these pressures were available in this market to give households the best possible deal.
Thanks, Scott. Josh?
THE HON. JOSH FRYDENBERG MP, MINISTER FOR THE ENVIRONMENT AND ENERGY:
Thank you, Prime Minister.
This is a very significant and substantive set of reforms to come out of a meeting today with companies that represent some 8 million Australian households who they provide an essential source of power to.
Now, the Australian Energy Regulator has told us that an Australian household can save more than $1,000 a year by changing contracts or changing retailers.
But at the same time, the Australian Energy Market Commission has told us that 50 per cent of households have not changed retailers or contracts in the last five years.
So what the Prime Minister has been able to achieve today is a commitment from these companies to one: providing better information to consumers and families, telling them when their discount period has ended.
This information is secondly going to be provided in a more comparable way so that they can better compare the different offers available in the marketplace.
And thirdly, a significantly concession from the companies to assist vulnerable consumers.
And consumers now won't be subject to losing all of their discount for a late payment if they are a hardship customer. That is going to help thousands of Australian families.
It is a significant set of reforms. It builds on what the Prime Minister has already achieved in other areas and there is still more work to be done.
Prime Minister, was there a discussion on the clean energy target given the energy companies say they need certainty for investment, to bring more power online and bring down prices?
We certainly did discuss energy policy but the focus of the meeting, as you can imagine, was on the actions that we are talking about here, which is protecting consumers right now.
I mean, when you tackle–
What about greater investments in the industry?
Hang on - when you look at the energy sector, there are short-term measures, there are medium-term measures, there are long-term measures.
Clearly, a certain investment climate is required for long-term investment. We totally understand that and we have already committed to 49 of the 50 Finkel recommendations, as you know - Josh has been handling that.
There are medium-term measures, the abolition of the Limited Merits Review is an example. That is not going to have an impact tomorrow but it will have an impact over the next few years.
Then there are short-term measures, the price of gas is absolutely in the here and now. This is another one.
Australian families are hurting now.
They want protection and support now.
They want their government to stand up for them now.
They want their government to ensure that these big companies look after them and do a better job of looking after the consumers and the families that want to know, to be empowered, as the Treasurer said, to be empowered with the information that their plan has come to an end and what their alternatives are and what the cost of doing nothing is.
Look, everybody is time-poor. The truth is that retailers benefit from customers' inertia. They benefit from people not picking the best plan.
We are determined to ensure that they do the right thing by their customers, that they care for their customers and ensure - our goal is that no Australian family should be paying more for their electricity than they need.
In other words, whatever the best deal for them is, they should be on it. We are taking these very strong measures with the retailers to ensure, so far as is possible, that that can be done.
Your Energy Minister said it was a significant and substantial reforms, when it is really just a tinker with consumer laws. Wouldn't a significant and substantial reform be having an energy policy?
Thanks for the editorial. Michelle?
Can you give a guarantee that decisions will be made on the long-term, in other words, about the clean energy target, by the end of this this year?
We are working through it very carefully and have important inputs into it, not least of which is the work being done by AEMO on what is going to be the gap in a baseload, dispatchable baseload power in the future.
We are expecting that report on 1st of September.
Look, this is a very complex area and you can see there is not one single silver bullet here to solve these challenges.
There are short-term measures, which we are taking and I’m not saying when I say short term, I am not saying that they are not going to be enduring, but they are measures that will have an impact right now.
If, as a result of the commitments we have today - and this will undoubtedly happen - you will see families being alerted to the fact that they are paying more for their electricity than they need to and they will get on to the right plan and they will be paying less for their electricity and that will happen now. That is an example of immediate action or action that will have an immediate impact.
Just on the short-term measurers, are there other things that were discussed in the meeting that the retailers are considering and will come back with? Or what you have announced today is the sum of it?
There is a lot of work going on but the main focus of the meeting was naturally on the matters I discussed.
Sure. But any other short term things that they -
Josh, I’ll ask you to touch on that.
