Sharri Markson: AGL gives big discounts overseas while Aussies struggle to pay bills
AS Malcolm Turnbull tries to make his crusade against high electricity prices his signature issue, power company AGL is giving big discounts on gas to foreigners, writes Sharri Markson.
Opinion
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MALCOLM Turnbull thinks he’s onto a winner with his crusade to hold the big power companies to account. Right now, big energy is having the last laugh at the expense of ordinary Australian consumers.
Take AGL. It likes to present itself as the warm and fuzzy face of sustainable energy.
Not only has the company played a cynical double game, trumpeting the closure of the Liddell Power Station as a win for the environment when in fact it will only cause power prices — and thus AGL’s profits — to rise, but it is exporting vast quantities of natural gas overseas, earning the company massive profits while businesses and consumers back home suffer.
READ MORE: AGL sending $2b of gas overseas while Aussies are ‘ripped off’
It will make you feel sick to hear just how much gas AGL is sending abroad, and how much the company, which touts itself as an Australian icon, is raking in at our expense.
Because while the company has been spruiking its move into gas away from coal, it hasn’t been advertising just how much gas it is sending overseas into the LNG export market — at a time when supply is squeezed in Australia.
Next year, AGL has plans to sell 34 petajoules worth of gas to Gladstone, where it will be exported out of Australia via the Gladstone Liquefied Natural Gas (GLNG) project.
Experts say one petajoule is enough to power a regional city like Wollongong for a year.
At the same time, the federal Government has received two expert reports warning NSW and Victoria face a shortage of gas amounting to between 54 and 108 petajoules next year. In total, AGL has signed a contract to sell 254 petajoules of gas over an 11-year period to GLNG Project participants Petronas, Santos and Kogas, to GLNG at Gladstone, where it will be exported. This is enough gas to power Wollongong for 254 years.
The contract was quietly signed on Christmas Eve in 2015 with a start date of January, 2017.
This venture is incredibly lucrative for AGL which is headed by an American, Andy Vesey, who is here on a 457 visa — because apparently no Aussie is qualified enough to be so ruthless.
Australia is staring down the barrel of a gas shortage and AGL is making the threat worse.
And it stands to make an estimated $2 billion from the deal.
And here’s where it gets even worse: The price at which exporters like AGL are selling gas overseas is much lower than the price they are quoting to Australian companies. This means they’re prepared to give a better price to a Japanese or Chinese customer than an Australian one.
It’s something Australian Competition and Consumer Commission chairman Rod Sims will investigate. He has already discovered some major gas producers and retailers are charging Aussies up to $6 per gigajoule more than offshore customers.
“We cannot understand why the prices that are being quoted to many companies are as high as they are given what we understand the underlying gas price is,” he said.
“We are not sure where the excessive pricing is coming from. I don’t think it is fair.”
Cities Minister Angus Taylor has deep experience in the energy sector from his role before politics at management consultancy firms McKinsey and Port Jackson Partners, where, funnily enough, he worked with Sims for a decade.
Taylor says AGL has a responsibility to sell to Australians at or below the export price of about $8 to $9 a gigajoule.
“Gas producers shouldn’t be ripping off Australian companies to bolster their profits, it’s just not on,” he said.
Make no mistake, AGL is profiting from Australia’s gas shortage. And the energy giant is set to make even more profits by reducing our supply of coal-fired baseload power, a move which will push bills up even more.
Meanwhile, using leverage, negotiating skills and the sheer force of his personality, Malcolm Turnbull has secured agreements from Santos, Origin Energy and Shell to make sure there’s enough gas in the domestic market to cover the shortfall expected in 2018. His intervention is at odds with his defining statement when he took over as Prime Minister that he believed wholeheartedly in free-markets.
And his move into the electricity debate is reminiscent of Kevin Rudd’s rush to win the war against petrol and grocery prices — things he had no control over.
Unlike Rudd, whose answer to the rising cost of living was superficial websites with no teeth, Turnbull has hauled every gas producer and energy retailer to his office for a lecture.
Turnbull has seized on the issue of spiralling power prices which both Liberal research and common sense tell us is the biggest issue affecting families.
He now owns this issue.
But can Turnbull actually reduce power prices, or even halt their rise, before the next election in under two years time? Has he, realistically, bitten off more than he can chew?
It makes you wonder why the Prime Minister has descended into the swamp of energy giants and exploding electricity prices when he has no control over supply to the market.
NSW Premier Gladys Berejiklian could ease prices far more swiftly if she chose to lift restrictions on gas exploration in her state.
But if Turnbull does manage to pull-off a miracle and be as effective at driving down power prices as he was in forcing the hand of the US President Donald Trump to take our refugees in a seemingly impossible phone call, he may very well cement his leadership ahead of an election.