COAG Energy Council is dead…

…long live the National Cabinet Energy Reform Committee?

With little fanfare, amidst a general COVID-19 update on Friday, the Prime Minister announced an end to the Council of Australian Governments (COAG) and its portfolio equivalents, including the COAG Energy Council. The periodic leaders’ summit will be replaced by the National Cabinet that has already been meeting weekly for the last couple of months. As the crisis eases it will meet less frequently but according to the PM will have a singular focus on jobs to drive the economic recovery. Intergovernmental discussion will be bolstered by seven reform committees, one of which will focus on energy. Given the remit of the National Cabinet, it’s not clear what the terms of reference of the Energy Reform Committee will be. It could be about creating energy jobs or – given energy’s crucial role as an input to so many industries – it could be about driving down energy prices to support jobs in the rest of the economy

The PM noted that the details of the new arrangements will need to be worked out and that some of the existing regulatory councils may be retained. But it would surely be very confusing to have two intergovernmental bodies with responsibility for energy, so presumably the COAG Energy Council is defunct.

Should we mourn the loss of COAG Energy Council? In one sense it has only existed since late 2013, but similar arrangements existed under the name Standing Council on Energy and Resources (2011-13) and before that the Ministerial Council on Energy (2001-11). These bodies were necessary given the Australian Energy Market Agreement (AEMA, signed in 2001) formed the basis of a pact between states and territories (who have constitutional responsibility for energy) and the Commonwealth to create the National Electricity Market (NEM) and the consequent energy market bodies: market operator (AEMO), rule maker (AEMC) and regulator (AER). The AEMA was an outworking of the national economic reform process that shook up a lot of industries, and which many commentators remark wistfully upon as a golden era of policy.

The administrative side of the NEM is a Sisyphean task that never ends, and the reform agenda has only grown with the pace of the energy transition. This has led to serious congestion in processing reforms. Some recent legislative changes to the enforcement and penalties framework have taken over a decade to process from the time they were first canvassed. Tellingly, the terms of reference for the COAG Energy Council have not been updated since 2015, despite a note on the website that an update is in progress and that the initial work plan was only for eighteen months.

The PM alluded to this kind of bureaucracy in explaining the reason for the “congestion-busting” changes to intergovernmental arrangements. It is arguably a poor use of Ministers’ scarce time to have to wade through so many highly technical issues. But then, who will do it instead? It’s possible that the changes are little more than a change of name and that the Energy Reform Committee will pick up where COAG Energy Council left off, but this seems inconsistent with what’s been presented by the PM. Given the new arrangements are meant to facilitate frank discussion and decision-making by having less paperwork and publishing less of the documentation, this would also be a retrograde step in terms of transparency. While the previous meetings were initially so secretive, officials were loath to disclose the dates of them, things did improve over time. For a while, they were precede by an admittedly somewhat theatrical stakeholder engagement session, and communiques were published after the event.

NEM-wide governance could be largely delegated to the Energy Security Board – if it survives its current review. But this could be criticised as creating a democratic deficit by empowering an unelected technocracy.

Or the states and territories could fill the gap by leading their own reform agendas. This is already starting to happen with Victoria derogating from key elements of the NEM earlier this year and jurisdictional renewable energy policies filling the gap left by Commonwealth climate inaction. The Commonwealth’s role in energy would morph into something similar to health and education where it is largely a funder, albeit on a more ad hoc basis, and with the funding used as leverage for local reform or investment facilitation. This approach is reflected in the recent bilateral agreement between the commonwealth and NSW.

Whatever the outcome, it appears that we are on the brink of a reset of overarching governance arrangements for energy. Whether it will benefit consumers rather than jobseekers remains to be seen.