Key figures in the energy industry have urged the government to abandon proposed legislation that would enable the Treasurer to force energy retailers to restructure their companies and sign financial contracts.
The draft law, Treasury Laws Amendment (Electricity Price Monitoring) Bill 2018, allows the Treasurer Josh Frydenberg to issue divesture orders to tell companies to dispose of assets while restricting potential buyers.
Prime Minister Scott Morrison warned forced divesture would be on the table back in October under his Big Stick policy, but there are greater concerns over the individual power this law would give to the Treasurer.
A group of energy industry figures – the Australian Energy Council, Energy Networks Australia, Ai Group, the Business Council of Australia, APPEA and EUAA have urged the government to abandon the legislation, saying it presents a genuine sovereign risk.
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The group says the proposed legislation will impede the broader investment environment in Australia and specifically discourage badly needed investment in the energy sector.
“Such discretionary and quasi-judicial powers [unilateral divestment powers for the Treasurer] represent deep and genuine sovereign risk,” they said.
“They are inconsistent with best practice for a modern economy, such as Australia’s, and were specifically considered and rejected by the ACCC and the Harper Competition Policy Review.
“If enacted, these powers would cast a pall over investment in all sectors of the Australian economy and threaten the economic attractiveness of a country highly reliant on foreign investment.”
The group added that while it supports ongoing consideration of options to improve existing regulatory regimes, divesture powers was not one of the 56 recommendations aimed at improving outcomes for energy customers made by the ACCC in its Retail Electricity Pricing Inquiry Final Report.
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“The Treasury Laws Amendment (Electricity Price Monitoring) Bill 2018 (the Bill) sets the ACCC recommendations aside and instead creates an unpredictable enforcement regime,” the group said.
“This only undermines the long-term interests of consumers. This is a dangerous precedent.
“Driving down prices for any market requires investment.
“Investors require clear, stable and predictable rules so that they have the necessary confidence to make those investment decisions.
“This legislation will only lead to increased investment uncertainty and prices.
“We urge the Government to abandon the Bill and work with the business community on reform options which enhance Australia’s economic stability, encourage investment and deliver better outcomes for consumers.”