States delay approval of Australia’s National Energy Guarantee with set of demands

Policy survives crucial meeting, but Victoria and Queensland want the ruling Coalition to first rubber-stamp it, as they call for a clause to stop emissions targets from decreasing over time.

State governments in Victoria and Queensland have issued a set of conditions for their support of Australia’s National Energy Guarantee at a meeting today, postponing its approval to a future date.

The Council of Australian Governments Energy Council met today in Sydney so that state and territory energy ministers could debate the NEG and potentially grant it approval. However, the Labor-run governments in Victoria and Queensland decided to hold back support until the policy has been approved by the ruling federal Coalition’s joint party room, which is a meeting of all the MPs and senators from both the Liberal and National parties. That meeting will take place next week on 14 August, with several MPs expressing public criticism of the NEG in recent weeks.

The NEG is Australian Prime Minister Malcolm Turnbull’s flagship energy policy and aims to increase reliability of supply and lower energy prices for consumers, while increasing the level of renewable energy through a 26 percent renewable energy target.

Many observers have criticised the renewable energy target for being too low, but most investors are keen to see some policy certainty with the option of ratcheting up the target in future.

The move to postpone the decision is more positive than the alternative, as speculation was rife that one or more states could move to kill off the policy at today’s COAG Energy Council meeting. A vote against the policy from a single state or territory would be enough to scupper the NEG.

Wavering Labor state energy ministers have been keen to ensure the policy will be accepted by the Coalition’s backbench before giving it support, with the Labor government in Victoria stating that today’s outcome meant federal energy minister “Josh Frydenberg is no longer seeking blind endorsement on the NEG prior to its uncertain passage through his own party room”.

Both the Queensland and Victoria governments also set out a series of conditions for their approval of the NEG, with both demanding the emissions reduction target should only be allowed to increase over time and not decrease.

In addition, the Victorian government called for future targets to be set by regulation (not legislation as is currently proposed), that targets would need to be set every three years and three years in advance, and the establishment of a transparent registry with access by regulators and governments to ensure the NEG is working in the best interests of consumers.

It also said it was concerned about “extreme profits” being generated by big energy companies “at the expense of Victorian families and businesses”.

Victoria minister for energy Lily D’Ambrosio said in a statement the NEG still “needs more work”.

“We have always been clear – we won’t sign up to any scheme that threatens Victoria’s renewable energy industry and the thousands of jobs it’s creating in our state. We’ll continue to seek improvements to the NEG and carefully consider whatever comes out of Malcolm Turnbull’s party room,” she said.

Queensland acting energy minister Cameron Dick echoed concerns about the Coalition’s internal approval process, stating: “The Coalition party room is the biggest risk to energy and price stability – and has been for 10 years – so we need that party room certainty.”

State and territory energy ministers will reconvene for a teleconference on Tuesday following the Coalition party room meeting, after which a draft of the National Electricity Law amendments that would implement the NEG will be published for consultation.

Final sign-off for the NEG from the states is unlikely to come before the end of that consultation period. If the NEG’s design were to be approved, the federal government hopes to pass legislation implementing it before the end of 2018.