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The energy crisis just got serious

Paul Bongiorno on the suspension of the energy market and the political blame game that's followed.
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This week, the wholesale energy market was suspended. 

It’s the first time the Australian energy market operator has ever had to take that step to keep electricity flowing to homes and to businesses.

But this crisis has been decades in the making, caused by a policy vacuum that both sides of politics share responsibility for.

So the question now is, how do you fix over a decade of political inaction?

Today, columnist for The Saturday Paper, Paul Bongiorno on the suspension of the energy market and the political blame game that's followed.

 

Guest: Columnist for The Saturday Paper, Paul Bongiorno.

 
Read Transcript

[Theme Music Starts]

From Schwartz Media, I’m Ruby Jones, this is 7am

This week, the wholesale energy market was suspended. 

It’s the first time the Australian energy market operator has ever had to take that step… to keep electricity flowing to homes and to businesses.

But this crisis has been decades in the making, caused by a policy vacuum that both sides of politics share responsibility for.

So - the question now is, how do you fix over a decade of political inaction?

Today, columnist for The Saturday Paper Paul Bongiorno, on the suspension of the energy market… and the political blame game that's followed.

It’s Friday June 17. 

[Theme Music Ends]

RUBY:
Paul, the energy market regulator AEMO took the extraordinary step of pausing the electricity wholesale market this week. Before we get to the politics of it all, Paul, what exactly does suspending the energy market actually mean? 

PAUL:
Well, basically it means, Ruby, the market between electricity generators and electricity retailers who households buy their electricity from got too difficult to manage this week. After days and weeks of chaos in the market and allegations that generators were withholding supply, waiting for compensation mechanisms to kick in so they could get the top dollar to put their electricity into the grid.

Archival Tape -- Sky News anchor:
“The energy regulator has just declared it suspended the spot market in New South Wales, Queensland, South Australia, Tasmania and Victoria, with markets suspended…”

PAUL:
So the Australian energy market operator said for the first time in its history it would suspend the market and said this was the best way to quote ensure a reliable supply of electricity. 

Archival Tape -- AEMO CEO:
“What we're creating today is a secure electricity system where we're able to manage supply and demand in real time and have visibility on any gaps in between supply and demand for the foreseeable future…”

PAUL:
Now, suspending the markets being the best way to ensure reliable electricity is a pretty incredible thing for the market operator to say. And for as long as this suspension stays in place, it means electricity will be sold to retailers at a fixed price set by the regulator. 

Archival Tape -- AEMO CEO:
“There are a number of factors that go into price, which I'm not going to speculate on here, but I'm focussed on today, is making sure that we have safe, reliable energy for consumers throughout Australia.”

PAUL:
It's a crisis that's been building for years, and the last Federal Labor government can share the blame for not insisting on a reservation policy for gas producers as they began exploiting our vast resources.

But that short sightedness was over a decade ago, and in the years since, the situation has worsened due to a lack of policy development and clarity on the future of coal, gas and renewables.

RUBY:
Right. And I suppose when we look at the current situation, there's a lot of blame to go around. But can you tell me a bit about how various state governments around the country are reacting? What are they saying to the people who live in their state about the issues with supply that they're all experiencing?

PAUL:
Oh, sure. The New South Wales Energy Minister, Matt Kean, has gone as far as calling on residents in his state to reduce their power consumption in the evenings to help the grid cope with a lack of supply. He said even people could chip in and help by avoiding putting on the dishwasher until they go to bed. And Victoria's Energy Minister Lily D'Ambrosio welcomed the market suspension and said it was to protect energy users and put certainty back into the market. D'Ambrosio said and I quote, “It's disappointing that energy generators were potentially gaming the system and not utilising the options available to them.” This behaviour is unacceptable and she says, will be investigated.

At the end of the day, Ruby, those private energy companies are looking after their own bottom line, gaming the poorly designed system to enhance their profits. And this, after all, is demanded by their duty to their shareholders. But of course, it exposes the very flaw at the heart of the privatisation of essential utilities. 

RUBY:
Hmm. Right. And as you said earlier, Paul, this crisis has been building for a long time. It's been created by the last decade or more of bad policy or I suppose more accurately, no policy on energy. But all of that doesn't change the fact that it is right now this current government's problem to fix, isn't it?

