Seems to be a bit of a war in here between investors and greens. I'm a bit of both really, but this overall policy makes no sense whatsoever (and the $'s prove it). This is a policy designed for the long term but sold for the short term. The initial "price cap" is a smoke screen for one of the worst policies I've ever heard of.
I'll set my position first, I'm an investor in the energy industry across various companies (both O&G and coal). I see my power bills and agree something should be done, but it needs to be done in the right way, essentially when prices rise so does government intake, which to me seems to fit the royalty system to a tee but for some reason the Albanese government thinks that rather than a fairly simple change to the royalty system, they want to delve into price capping and controlling the energy market.
The figures tell you everything you need to know. The quoted $230 saving per household over 10m households (its probably actually less than this as only focused on the East Coast but I'll be kind), is a saving of $2.3bn but where does this come from. $1.5bn is a subsidy being provided by the government to those with concession cards, so they believe that these price caps (on both gas and coal) will generate 12 months savings of about $800m. QLD just increased their coal royalties scheme (6 months ago) and they expected royalty increases of $1.2bn over 4 years, but now estimate that to be $3.4bn I think I read, so QLD are generating more in just coal industry royalties than they expect to raise in the entire east coast from both coal and gas. Doesn't make sense.
The reason why its so low, is the price cap does not kick in for those where their gas is contracted. I saw an article that estimated that this price cap would only affect about 4% of gas so it leads you to what the real point of this legislation is.
Its the long term control of pricing (with their code of conduct), but you charge a "reasonable margin", firstly is that a cash margin or does it include depreciation (hence recovering the costs of investment), but also how is the margin calculated. If its a % margin, then this essentially mean all generally accepted business practises around generating efficiencies goes out the window. Whats the point of generating efficiencies to lower your cost price, if your margin drops at the same time? Its the dumbest thing I've ever heard. Not only will this result in a lack of investment, it will lead to a lack of focus on efficiencies, hence will drive the cost of energy up. The union comes to you, "we want a 10% wage increase", heck take 15%, we make more money that way. Stupid and short sighted with both parts (lack of capital investment) and removing a companies benefits from striving for cost control will only result in costs going 1 way and thats up, not down.
They have a tried and tested system of royalties already there if they want to take more of the top from what are regarded as excessive pricing, but the Albanese government and Chris Bowen decide to go all communist on is and try and control and essentially nationalise the industry. We have entered crazy town.
The previous Lib governments have a fair amount to answer for due to poor government policies that led us here (see WA as an alternative) but this action is most likely even worse in the long term.
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