Big business not fully convinced by NEG

Corporate Australia says the NEG has the ­poten­tial to break a decade-long policy deadlock but it will require further tweaks.

Corporate Australia says the Turnbull government’s national energy guarantee has the ­poten­tial to break a decade-long policy deadlock but it will require further tweaks to deliver cheaper and more reliable power.

While big businesses including Rio Tinto, Telstra and BlueScope said they largely supported the government’s signature energy policy, they said some of the onerous rules, particularly around ­reliability obligations, needed to be changed to avoid pushing up electricity prices.

Under the present Energy ­Security Board design framework, Australia’s 100 biggest energy consumers would be required to enter into a reliability obligation. The companies could “opt-out” by contracting with energy retailers to meet that obligation or meet it themselves by contracting or building their own “firming” ­capacity to guarantee the increasing amounts of reliable energy in the system were deliverable.

Mining giant Rio said it backed the reliability concept but argued that an opt-in system would provide a better outcome for large users who account for 30 per cent of ­national energy consumption.

“We support the proposed high level approach to the reliability guarantee on a national electricity market basis and have put forward recommendations to make the guarantee more practical for large electricity users including a shift to an ‘opt-in’ model,” Rio said in its submission to the Energy ­Security Board.

Billionaire Anthony Pratt’s cardboard and recycling company Visy Industries said it remained concerned that the obligation for users to secure contracts for all of its demand could serve to entrench the dominance of existing market players.

“East coast electricity markets have relatively few participants, both physical and financial, and our electricity markets are unquestionably highly concentrated relative to many other developed and far less liquid than efficiently-functioning markets around the world,” Visy said in its submission.

“While this may not necessarily negatively affect the competitive landscape of physical and financial electricity markets, Visy’s view is that there is a significant risk that it will.”

The final design of the NEG is due to be considered at the COAG energy council meeting next month with Energy Minister Josh Frydenberg planning to finalise the policy by the end of the year.

It comes after the Australian Competition & Consumer Commission outlined recommendations last week to reset the power market, which could reduce prices by 22 per cent on average by 2021.