PAUL:
Well, that's right. Australia has been mired in inaction for a long period on this. Ruby and Prime Minister Anthony Albanese identified the failure of energy policy as one of the main reasons we have a change of government. 

Archival Tape -- Anthony Albanese:
“Well, it should be a source of incredible embarrassment for the occupiers of government over the last ten years that we've had this situation arise. This is a direct result of a failure to invest in the failure to have an energy policy of having 22 policy announcements but not landing one…”

PAUL:
Albanese says the energy emergency is the result of a decade of neglect on energy policy. 

Archival Tape -- Anthony Albanese:
“My Government, and Chris Bowen as the Minister, will act in a considered sober way to make sure that as we go into the future, anything that can be learnt from what has happened this week will be but we won't hesitate to take action that's available…”

PAUL:
And the same vested interests that drove the climate wars that held the old Coalition government in their thrall, well, they've been just as culpable for the present situation. You know, Malcolm Turnbull actually hit on a credible solution in the shape of the National Energy Guarantee. But for his trouble you might remember Peter Dutton and Scott Morrison dispatched him. Now Albanese and Bowen are working on delivering their energy policy that they say will give investors the certainty they've been denied while the Coalition's slugged out its internal conflicts. 

RUBY:
Mm sure. And when it comes to energy, Paul, I mean, all we really know at the moment is that Albanese imposed a working on an energy policy, so it's not much to go on, but the stakes are, you know, as he said earlier, they're extremely high. 

PAUL:
Well, they are. And this is the problem. If we can use the analogy, it’d be great if you could just flip the switch and all the problems were answered. But what we are seeing, however, is quite urgent crisis management with AEMO being urged and backed to do whatever it takes to keep the lights on.

RUBY:
Mm. So it seems like really this is the Labor Government's first real challenge since taking power and it's an important one to get right, isn't it, Paul? Not least of all, because people are pretty worried about their energy bills. 

PAUL:
Well, Ruby, its importance can't be overstated. As I say, Albanese and Bowen will make energy sector reform a priority. But the more immediate issue is household budgets, because electricity is not the only cost of living pressure. We're still left with rising gas prices and petrol price relief is ending in September. These cost of living pressures along with falling property values, well, they all spell trouble. 

For Albanese, the view of one newly marginalised Liberal MP who saw his margin shrink by about 8%; I spoke to him this week and he said no government can survive the middle class feeling poorer. Well, maybe, but with three years to go until the next election, some in Labor are counting on things improving. 

And there was more relief offered on Wednesday when the Fair Work Commission raised the minimum wage by 5.2% and that was slightly above the level Morrison and Frydenberg warned would destroy the economy. 

When Albanese absolutely supported low income workers not going backwards in the campaign. The Prime Minister welcomed this vindication, saying it would make a big difference to these struggling families. So Labor hopes all of this adds to making a difference. 

But Parliament resumes in a little over a month and we'll have a much better idea then of how Labor will address the cost of living crisis in its October budget. And we'll also see how the new Opposition Leader Peter Dutton shapes up holding the Government to account.

RUBY:
We'll be back in a moment.

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RUBY:
Paul, we've been talking about the week in politics and it's been dominated by the energy debate. But you were just saying that there were some other interesting tests that are on the agenda when parliament resumes. So what do you think that they will be?

PAUL:
Well, an early test for Peter Dutton may have developed this week. On the weekend he wrote an opinion piece in The Australian revealing a secret plan he had in the dying days of government to fast track the acquisition of nuclear submarines built in the United States. You know, it's quite the thing to reveal in an article in the press. It was a political attack which he attempted to cloak in his superior national security credentials and his inside knowledge. Dutton claimed the incoming minister, Richard Marles, would have been briefed on this plan by the department. But he said the new Minister's early comments on the topic are alarming, a reference to Richard Marles talking of prolonging the Collins class diesel electric subs. Oh, building a few more pending the arrival of nuclear boats in 20 years time. 

Archival Tape -- Sky News reporter:
“However, the new Defence Minister and Deputy Prime Minister, Richard Marles, has lashed Dutton over these comments or this piece today in The Australian. In a statement he says “this outburst today from someone so recently in the chair is damaging to Australia's national interest. The comments are loose and undermine the caucus agreement. All options remain on the table.” 

PAUL:
But some from the security establishment were appalled.

Archival Tape -- Patricia Karvelas (ABC):
“Dennis Richardson is a former director general of ASIO, Secretary of Defence and Secretary of Defence, and he's our guest this morning. Dennis Richardson, welcome to the programme.”

