After election, energy war reignites between government and industry

The Morrison government wasted little time putting the heat back on the energy sector after its election victory, committing to hardline interventionist action designed to reform and punish the power industry.

Analysts have already called the Coalition's win "a negative” for energy companies, and warned it could make power prices more volatile.

Energy Minister Angus Taylor is staring down the power industry as he keeps the pressure on after the election win.Credit: Alex Ellinghausen

The energy stoush began in 2017, when AGL reaffirmed its intention to close its Hunter Valley-based Liddell coal-fired power station in 2022, raising fears it could create an energy shortage similar to the experience after the closure of Victoria's Hazelwood power station earlier that year.

This drove energy prices to record highs and ignited a battle between AGL and the government to extend the life of the Liddell power plant to keep the lights on.

As part of this battle, the Morrison government set out a raft of new policies before the election to lower historically high power bills and prevent energy shortages.

The proposed measures included giving the government power to break up energy companies found to be behaving poorly in the market and force them to sell off assets to reduce their footprint; the creation of a new, fixed basic electricity price for households not already on a discount offer; new safety nets to remove energy companies' ability to charge consumers excessive late fees, and a new reference price to compare discounts offers.

They were introduced after the government dumped its own energy and emissions policy aimed at driving down both power prices and greenhouse gas levels, the National Energy Guarantee (NEG).

Federal Energy Minister Angus Taylor also made an ambitious pledge to slash wholesale prices – what generators charge retailers for electricity – by up to a quarter.

Energy providers called many of these rules market-wrecking actions, particularly the forced divestment power, known as the government’s ‘big stick’.

'Big stick' prevails

The government had managed to get most of these new rules underway ahead of the election, apart from the ‘big stick’. Most should come into force on 1 July.

With pre-election polls predicting a Labor victory, the energy industry had begun planning for a Bill Shorten government, expecting many of the Coalition's harshest policies to be dropped.

Instead, it found itself blindsided by the Coalition victory and the realisation its harsh interventions would be implemented.

The big power companies swiftly urged Prime Minister Scott Morrison to drop these policies, hoping to reset the relationship with the government and move beyond the antagonism that had plagued the energy debate over the last three years.

To no avail: The government renewed its hardline approach to the industry on Wednesday, focusing on energy giant AGL, and threatening tough action against power retailers.