Government's overstated victory on power pricing: It was an easy goal
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Government's overstated victory on power pricing: It was an easy goal

Call it the big stick or the big squeeze - the Coalition government’s emissary, Angus Taylor, was sent to at the very least create the appearance that power companies would be bludgeoned into lowering energy bills within a politically motivated timetable.

His meeting with the energy retailers, network transmitters and various interested parties in Sydney on Wednesday was another heavy-handed move to ram home the need for companies to get moving on the first leg of lowering prices - that is to adjust down the prices for loyal customers who are paying high tariffs because they haven’t shopped around for cheaper deals.

Taylor characterised the meeting as a big win for the government, explaining that energy companies have now seen that the government is serious.

The energy round table felt more like a public relations exercise for the government.

The energy round table felt more like a public relations exercise for the government.Credit:Glenn Hunt

The only thing missing from a round table on pricing was an actual detailed discussion on pricing.

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Rather than taking the form of a high-level meeting between Taylor and the chief executives of the big energy companies, the gathering at the Intercontinental Hotel seemed more like a town hall meeting with 20 companies represented.

It felt more like a government public relations exercise - one that was designed to ensure the public was aware that the government was prepared to take on big business, and advocate for consumers and small business that had been overpaying for energy while pumping up the earnings of the big industry energy companies.

Taylor, who had said he was open to hearing feedback, was not about to change his message.

Federal Energy Minister Angus Taylor as he arrived for the energy roundtable.

Federal Energy Minister Angus Taylor as he arrived for the energy roundtable.Credit:Nick Moir

To date, the ultimatum had been that energy companies take it on themselves to act on prices by the end of the year before the government would impose a default cap. The January 1 deadline, however, looks to have been pushed out until July and it's now not directly about pricing.

The companies agreed to provide customers with standardised and easily comparable rates by July 1 to enable them to make easy comparisons, and will make a January 1 ‘voluntary downpayment’ on this exercise after the meeting that Taylor described as constructive and productive.

The government will also leave open the option of the ultimate hard line approach of forcing companies to divest assets in order to increase competition - the so-called big stick.

The industry was wise enough to let the government score an easy goal and garner some goodwill.

This is what counts for an energy policy for the coalition, having abandoned a comprehensive long-term set of measures that also deal with emissions.

After the meeting, Taylor made little reference to the introduction of a default price.

While there is possibly some scope to charge more than the default or reference price, it will need to be accompanied by a convincing explanation as to why.

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It was this default price mechanism that had been the big concern for energy companies who had argued it would discourage investment in fresh generation assets.

But detailed discussions between retailers and energy suppliers on pricing has legal collusion implications, so the topic seems to have been mainly bypassed.

Allowing customers access to information that will better enable them to compare different discounts from energy companies will only lower prices if customers access the information.

And given that most already have, the effect on the revenue of power retailers shouldn’t be particularly large. Indeed, the reference price that will enable comparisons is said to have been an idea generated by the industry.

But publicly it plays well for the government.

Taylor says the aim of the exercise is to end the confusion customers suffer when they enter into a contract with an electricity company. He wants customers to be able to compare apples with apples and the loyalty tax to be gone by July.

He said these companies were making record profits - the kind of rhetoric normally heard with reference to the banking industry.

The industry was wise enough to let the government score an easy goal and garner some goodwill.

Elizabeth Knight comments on companies, markets and the economy.

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