Greens are outraged that ERM Power, an Australian electricity company, has chosen to pay a penalty for not buying green energy certificates, rather than “supporting” green energy companies.
ERM Power criticised for choosing $123m fine over renewable energy certificates
Company says it’s cheaper to pay the penalty, but the move is branded as ‘undermining of the objectives’ of the renewable energy target.
The Clean Energy Regulator has castigated a major electricity company for choosing to pay a $123m penalty rather than build or contract new wind or solar power.
It said the move was “hugely disappointing” and customers would rightly be outraged to know the company wasn’t using money collected for investing in renewables in the proper way.
ERM Power has announced it will pay the regulator rather than buy certificates of green power generation to meet its renewable energy target obligations for 2016, citing tax reasons.
“We view the intentional failure to surrender certificates as a failure to comply with the spirit of the law and an undermining of the objectives of the scheme,” the regulator’s chair, Chloe Munro, said. “It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.”
…
In a statement to the stock exchange, ERM said the price for the large-scale generation certificates had more than doubled to nearly $90 each, while the penalty to the regulator was valued at $65 per certificate.
…
What this sorry affair exposes is how hideously expensive green energy really is, and the impact forcing electricity companies to buy useless green energy is having on the cost of electricity.
That $123 million which ERM paid to the regulator, in a fair market driven regime, would never have left the pockets of electricity consumers.
ERM’s courageous decision to pay a penalty rather than buy outrageously overpriced green energy will hopefully help expedite the demise of this nasty scheme to divert cash into the pockets of green rent seekers.
so they would have been legally failing in their duty as management to pay the green tax.
Yep,
If the company had chosen to spend more money on certificates than the penalty for not buying them, then any shareholder would have been quite within their rights to accuse the management of failing their fiduciary duty to properly manage the funds they are responsible for. Such actions can have serious consequences, including barring the managers from holding positions of authority in the future as well as monetary damages.
If I was a customer of the this company I would also be upset if they chose to spend more money than they had to as you know it will be passed on to me in charges. Chloe Munro (the chair of the regulator) clearly has no clue if she thinks that customers will be “outraged” at this. I suspect Ms Munro doesn’t pay her electricity bill to this company.
“I suspect Ms Munro doesn’t pay her electricity bill to this company”
If there is a buck to be made (saved), I wonder how many other energy suppliers will follow suit?
Given that in Australia they speak at least of variety of the English language; one might consider saying that ” the spirit of the law ” is exactly represented by ” the letter of the law “.
So fluff off; The law IS what it IS.
g
Now, now. Don’t you believe in a “living” legal code? I mean if it is good enough for Humpty Dumpty, it is good enough for everyone. Hopefully we get somebody on the SCOTUS like Scalia who says that the law is whatever the law says it is in the plain language interpretation of the words as they were written in their time of writing. For instance, “corn” does not mean the stuff on the cob as late as the 1800s. It was a generic term for grain of all sorts.
“I don’t know what you mean by ‘glory,’ ” Alice said.
Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’ ”
“But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”
Alice was too much puzzled to say anything, so after a minute Humpty Dumpty began again. “They’ve a temper, some of them—particularly verbs, they’re the proudest—adjectives you can do anything with, but not verbs—however, I can manage the whole lot! Impenetrability! That’s what I say!”
No, what they should do and have a right to do is to sue for all of these penalties plus interest after the scam collapses. Collecting taxes under false pretenses is illegal.
Yes, but isn’t it sad that they had to pay a fine to act in the best interests of their consumers and the country at large?
Tom , I’m looking at switching now will go no further than ERM.
Indeed. Corporations Law is very clear. First duty of directors is to the company )not the same thing as the shareholders).
“It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.”
…except that return will go neither to the company who pays nor the end users who earned the money in the first place.
giving away money is not “investing”. If it is done under duress , it is robbery.
That is why I call them “the green mafia”, It is extortion.
Renewables are “a growing industry” only in the same sense that prisons are “booming employers.” The world is going insane.
