States switch power onus onto Canberra - Sydney Morning Herald

STATE governments lost little time in pushing back against the federal government's call for more energy market competition by asking Canberra to overhaul regulation of the sector.

After a doubling of electricity prices in parts of Australia over the past few years, much of the interest in Thursday's release of the energy white paper was on electricity sector reform.

Following privatisation in the 1990s, Victoria is the only state to open the door fully to electricity competition.

New South Wales has retained price controls for residential and small commercial users, and a review of the market is under way to assess competition and whether price controls should be removed.

All other states have retained some form of price control, which reflects the exposure of state politicians to the backlash from power price or supply problems.

The real work in overhauling electricity sector regulation will begin at the energy ministers' meeting later this month.

That meeting will consider a series of reports aimed at overhauling the way investment in the power sector is regulated.

Under the present regulatory regime, electricity companies are able to inflate their capital spending plans and challenge government decisions they don't like. This, coupled with decisions by some states such as NSW to opt for higher reliability standards, has fuelled steep power price rises in recent years.

''The federal government must … strengthen its regulator to ensure decisions are made in the long-term interests of consumers,'' NSW Energy Minister Chris Hartcher said.

Victorian Energy and Resources Minister Michael O'Brien said: ''What was missing [in the white paper] was any program to ensure the Australian Energy Regulator

has the resources, the powers and the independence it needs to do the job consumers need it to do.

''The AER will continue to face difficulties in regulating large, well-resourced energy network companies without fundamental structural reform.''

The federal government wants all state governments to open the door to full competition by privatising all government-owned assets and removing price controls.

''Nearly half of NSW households have already moved away from standard regulated rates by shopping around for the best deal,'' Mr Hartcher said.

''But until we are confident competition in the energy market has been found to be effective … the government will continue to provide a regulated price option."

Victoria has mandated smart meters aimed at cutting electricity use, at significant cost to all users, but other states have refused to follow suit despite pressure from Canberra.

Mr Hartcher said some customers could benefit from smart meters, but his government was opposed to a national scheme because of the cost to customers if they were forced upon them.

"Customers must first understand the potential benefits that smart meters can offer,'' he said. ''Energy businesses should have flexibility to offer innovative products that customers want, not ones that a government has forced upon them.

"And when these products are made available, customers should be entitled to choose."

NSW is working with Victoria and Queensland to present a united front at this month's meeting of energy ministers, which could clear the way for measures to overhaul electricity sector regulation to be finalised at the Council of Australian Governments meeting in early December.