future of Energy Security Board up in the air

Ms Schott said the board had made “very good progress” with the first of its tasks, implementing the recommendations of the review into the future security of the National Electricity Market by Alan Finkel, Australia’s Chief Scientist.

The main exception was Dr Finkel’s call for a Clean Energy Target that the Turnbull government ultimately rejected. Its replacement, the National Energy Guarantee, was subsequently culled when Malcolm Turnbull was toppled by a party spill in August 2018.

Power play: the role of the ESB will be reviewed, with its cessation or replacement being considered.Credit:James Davies

Ms Schott highlighted greater co-operation among the main market bodies represented on her board – the Australian Energy Market Operator, the Australian Energy Markets Commission and the Australian Energy Regulator – as another achievement.

“[They] are working far better together than when I walked through the door,” she said.


Such close co-operation, though, has long been a red flag to analysts such as Danny Price, managing director of Frontier Economics, who have argued that the cosy relationships targeted by regulators in industries such as banking have instead been solidified in the electricity sector.

Mr Price said the National Electricity Market was set up in 1996 to separate rule making in the sector from governments and other stakeholders, a principle “thrown out the window” by governments.

The creation of the ESB in particular was “the very thing the original NEM designers said must not happen in order to avoid the conflicts of interest we now see”, he said in a speech last year.

“The ESB should have been throttled at birth and it should now be done in,” Mr Price said on Wednesday, adding that recent near misses of mass blackouts during heatwaves suggested the market had become “a basket case”.

However, NSW Energy and Environment Minister Matt Kean said Ms Schott was “doing a great job” as ESB chairwoman.


“The ESB has played an important role in ensuring that the NSW government and the COAG Energy Council receive consistent advice across the market bodies,” Mr Kean said. “In my view, that’s why we need the ESB to continue or a similar body in place to perform that role.”

Director of the Victoria Energy Policy Centre Bruce Mountain said that, while the ESB members and staff were characterised by “passion and hard work”, ongoing governance and operational troubles of the electricity sector provided “no confidence that the existing institutional settings are appropriate”.

“Consumers surveys repeatedly show consumers simply do not trust the energy industry [and] rightly so,” Dr Mountain said. “It is time that the technocrats and bureaucrats stopped trying to make up for the shortfalls in policy and ensured responsibility is sheeted back to where it belongs: government.”

Federal Minister for Energy and Emissions Reduction Angus Taylor said he looked forward to the finding of the independent review, with a final report due by June.

“As the energy market continues to transition, it is important the market bodies and the role they play are reviewed,” he said.

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