But renewables are a “Growing industry”. In the UK they have converted one of the Drax power station boilers to burn trees that are grown in the US and then chipped and shipped all the to the UK. So a good example of “the world is going insane”
Harrow sceptic that’s not the worst of the wood chip scam. As reported on this site, the wood chips are being used to heat empty buildings because the businesses can get £160 from the government for every £100 they spent on fuels. https://wattsupwiththat.com/2017/01/03/heating-empty-buildings-billion-pound-british-biomass-subsidy-scandal/
Taphonomic old soul,
Someone, possibly Booker, or O’Rourke, or Steyn, or someone else entirely, once said that there is no situation so dire, so desperate, that it cannot be made worse by government interference. [Or similar]
The RHI woodchip rip-off confirms that – probably for the millionth time . . . .
Auto
PS When will they understand that ‘nicht gefingerpoken’ is, in many situations, actually a wise policy??
The [Wikipedia, apologies] full quote is: –
ACHTUNG!
ALLES TURISTEN UND NONTEKNISCHEN LOOKENPEEPERS!
DAS KOMPUTERMASCHINE IST NICHT FÜR DER GEFINGERPOKEN UND MITTENGRABEN! ODERWISE IST EASY TO SCHNAPPEN DER SPRINGENWERK, BLOWENFUSEN UND POPPENCORKEN MIT SPITZENSPARKEN.
IST NICHT FÜR GEWERKEN BEI DUMMKOPFEN.
DER RUBBERNECKEN SIGHTSEEREN KEEPEN DAS COTTONPICKEN HÄNDER IN DAS POCKETS MUSS.
ZO RELAXEN UND WATSCHEN DER BLINKENLICHTEN.
I’m sure in “their view” it is a better investment. But “their view” does not count when the utility is making financial decisions. Good thing too.
It isn’t like you get electric power out of that money. Unreliables are the worst of all possible ways to generate power for your $. Even diesel generators are cheaper.
Ponzi scheme !
No, that’s an insult to Bernie Madoff. Ponzi gets people to hand over their money willingly, this is simple old fashioned robbery.
The stock price took a short-term hit, but is still trading above its one year average. If investors think this was a good idea then its likely that other power companies will take the same route, and before you know it the green market collapses.
So Australia’s “energy” plan is the same as Obamacare, fine people into bankruptcy and then jail them for not paying more fines.
That’s what rent-seekers do, until they run out of others people’s money
… and it’s not a penalty – it’s a tax!
This is analogous to the failure of Obamacare to sign up enough people because the penalty was too small. They needed something stronger (like the threat of jail).
The takeaway here is that socialism requires force to work. That’s why socialism almost always turns into a dictatorship.
Yeah, 20M new enrollees is considered a failure.
Yes, when you have to threaten people with huge fines and jail in order to force then to “participate” in your program it is a failure.
The 20M get freebies, it is the 100M who lost their insurance, their doctors, and their costs have more than doubled. Please go get a clue before you comment. When it is given to a select few for free, of course they will sign up.
out of 350 million it IS a failure.
G
Chris
January 26, 2017 at 8:31 am
“Yeah, 20M new enrollees is considered a failure.”
Chris,
My son is 27 years old. He has looked at the penalty imposed by Obamacare and chosen to pay the fine in stead of purchasing insurance. He can’t afford Mr. Obama’s insurance plan. We here in Texas still have the right to choose. He chose paying for his rent instead. He needs a roof over his head.
The good news is that not a single govt employee had to change health plans.
As they say, when you rob Peter to pay Paul you will always have the support of Paul. Obamacare forced everyone into the same plans but doctored the price with subsidies.
Real world instance;
Before ACA my wife had health insurance for $210 per month with a $1500 annual deductible. After ACA she could only buy a policy that contained coverage she didn’t need or want for $475 per month with a $6500 annual deductible (which was raised this year to over $7000).
So, understanding that the purpose of insurance is to guard against excessive monetary loss, making the purchase of insurance the actual excessive monetary loss goes against the very idea of insurance protection. Unless of course you need the money to continue to subsidize Paul.
When they were counting on 3 times that number, yes it is a failure.
Like this?
https://chiefio.wordpress.com/2017/01/23/0-00154-of-usa-cranky-in-d-c/
try using the VA then letting me know how well you like it.
and sliding people onto medicaid should not be considered a new enrollee like so many like to do.
