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Labor states defer NEG decision until next week

Labor states defer NEG decision until next week

The Labor states have voiced support for the National Energy Guarantee mechanism but will reserve their final position until they see the fine print – and only if it is approved next week by federal Coalition MPs and senators.

The Queensland, Victorian and ACT governments held cabinet meetings on Monday and, while demolishing any prospect of a final sign-off this Friday when state and federal energy ministers meet, indicated they supported the mechanism but would fight over the details.

"Queensland supports having a national framework that gives certainty to not just families but also to investors," said Premier Annastacia Palaszczuk.

But she criticised the federal government for not showing the states as of Monday the legislation they will be asked to consider on Friday, and for asking them to support a policy the Coalition party room could change or torpedo on Tuesday next week.

"Our position remains clear. We would like to see a national framework, we would like to see the legislation but first of all this must go through Malcolm Turnbull's party room," Ms Palaszczuk said.

All three jurisdictions said they would not make a final decision until at least Tuesday afternoon next week. Then, there will be a phone hook-up of the states following a Coalition joint party room meeting that morning where Tony Abbott and other rebels will try to derail the NEG.

To begin in 2020, the NEG will require power retailers to source electricity that meets reliability and emissions reduction targets.

While the states will legislate for the mechanism of the NEG, federal Parliament will set the targets. The government wants an emissions reduction target of 26 per cent on 2005 levels by 2030 with a review in 2024.

Regulation v legislation

Federal Labor and the Labor states want a higher target, for the review to be earlier and more frequent, and for the emissions reduction target to be set by regulation, not legislation.

Regulation is essentially a ministerial decree that does not need to pass either house of Parliament but can be undone by a majority vote in either house.

Energy Minister Josh Frydenberg said he would fight this demand because regulation would introduce too much volatility.

"When Labor was last in government during the Rudd-Gillard-Rudd years, they legislated twice for the Renewable Energy Target," he said.

"They chose specifically not to go to regulation because they said the sector needed investment certainty. The same applies here.

"You can't just flick a switch to turn a target from 26 per cent to 45 per cent with all the subsequent consequences that that will mean for the energy companies."

The ACT government said as well as concerns with the NEG's "inadequate" 26 per cent target and the hurdles to changing it easily and frequently, there were localised concerns with the impact on the ACT's 100 per cent renewable energy target.

Victorian Energy Minister Lily D'Ambrosio said Mr Turnbull must demonstrate "he can deliver the NEG through his own party room before asking others to sign up to it".

Mr Frydenberg and Mr Turnbull were confident the NEG would be approved by the Coalition party room and the rebels led by Mr Abbott and Craig Kelly would be in the minority.

'Listen to experts'

Last week, Mr Abbott dismissed the modelling from the Energy Security Board, which designed the NEG, that forecast power prices would drop by $550 a year over the next decade, of which $400 is due to the commitment to build renewable energy and $150 due to the policy certainty the NEG will provide.

Mr Frydenberg urged MPs to listen to the experts, not Mr Abbott.

"Anybody who's against the National Energy Guarantee is turning their back on those experts," he said.

Mr Frydenberg assured Mr Kelly and others that as well as the NEG, the government would most likely adopt a recent recommendation of the Australian Competition and Consumer Commission that the federal government underwrite the construction of baseload power, including coal, by guaranteeing to be a buyer of last resort for the energy the new plant produces.

He said this would also be on the agenda at Friday's meeting.

Mr Turnbull said if Labor states blocked the NEG, they would be responsible for higher prices.

Federal Labor spokesman for climate and energy Mark Butler re-emphasised Labor liked the NEG but wanted a higher target.

"Our quarrel is not with the design of the National Energy Guarantee," he said.

"Even if there is support for the design of the National Energy Guarantee, there will still be a debate about the level of ambition for new renewable energy."

"We want to see sensible investment frameworks put in place to put an end to this very deep energy crisis that has emerged under Malcolm Turnbull, but we also don't want to see something locked in that smashes renewable energy investment and jobs and sees power prices start to rise again over the course of the next decade."

Australian Financial Review

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