Archival Tape -- Dennis Richardson:
“Hi there PK, thanks.” 

PAUL:
Dennis Richardson called out Dutton's use of classified insider knowledge when he went on RN breakfast.

Archival Tape -- Dennis Richardson:
“There were aspects of what Mr. Dutton wrote in The Australian which had previously been classified. So I suppose it's a matter for the Government and Mr. Dutton to sort that out.”

RUBY:
When he says sort it out, Paul, what does that mean, and can the new government really do anything to stop the Opposition Leader from using his knowledge of these kinds of classified deals to his advantage? 

PAUL:
Well, Ruby, already it’s earning Dutton condemnation. Labor insiders would be very surprised if the matter is allowed to slide when Parliament resumes. Questions will be asked and the new Opposition Leader could be in for a bumpy start. At the very least, Dutton's credibility as a responsible Australian statesman is on the line. Using classified information to score political points, especially in this area of security, surely crosses the line. 

Archival Tape -- Malcolm Turnbull:
“Well, it was just more blustering from Dutton, isn't it? I mean, he's a belligerent, belligerent bluster who wrecked a submarine contract…”

PAUL:
Former Prime Minister Malcolm Turnbull was scathing. He describes Dutton's outburst as the same belligerent bluster that destroyed a submarine contract. He's referring there to the shambolic way the French submarine deal was ditched.

Archival Tape -- Malcolm Turnbull:
“And we're now in a position where we don't have any submarine programme at all between Morrison and they did enormous damage to Australia's national security. Shameful, actually.”

RUBY:
Okay. And while we're on defence and foreign affairs, Paul, we've seen this big diplomatic push in the last few weeks. We've had Labor ministers meeting with their Pacific partners and Indonesia and even renewing meetings with China after that freeze on meetings between Chinese and Australian officials that went on for a few years. So what do we know about whether any of these efforts are actually working?

PAUL:
Well, Dennis Richardson, who's one of our most senior former bureaucrats, is full of praise for the way the new government leadership has set out to repair crucial relationships in the South Pacific with China and with Australia's quad partners, the USA, Japan, India and Indonesia.

Archival Tape -- Dennis Richardson:
“I think the Prime Minister, the Foreign Minister and Defence Minister have managed it superbly well. Having said that, the easiest part of any government is at the beginning.” 

PAUL:
He says they have the advantage of being new and without the baggage and barnacles of the past ten years or indeed senior ministers always talking up conflict with China. This former senior bureaucrat, though, stresses it will get harder from here. 

RUBY:
Hmm. And Paul, it's been almost exactly a month now since the election. Do you get the sense that the reality of being in Government has now fully sunk in for Labor because they are faced with these big problems with fixing the China relationship, with fixing the energy market. And, you know, right now the outcomes of either of those are still a little unclear.

PAUL:
Well, certainly, as you've just outlined, has been no honeymoon from their part. But I think there is the benefit that most of these senior ministers have already been in government. So there's a certain equilibrium, if you like, in facing up to all of this. And Albanese has been very keen in his interviews and public statements since winning power of emphasising that there's no panic here, there's no rush, that they will be taking things as calmly and as they come based on the best advice. And so far, according to early opinion polling, the Australian nation is impressed. 

RUBY:
Hmm. Paul, thank you so much for your time. 

PAUL:
Thank you, Ruby. Bye.

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***

RUBY:
Also in the news today 

The federal government has formally committed to the United Nations that Australia will make a 43 per cent reduction in emissions by 2030 under the Paris Agreement. 

The federal government says its new target draws a line under a decade of "climate wars". 

And in the US, Ghislaine Maxwell has requested a jail sentence of no more than 5 and a quarter years, for helping deceased financier Jeffrey Epstein sexually abuse teenage girls.

Maxwell was convicted last December on five criminal counts including sex trafficking, but her lawyers argue that Epstein was the "mastermind" behind the abuse. 

7am is a daily show from The Monthly and The Saturday Paper. It’s produced by Elle Marsh, Kara Jensen-Mackinnon and Alex Gow.

Our technical producer is Atticus Bastow.

Brian Campeau mixes the show. Our editor is Scott Mitchell. Erik Jensen is our editor-in-chief. 

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio. 

I’m Ruby Jones, see you next week.

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