Surely this is Australia’s Enron. The electricity market has been shut down after years of fossil fuel thuggery culminated in naked extortion this week. Michael West reports.
Fed up with being bullied and scammed, the operator seized control of the electricity “market” on Wednesday, shut it down to stabilise the grid and make sure millions of Australians on the East Coast could turn their lights on. It was a belated though commendable move from AEMO (Australian Energy Market Operator) to finally call the bluff of the energy giants.
Mind you, when we rang up to ask who actually owned AEMO – it looks like a government regulator but is in fact part owned by the very corporate thugs who are gaming it – they stonewalled. “Commercial in confidence” they replied. How can a state-controlled essential service possibly claim they have to hide their shareholders? Owned 60% by the states and 40% by these apparently confidential corporations, AEMO is sadly part of the problem.
In any case, commendably, they stared down the fossil fuel manipulators and said enough is enough. The energy suppliers had been crying poor as usual, pretending they didn’t have the generation capacity to supply the grid, to keep the lights on for millions of Australians. This despite the essential nature of the commodity they supply, a commodity without which people die, businesses fold, ordinary Australians shiver in the winter cold.
It is truly a preposterous turn of events. Even more preposterous is that the suppliers knew that if they refused to feed the grid, and AEMO ordered them to feed it, they would be paid compensation. The craven financial press is today claiming, “This week’s electric shock had mostly outside causes” and calling for “Energy fix must keep the market in the NEM”.
But for coverage in independent media, not furnished with fossil fuel advertising money, the story would not properly be told.
“The extraordinary scenes that emerged in Queensland over the long weekend, and which quickly infected NSW, where generators threatened power shortfalls unless they got paid more money – come from an electricity system – its markets and its regulatory environment – that are completely broken,” wrote Giles Parkinson in Renew Economy before the battle between AEMO and its suppliers came to a head this week.
This faux market, championed by the industry and its PR machine, has irretrievably failed. Power prices had already more than doubled after deregulation even though this country has an abundance of coal, gas, solar and wind generation. Australia is the world’s biggest exporter of gas, yet the proponents of the gas cartel, and fossil fuels generally, still have the chutzpah to assert there is a supply issue and that we must frack up the soil and drill the seabeds for more gas because there is a supply problem.
As if by magic, having shut down the market on Wednesday, after furious negotiations, the problem was fixed just in time for the 6pm news bulletins last night. Crisis averted, they all said; there’s capacity after all, no blackouts.
What was the circuit breaker here in this game of bluff? The suppliers have the generation capacity, the gas and the coal. What they were whining about was the price. AEMO was enforcing a price cap and they, deceitfully, were crying they would have to deliver at a loss. This at a time of extraordinary super profits thanks to soaring export prices for gas and coal.
Did the government have the temerity to threaten to tax them properly?
Surely this is Australia’s Enron. The fall of the infamous Enron in the US followed revelations that the energy trading juggernaut was intentionally removing power from the Californian market to create higher prices for coal and gas. Same deal here, except that our regulators have not bothered to go after this mob for their accounting shenanigans as did US authorities. These days authorities don’t let large corporate basket cases die, they subsidise them with public money.
In the case of Australia’s fossil fuel traders, there is no public Enronesque accounting fraud, although we have identified many times in these pages the aggressive and deceptive tax avoidance tactics of the likes of Exxon, Shell and Origin Energy.
Same deal for other energy majors in this country such as Glencore, Energy Australia, Spark, Jemena and BHP, which has had its own rebukes from the tax office for its “Singapore Hub” tax racket.
The drama of this week put years of fossil fuel lies in stark relief: the lie that coal generation is reliable (the wind don’t blow and the sun don’t shine fairytale), the lie that there is a market for gas. There is no market, just a cartel.
AEMO deserves credit for its action. For years it has been manipulated, gamed, duped and willingly exploited by the energy companies, both state-owned and private. That is because of a fundamental flaw in the way the whole show operates. Gold-plating is the term.
The more the generators, distributors (poles and wires) and transmission companies (the big coat-hangers) spend, the more they claim in compensation from the regulator. This so-called “market” has nothing to do with efficiency and transparency. The players have a perverse incentive to spend as much as possible in order to claim as much as possible from the Australian Energy Regulator.
In light therefore of their stand-over tactics and manipulations, there is a bullet proof argument that they must be taxed to ensure a reasonable contribution to the society in which they operate. Most are multinationals, here to export both the commodities which belong to ordinary Australians and the billions in profits.
Take Exxon for instance. The scam is, after forking out not a cent of tax on $71bn of income over 7 years, ExxonMobil Australia paid nothing in corporate income tax.
Then there is Santos $23bn total income, just $3m tax. Peabody $21bn total income, zero tax. APLNG $18bn, zero. QGC (Shell gas fracking) $17bn, zero. Victoria Power Networks $16bn, zero, Yancoal $17bn, zero.
EnergyAustralia, used to be number 2 in our Top 40 Tax Dodgers chart before shamed into paying a bit and burying its former tax haven structure which bizarrely had a company with “Australia” in its name even though its business model was ripping out billions of dollars in profits to its parent in the British Virgin Islands.
We have a state of affairs in which a cabal of multinational tax cheats, during a super profits boom, are routinely extorting the regulators over an essential commodity, threatening to put Australian lives at risk, threatening blackouts, and this has been meekly accepted for years by the politicians and bureaucrats who govern us.
Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.