Minister Says Energy Company Profits Not a Priority Amid Concerns Over Price Caps

Australian Energy Minister Chris Bowen speaks to the media during a press conference at Parliament House in Canberra, Australia, on Sept. 18, 2023. (AAP Image/Lukas Coch)

Federal Energy Minister Chris Bowen has dismissed concerns about energy companies not making profits under government-backed price caps, saying that his priority was to deal with cost of living.

Addressing complaints about wholesale price caps on energy—a move designed to drive down costs for small businesses and residential customers—Mr. Bowen said that company profits have been “healthy” and that the government and the Australian Energy Market Operator (AEMO) would always prioritise the consumer.

“I think the Australian Energy Regulator does an excellent job. They weigh up a whole range of factors,” he told ABC Radio on Dec. 21.

“Energy company profits have been healthy, and I think in this spirit, in this environment of cost of living pressure, it’s quite right that the Australian Energy Regulator would prioritise cost of living, and I know my state and territory ministers agree with me about that.”

The energy minister said he did not want to see high energy prices for Australians, and said that the regulator was considering a range of factors before making a decision on the Default Market Offer (DMO) draft, which is due to be released in February.

He said that the 2024-25 DMO offer will be different from this year’s as “we’re already seeing wholesale prices way down on last year.”

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Under the Albanese government’s Energy Price Relief Plan, a price cap of $125 per tonne of coal used in electricity generation was applied, along with an emergency 12-month cap of $12 per gigajoule on new domestic wholesale gas contracts.

Additionally, the wholesale cost of electricity makes up between 30 to 40 percent of the last DMO, which became effective on July 1.

Energy Providers Affected

In a submission (pdf), the Australian Energy Council (AEC) said that while it understands the balance between the regulator and the DMO pricing, the sustainability of companies operating at such prices is in question.

“The AEC considers that in recent years the pendulum has swung well away from supporting reasonable and efficient margins and that the retail market is becoming increasingly unattractive as a site for equity investment,” the AEC said.

Mr. Bowen dismissed those concerns.

“Of course, we want profitable energy companies, but we want families receiving cost-of-living relief as well … I don’t agree with any argument to say energy company profits should be prioritised,” he said.

Mr. Bowen also affirmed findings by the 2023-24 GenCost consultation draft report, which claimed renewable energy energy was the cheapest option in Australia, despite significant expenses on wind and solar storage, transmission, and new-build technologies.

“Nuclear small modular reactors (SMRs) emerged as the highest-cost technology explored in the report,” the report added. Queensland Senator Matt Canavan has criticised the GenCost report for only looking at the newer SMR nuclear reactor models, and not traditional reactors.

Meanwhile, Ed Husic, Labor minister for Industry and Science said that wind and solar remain frontrunners as “Australia’s cheapest and most effective options to deliver a reliable grid to continue to power Australian industry and households.”

“Cheaper renewable energy generation means more clean-green jobs for Australians.

“We’ve set aside $3 billion in the National Reconstruction Fund to support the growth of Australia’s renewable and low-emissions energy industries and meet growing demand in international supply chains.”

Meanwhile, Shadow Climate Change Minister Ted O’Brien said that Australia’s energy policies should be driven by “economics and engineering,” telling Sky News that the Coalition would approach energy policies from a “very different angle” if it were in government.

“That means a balanced mix of technologies—each technology doing what it’s best doing on that grid.

“We need to consider all types of technologies, not just the technology we got today, but next-generation technologies, including zero-emissions nuclear energy.”