No Treasury checks on 'big stick' impact

The coalition says new powers are necessary to stamp out misconduct in the energy market.
The coalition says new powers are necessary to stamp out misconduct in the energy market.

Treasury has not analysed how the Morrison government's proposal to intervene in the energy market will affect electricity prices, senators have been told.

The government says the controversial powers are necessary to stamp out misconduct so power giants pass on better deals to customers.

The bill - with Labor's changes - passed the first step of parliament on Wednesday and will now be scrutinised by a Senate committee before being debated in the upper house.

Energy Minister Angus Taylor says the proposal focuses on stamping out anti-competitive behaviour and credits his approach to reducing power bills to last year's competition watchdog report into the electricity market.

But the Australian Competition and Consumer Commission report says a divestiture mechanism is an "extreme measure" and not appropriate.

In the most serious cases, an energy company could be forced to sell off generators or other parts of their business.

Labor's Katy Gallagher used Wednesday's Senate estimates hearing to ask senior Treasury official Damian Dunn if any analysis had been done on how the plan would impact electricity prices.

"We haven't done any modelling," he replied.

Business groups have warned market intervention could put future investment in jeopardy and end up costing consumers more.

The minister doesn't agree.

"The real deterrent to investment in Australia is anti-competitive conduct," Mr Taylor said.

In its submission about the bill, the Law Council of Australia said the divestment mechanism won't have the affect the government is hoping for and makes competition law inconsistent.

The Environment Department submission mentions a goal of $70 per megawatt hour of wholesale power by the end of 2021 but doesn't outline how much this would reduce household bills.

Instead, it simply says the government's plan to underwrite new power projects will put downward pressure on prices.

Labor had opposed the original version of the bill but changed it to ensure energy companies can't be forced to partially or fully privatise.

However state-owned electricity assets such as in Queensland and Western Australia could be forced into the federal government's hands.

Labor's support for the bill was also conditional on it being reviewed before sunsetting in 2026 and ensuring workers are protected if caught up in a forced divestment.

Greens MP Adam Bandt and independent MP Zali Steggall raised concerns the legislation would be used to force companies to keep coal power in the mix.

Labor's mark Butler said although he was initially concerned about that occurring, the legislation now gave more decision-making power to the courts and competition watchdog instead of the minister.

Mr Taylor said he didn't expect the government to pursue the "big stick" powers but would do so if required.

The "big stick" involves:

* a retail pricing measure requiring retailers to pass on "sustained and substantial" reductions in costs.

* a contract liquidity prohibition penalising generators that withhold electricity contracts for the purpose of subduing competition.

* a wholesale conduct prohibition banning generators from manipulating the spot market.

The competition watchdog will be able to issue warning and infringement notices and companies face court-ordered fines of at least $10 million.

Australian Associated Press