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Divestment drive puts AGL’s Liddell back in the frame-Andrew White

Divestment drive puts AGL’s Liddell back in the frame-Andrew White

The federal government’s sudden backflip on national energy policy has put AGL Energy’s contentious Liddell coal-fired power station back in the spotlight after the government said it would introduce powers to force divestment even though the competition regulator argues against them in its report on electricity prices.

As the government faced fresh warnings that price controls and divestment powers would chill investment in replacement generation and push companies out of the market, observers said the ­divestment power appeared aimed at placating pro-coal elements in the Coalition.

But the Australian Energy Council said the government’s proposals went against the advice of both the Australian Energy Markets Commission and the Australian Competition & Consumer Commission.

AEC chief executive Sara McNamara said increasing the ACCC powers to allow divestment of private assets was not supported by the ACCC’s report into retail electricity prices.

The ACCC report delivered to the government last month said divestiture was an “extreme” measure and that trying to impose limits on market power that were used in other parts of the world would not address the issue.

It said high prices had been driven by “high and entrenched levels of concentration in the market”, and higher prices for fuel, “rather than identifiable uses or abuses of market power”, such as generators attempting to “spike” the price.

“Requiring the divestiture of privately owned assets is an extreme measure to take in any market, including the electricity market,” the report said.

“While the way in which concentration has developed in the wholesale market is clearly contributing to current high prices, the ACCC considers that the other recommendations made in this report will, if implemented, be a better means to restore competition to a level which serves consumers well.”

The report did, however, recommend reversing the consolidation of the Queensland government-owned generators from two entities back to three.

After staring down calls from Malcolm Turnbull and Energy Minister Josh Frydenberg to sell Liddell to a competitor or extend its life past the schedule 2022 close date, AGL had believed the issue was behind it.

It rejected a $1 billion offer from rival Alinta Energy to buy, refurbish and assume responsibility for remediation costs and had steadily increased commitments to a planned replacement of the lost generation with new gas, wind, solar, hydro and battery ­resources.

It received mixed reviews from the Australian Energy Market Operator, which said coal plants should be left running as long as possible during the transition across the market to more green power and that there would be no generation shortfall if AGL committed to all of the investments at Liddell that it had announced.

Facing a threat to his leadership from pro-coal conservatives Mr Turnbull — alongside Mr Frydenberg and Treasurer Scott Morrison - yesterday dumped plans to legislate emissions targets as part of the NEG and announced a range of measures aimed at cutting high electricity prices.

That included a default price that was estimated to save households between $183 and $416 a year from electricity bills. As recommended by the ACCC, the federal government will agree to underwrite new baseload power generation that could include new clean-coal-fired power plants as well as gas, hydro and renewables.

The Prime Minister said the ­divestment powers would be a “last resort” for “the most egregious cases of abuse”.

The Australian

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