Energy executives push back against government intervention

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Executives from major energy companies are pushing back against increasing government intervention in electricity and gas markets.

Writing in an opinion piece for the Australian Financial Review, Kevin Gallagher, Managing Director and CEO of Santos, expressed his concern that “sovereign risk is rising fast” after the Australian Labor Party announced in early September 2018 that a federal Labor government would curb LNG exports if domestic prices ran too high.

“The major political parties, strongly supported and urged on by minor parties of the right and the left, are embracing policies of price controls, export controls and, recently, in the government’s case, forced divestiture of assets legally created or acquired.

“If governments continue to escalate their interventions to change the rules after investments have been made in export projects, they increase the prospect of investors assessing Australia as being just too risky a destination for their funds.

“The foreign investors that Australia relies on need reassurance from governments that export contracts will be honoured, Australia will remain committed to competition and free trade, and that it will allow its vast undeveloped gas resources to be unlocked on stable and internationally competitive terms to service growing Asian and Australian demand.”

EnergyAustralia managing director Cath Tanna voiced similar concerns about price controls, arguing that the majority of the retailer’s customers would be worse off if a default retail power price was imposed.

The default price proposal, which would introduce a capped retail price that must be lower than standing offers, was recommended by the Australian Competition and Consumer Commission (ACCC) in July and endorsed by the government at the end of August 2018.

The default price mechanism is expected to be a key topic in discussions being held between Energy Minister Angus Taylor and retail executives throughout September 2018.

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