MINISTER FOR THE ENVIRONMENT AND ENERGY:
There was a host of other issues that we are going to go back and work with them on. That is why we are going to have another meeting and I think this will be an ongoing dialogue.
But really, what we want to put in place is the ability for consumers to have an informed choice so that they can move to the retailer or the contract that gives them the best possible deal.
You see, right now, the biggest discount doesn't necessarily mean the best possible deal, because if you get a 20 per cent discount on a 20 cent kilowatt hour price of electricity, that is a better deal than getting a 30 per cent discount on a 30 cent kilowatt hour price of electricity and it is that level of complexity which customers are not aware of and they are effectively getting short changed.
There are many Australian households who are paying hundreds of dollars more for their electricity right now than they need to. The difference between what would be the right plan for them and what they're paying can be as much as $1,500 for an average household.
This is an area where we have to protect the consumer. And we have taken the action today, as we do every day, to protect Australian families. We are determined to protect them and ensure that they are not paying any more for electricity than they need to.
Prime Minister - on the point about short term though and short term action, the experts have been discuss behaviour by electricity retailers for months. The Grattan Institute produced a report in March, a comprehensive report going into all of the detail of what electricity retailers are doing and the impact on consumers. That was March. You say you are taking immediate action. Why has it taken five months since the Grattan report to call a meeting with electricity retailers to sort this out?
We have taken action immediately following that report and other reports. Josh, do you want to summarise some of that?
MINISTER FOR THE ENVIRONMENT AND ENERGY:
Sure. Obviously, with the ACCC, which the Treasurer instigated, which is a much more broad-ranging inquiry, which is also looking at the issues of vertical integration as well as profit margins.
And as you know the Grattan Report talks specifically about the Victorian market where they saw profit margins of 22 per cent which could be double or triple what the comparable retailers were doing in countries like the UK.
So we got on to that straight away, but we can't afford to wait until next June to get the final ACCC report.
That is why the Prime Minister has called in the retailers and had this very frank discussion today.
Prime Minister – a little bit more detail on one of the things you have said - retailers are writing to customers that are on plans that are expired and saying: ‘Hey, you could get a better offer here’. How many people does that actually affect? Like how many people are on these expired contracts?
It’s a very large number.
MINISTER FOR THE ENVIRONMENT AND ENERGY:
Well they represent 8 million customers, the people we met today, and the bulk of those would have been on plans that have actually expired.
So they will be contacting most of their consumer base, their customer base to let them know now what alternative offers are available and to put them in touch with, as the Prime Minister said, the comparative website.
So this is a significant course of action on behalf of the companies. We thank them for the constructive manner in which the discussion was held today but they now, as a result of the Prime Minister's discussion, have taken on board these new activities that they’ll undertake.
There are about 1 million households on standing offer arrangements, right now. Over a million households on standing offer arrangements.
PM, you’ve said this is very significant obviously, but most of the things that we have been hearing about right now are about voluntary changes by the companies. Is there anything you’re doing today that involves legislation where Parliament may need to approve it? Or is there anything you’re doing that may need approval from the states in order to take effect? Is there any legal - anything being legally enforced on these companies?
MINISTER FOR THE ENVIRONMENT AND ENERGY:
The actual one about requiring these companies to provide the details about the fact that the discount offer has ended, that will require a rule change, that will be done through the AEMC.
We can approach the AEMC to do that and with the support of the industry, that can be done in an expeditious manner so it doesn't need, the advice to me, the support of the states, it doesn't need federal legislation.
The AEMC, as you know is sovereign within this domain and has the ability to make a rule change which as already indicated that it’s broadly supportive of it.
Why not take tougher action by law, if the prices are such-
This is law. We are talking about the national electricity law here. What we have secured-
Is there no case for regulated prices-
David, this is a legal change that will require them to make these disclosures and provide the information. So basically they will be required to write to you and say: ‘Dear Mr Crowe. You’re coming to the end of your plan. If you don't do anything, you will go onto the standing offer and that would mean that, based on your consumption over the last year, if you had been on the standing offer over the last year, it would have cost you $X more. So you should renew your plan or look at some alternatives’, and refer you to a comparative website.