~80% of which is medicaid- – -which is essentially gaining insurance without gaining health-care- –
“Chris, you ignorant slut…”
The 20M enrollees are more than 50% subsidized. It (the ACA) cannot be sustained, so yes it is a failure … it was before it started. Schumer knew this, stated this, and went on to say that when it fails it will lead to the ultimate goal of single payer system.
The very poor now can obtain free “healthcare”. The low income can waste a portion of their income on a shit “healthcare” policy. The non-union middle are paying for it.
I can pay 14% of my gross income for a “healthcare policy that does very little for me, Or I can pay 6% of my gross income for a shit policy that does almost nothing for me, Or I can pay 2% of my income as a penalty and save the other $8,000 for the things I will need (dental & knee replace).
The ACA was planned as a failure from the start. The only unintended aspect is that it will cost the Dems politically … they thought the backlash from any attempted fix/alter it would help them (the Dems), but it won’t.
Yes, when at least 6M had to enroll because Obamacare forced their insurance companies to cancel their policies because the policies were substandard (by Obamacare standards). And the many of the remaining 14M lost their insurance when their employer cut them from full time to part time because the employer couldn’t afford insurance coverage with all the bells and whistles required by Obamacare. And then there are the new medicaid enrollees. So yes, Obamacare is a huge, embarrassing failure.
LOL. Like, the guy who felt compelled to avoid the tax penalty, and signed on to the minimum plan? He’s paying 400ish dollars a month for a plan with a 7K USD deductible. How, exactly, was he helped?
Chris January 26, 2017 at 8:31 am
“Yeah, 20M new enrollees is considered a failure.”
Chris, yeah it is. They needed to encourage the 20-30 year olds to buy in. The whole idea of fining someone for not enrolling shows they botched the job in every way.
needed about 60m+ (as a guess)
michael
The whole idea was to threaten the young to force them to buy something that their own risk management planning said they didn’t need, and wouldn’t buy except under duress.
What does a working teenager need with compulsory maternity benefits coverage ??
Why would somebody who doesn’t do dangerous drugs want to buy drug rehab coverage ??
Trump’s proposal to allow ANYONE to freely buy ANY insurance coverage plan that is offered by ANYONE in ANY State, that meets their expected needs, fixes what is the single biggest fault in what we had before Obummercare.
G
Never have gotten a supporter of government run healthcare to explain how stopping healthcare insurers from operating openly and freely across state borders throughout the country is a good thing. They just chatter on about “evil corporations” and “evil hospitals” and “evil doctors” blahblahblahblahblah. Then they prattle on about how of course the government running healthcare is the ONLY way it will be fair and equal yadayadayadayada.
To a leftist big is always bad, unless it’s big government.
george e.
Excellent and direct observation.
Hence Stalin’s ‘statistics’. Let’s pray it doesn’t end there this time.
“socialism requires force to work” And having some really good liars helps too. One of them, Jonathan Gruber, was on Tucker Carlson last night still defiantly telling us that we are all just too stupid to understand how good Obamacare is for us!
Oh Bummer didn’t help me. I couldn’t keep my previous plan, couldn’t keep previous doctor. Lies, lies, lies.
Isn’t most of the “undermining” being done by the fact that the green energy is so much more expensive that the “evil” energy?
Except it’s not more expensive than fossil fuels.
Yes, it is, that is why you have to use the threat of armed force to make people use it.
In which case there’s no case for forcing ‘investment’ using renewable energy certificates.
except it’s unreliable. A font that give you water when it wants, not when you want, needs to be much cheaper than a regular font to be desirable.
your contrarian statements are just that..statements, opinion only with no substance. you are a troll nothing more
As always, the socialist uses fake math.
The only reason why renewables are even close to competitive is because government subsidizes it heavily.
Without subsidies it is. That’s why the renewable supporters are in a panic right now. They are afraid that President Trump will end the subsidies. I hope he does.
@chris,
if green energy is not more expensive than fossil fuels, then explain why a ERM Power would choose to pay the fine rather than buy into the green scam? surely if there was no difference in cost, they would have bought in instead of paying the fine.
Sorry, you seem to have a typo. It’s a “LOT” more expensive. There. Fixed if for you.
Chris, Energy subsidies Australia. Figures taken from Government Budgets.
