Victoria’s revived SEC may not have to compete on level playing field

The State Electricity Commission could be exempted from a levy that would put it on a level playing field with the private energy sector, as part of an Allan government bid for crossbench support to enshrine the resurrected energy agency in the state Constitution.

Labor’s promise to revive the SEC, including writing it into the Constitution, was a big vote winner for then-premier Daniel Andrews at the 2022 state election.

Daniel Andrews campaigning in Yallourn in 2022 with a promise to “bring back the SEC”.Credit: Jason South

He promised the new-look SEC would boost renewable energy supply, put power back in the hands of the people, and reclaim profits from greedy electricity companies and return them to the public through lower power bills.

But, as The Age revealed in November, the SEC’s strategic plan required that it comply with the government’s “competitive neutrality” policy, raising questions about its ability to have an impact on prices, and about the point of its existence.

Labor is also struggling to secure the “super majority” of 60 per cent in both the lower and upper houses – including 24 of the 40 upper house votes – it needs to amend the Constitution.

Transmission lines in the Latrobe ValleyCredit: Joe Armao

The Constitutional Amendment [SEC] Bill was scheduled to be voted on in the upper house last month, but Labor withdrew it at the last minute because it had not secured the numbers. The bill is due to return in May and now hangs in the balance.

Labor is working to shore up crossbench support, including from the four Greens, Legalise Cannabis and Animal Justice Party MPs and former Labor minister turned independent Adem Somyurek.

In return for their votes, the Greens have demanded the SEC be exempt from paying what is known as a “financial accommodation levy”, a charge applied to public entities, including water businesses, and designed to remove the competitive advantage government entities have in borrowing.

The levy stems from competitive neutrality policies championed by former Labor prime minister Paul Keating and agreed to by most states, including Victoria, in the 1990s. According to the latest Victorian budget, the levy is expected to raise $723 million over the next four years.

Then-prime minister Paul Keating and then-Victorian premier Jeff Kennett in 1995 at the signing of the competition policy agreement with the states.Credit: The Age

Greens energy spokesman Tim Read said that in return for support for the bill he expected the government to make a binding statement to parliament that would commit it to exempting the SEC from the levy.

“We want the government to honour its promises of lower power bills and increased investment in renewables,” Read said.

Well-placed sources speaking on condition of anonymity said the government was anxious that failure to impose the levy on the SEC could alienate private sector players at a time when investment in clean energy has slowed nationwide.

But Read said the new SEC was such a small player it would have little impact on the energy market. “I honestly doubt that the presence of the SEC would for instance discourage a major international wind energy player from buying into Victoria.”

Energy Minister Lily D’Ambrosio did not respond to questions about any agreement with the Greens or whether the agency would be required to pay the levy. A spokeswoman said: “Like any bill considered by Parliament” the Constitutional Amendment [SEC] Bill would be “subject to negotiation and debate and we are considering those amendments in good faith”.

Australian Industry Group director of climate change and energy Tennant Reed said exempting the SEC from the levy would make it “much more capable of doing the kind of market transformation job that people think it can do”.

“If it is subject to the competitive neutrality fees, it’s hard to see what makes it different from private investors except that it would be a lot smaller.”

Victoria University’s energy policy centre director, Bruce Mountain, last year advised the government on the SEC’s resurrection.

He said application of competitive neutrality to the SEC would make it an “aimless entity” and that exempting it from the levy would at least give it “a purpose and, potentially, an important role co-ordinating the production, storage and transmission of renewable energy”.

Victorian Greens leader Samantha Ratnam and energy spokesman Tim Read.Credit: Eddie Jim

But Grattan Institute energy program director Tony Wood said: “Anything that gives the SEC a competitive advantage over private sector businesses is inconsistent with Labor’s original proposal for the revived SEC and flies in the face of competitive neutrality.”

An exemption from the levy would likely boost Labor’s prospects of winning support for the constitutional amendment bill from upper house “progressives”.

Animal Justice Party MP Georgie Purcell.Credit: Twitter

“I’m leaning towards supporting it,” said Animal Justice’s Georgie Purcell, while adding: “I do have questions around the purpose of doing this and whether it’s actually an effective legislative measure or just a sexy election commitment.”

Legalise Cannabis MP David Ettershank said he was not ruling out supporting the bill.

“We think that first and foremost the people of Victoria want more affordable electricity,” he said.

“If competitive neutrality and the levy are contrary to assisting Victorians with cost-of-living pressures, then we are opposed to its application.“

In November four of the 12 upper house crossbenchers – Libertarian David Limbrick, the Shooters, Fishers and Farmers Party’s Jeff Bourman, One Nation’s Rikkie-Lee Tyrrell and independent Moira Deeming – flagged they would oppose the bill, which now hangs in the balance.

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