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It’s the vibe: power giants’ Castle call against divestment

It’s the vibe: power giants’ Castle call against divestment

Scott Morrison’s plan to divest the assets of electricity companies, capturing AGL’s Liddell coal-fired power station, could face a High Court challenge, as major energy operators are threatening to adopt the legal defence used in the Australian film The Castle.

The bitter standoff between the Coalition and energy companies over skyrocketing electricity and gas prices yesterday escalated when it emerged the Australian Energy Council had sought legal advice that could pave the way for a constitutional challenge to the Prime Minister’s “big stick” approach.

Mr Morrison has argued that the proposed divestment powers would hand the government a “big stick” to punish electricity retailers if they failed to bring prices down. Labor has savaged the proposal as an “extreme measure” more attuned to socialist Venezuela than Australia.

The Australian Energy Council — representing major electricity companies including AGL, Origin, Energy­Australia, Alinta, Aurora and Delta — yesterday released legal advice from Ashurst law firm flagging a potential breach of the Constitution arising from several of the “enforcement powers” contemplated for Treasurer Josh Frydenberg.

The advice was included in the council’s submission to Treasury after the government sought feedback on its energy overhaul — including its plan to set a price benchmark for retailers and break up the assets of major ­energy companies.

“We have concerns about the framing and constitutionality of the Treasurer’s remedies in respect of the proposed prohibited conduct; that is, the power of the Treasurer, on recommendation of the ACCC, to impose temporary price regulation on energy retailers, require generators to contract with third parties and require firms to divest assets,” the legal advice notes.

University of NSW law dean George Williams told The Australian the government would need to frame any legislation around forced divestment carefully to avoid being challenged under section 51 (xxxi) of the Constitution. Professor Williams, a constitutional expert, noted this was the same provision made famous in the 1997 movie The Castle and which prevented the commonwealth from acquiring property unless it is “on just terms”.

“The commonwealth will need to tread carefully …. There have been many High Court cases in the past where people have challenged federal schemes on the basis that they acquire property without providing ­adequate compensation,” Professor Williams said.

“An area where the commonwealth succeeded was on plain packaging for tobacco. The tobacco companies said, ‘You can’t take our trademarks without compensation’. And the High Court said ‘It just doesn’t fall under this provision. It’s not a law about acquiring property’.”

Energy Minister Angus Taylor last night hit back at the Australian Energy Council, accusing power companies of trying to avoid giving customers a better deal. “After years of taking record profits at the expense of consumers, it is unsurprising that the big energy companies, represented by the Australian Energy Council, are desperate to avoid any measures that would see a better deal for Australian families and businesses,” Mr Taylor said.

“The government is preparing a comprehensive legislative package to hold the big energy companies to account and stop the ripoffs. The ‘big stick’ legislative package will be introduced to parliament in coming weeks.”

It is unclear whether the government will have the numbers to secure passage of the divestment powers, as the Greens decline to say how they would vote and crossbenchers wait until they are presented with legislation. Opposition Treasury spokesman Chris Bowen said it was “completely unsurprising to see legal and constitutional questions being asked about Scott Morrison’s ministerial divestment powers given they are policy on the run”. “Undermining investor confidence with this sort of extreme intervention is more likely to put upward pressure on energy prices than cut them,” Mr Bowen said.

The legal advice to the Australian Energy Council notes the power to make a divestiture order is an “extraordinary and invasive power” and argues that, under section 51 (xxxi) of the Constitution, any acquisition of property by the commonwealth must be “on just terms”. “It is important to recognise that a divestiture order may result in a situation where an energy company is ­required to sell assets through a process that may not necessarily appropriately compensate it for the value of the assets,” the advice says.

The Australian

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