It is designed to prompt the customer, you in this case, to focus on the issue and you know of course, people will, once they realise how much it is going to cost.
But, of course, unless it is drawn to their attention, many of us, busy lives, don't pay attention to it.
The plebiscite bill has been blocked in the Senate, does that mean it’s now a postal vote?
Can we complete energy and then we can move on to some other matters.
Prime Minister did you get, perhaps, that from the electricity companies that they will not reduce discounts? Because there are examples all across business where discounts aren’t changed. You are asking them to give up discounts or encourage them to other firms. Will not a logical thinking electricity company think ‘I will reduce my discounts’?
It is the important thing - there was one retailer that doesn't actually have a discount in the sense that they have one deal they offer to all of their customers, which you know, they say is very attractive because people can understand exactly what they’re offering.
So they all have different approaches.
The important thing is what is the best deal available for a particular customer, given their usage. Everyone uses electricity, every household and business uses electricity in a somewhat different way but it’s important that they get the best deal for them.
Can I just add to that for a second? Complexity and inertia are the big energy company's friend when it comes to earning higher profits out of electricity consumers.
What we are doing today is to ensure there is less complexity and working on this inertia issue. It is not unlike what we see in other large regulated sectors that I, or Josh or the Communications Minister former and now Prime Minister have been responsible for.
There are a lot of similarities here, but this is an initial outcome from what was a very good meeting and as Phil I think was asking or James was, there is a lot more that is still being discussed and the consumer empowerment about control over their own data to get a better deal is a big part of that as well.
So there is a lot more work to be done here. But the work that is being delivered on today will mean that millions of Australians will be in a better position to get a better deal.
Prime Minister is there a concession here that the privatisation of electricity assets has actually resulted in higher prices, not lower prices as originally promised by many state governments?
Oh look, I think that is a question that many have raised and many have discussed.
Our focus is in the here and now, dealing with the retailers we have today to ensure that Australian consumers, Australian families get the best deal and are paying no more for the electricity than they need to today.
Do you think they’re being ripped off though? Do you think they’re being ripped off?
It is an interesting question. Look can I say to you, that probably the most rapacious electricity company in Australia has been the ones owned by the Queensland government.
MINISTER FOR THE ENVIRONMENT AND ENERGY:
You know, in fact they had to - as you know - they had to give a direction to them to change their behaviour, but they were absolutely gaming the system. This is state-owned, state-government-owned generators were gaming the system to maximise profit at the expense of consumers.
Now we will just take one more, one more, thank you.
Can I just go back to North Korea if I could – if you’re finished?
Thank you, yeah.
How helpful are the President’s comments and threats of armageddon overnight?
Look, I am not going to run a commentary on that. I just want to repeat the illegality, the recklessness is that of the North Korean regime.
Just let's be very clear about this. They are the ones that are threatening the peace of the region. They are the ones that are acting illegally, contrary to numerous UN Security Council resolutions.
The threats to the peace of the region are coming from Pyongyang.
Now this regime, its conduct is illegal, it’s reckless, it’s provocative, it’s dangerous and it threatens the peace of the region, the peace of the world.
And the global community, led by the Security Council - including China and Russia - are all united in seeking to bring the maximum economic pressure on North Korea to bring them to their senses without conflict.
A conflict would be shattering. It would have catastrophic consequences. We all understand that.
The critical thing is that this dangerous regime comes to its senses.
I am pleased, we welcome the resolution of the UN Security Council and we obviously support it and will implement those sanctions and others.
But let's be very clear about this. The fault in this area, the wrongdoing is that of the North Korean Government. They are the ones who are in breach of UN Security Council resolutions. They are the ones that are acting illegally. They are the ones that are threatening the peace of the region and the world.
Thank you very much.