Coal – $130m, $0.86/Mwh; Solar $2,002M, $412.11/Mwh; Wind $388m, $41.64/Mwh
http://www.minerals.org.au/file_upload/files/media_releases/Electricity_production_subsidies_in_Australia_FINAL.pdf
Green Blight
I prefer the Green Cancer.
Man Made Alleged Green Bull Glow?
Legalized extortion.
This is why I stated in a post in “March of the Scientists” (pray they are lemmings!) article that these supposed climate “scientists” HAVE DONE the damage (and not “will do”). This multi-trillion dollar waste of money, as has been very clearly pointed out by Mr. Alan M.R. MacRae, money which could have been used to save 50 million lives but instead, it is driving more of the global population into the inability to afford a quality of life that should be much closer to a “given” basic necessity than it currently is.
This cult religion of CAGW has had far-reaching effects on so very many people, and yet we continue to have shoved down our throats exorbitant costs for renewables that are not necessary and furthermore, due to the requirement of needing 100% backup by conventional energy sources, actually adds to CO2 emissions. And I state for the record that I am all in favor of the added CO2 emissions, but not at how it is being accomplished via the complete waste of funding for renewables.
CO2 is plant food – I call it the “molecule of life”.
CO2 is not a greenhouse gas.
The current atmospheric concentration of CO2 is alarmingly low.
Life on this planet (plant and animal) has survived and flourished with significantly higher CO2 concentrations over the past 600 million years.
The “pause” is completely natural, yet some have this “insane arrogance” to think that we can change the course of the climate on this planet. Hence the multi-trillion dollar waste of money
Weather related damages as a fraction of global GDP has dropped by 25% in the past 30 years.
There is no change to the magnitude and frequency of significant weather related events. To the contrary, if you were to put a trend on this information, it could have a negative slope.
Forest fire and wildfire counts in the US has been dropping for 30+ years.
Areal extent of droughts and floods has not changed in the past 30 years.
And yes, I can provide plots and references for all of the above if required.
Fortunately this is yet another shining light, that being the Board of Directors of ERM Power, who have made a BUSINESS DECISION to minimize the damage to their shareholders. Let’s hope and pray that more common sense prevails as time goes on.
Yup, legalized extortion.
YES – Legalized extortion.
NO – multi-trillion dollar waste of money
NO – (… which could) save 50 million lives but instead
NO – (… which also leads to an) inability to afford a quality of life closer to basic necessity
SPENDING a trillion dollar is not the same as putting a trillion dollars in a huge shredder and excising it from the economy, buddy. It might not be investing in something YOU or even what a large subset of ‘the populus’ might consider prudent, but it is not a waste of money. Further, “who cares?” about 500 million lives in some planet-wide assortment of shantytowns or hardpan sustenance villages? Humanity has been going at that since time began. We mistakenly feel some sort of “save the herd” provinence when it comes to poverty. Yet, after the last magnificent 60+ years of an endless succession of NGOs and Charities … whaddya know? Shantytowns continue to expand. The poor starve.
YES – cult religion of CAGW
YES – (… we have had) shoved down our throats bearing exorbitant costs for renewables
NO – renewables (are) not necessary
Oh, necessary? If you are far, far from the grid, they may well be the only alternative between “power” and “no power”. But that’s a technicality. The fundamental premise of all energy production is economic. If a source is cheap (or in the subsidized sense, made cheap enough) to be reasonably competitive, then it should be used. Yet, the (… we have had shoved) is also very real. I share your belief.
NO – requirement of needing 100% backup by conventional energy sources,
Never did (require 100% backups), when there is sufficient preëxisting conventional or “elective” generation in place. Only when solar and wind exceed 25% or so of the energy production mix does the need for super-elective buttressing power generation come into play.
WHY – I am all in favor of the added CO₂ emissions
I’m neutral here: why want to increase CO₂ faster than humanity is already adding to the mix? We’re doing a fine job increasing plant food.
YES – CO₂ is plant food – I call it the “molecule of life”.
Me too. It has a nearly linear effect on C₃ plant matter rate-of-growth increase. Good stuff.
NO – CO₂ is not a greenhouse gas.
Ah, technically you are definitely wrong. It is a GHG. HOWEVER (before you get mad and berate me), it is also nearly at its GHG potential in saturation. Even doubling its atmospheric fraction has only but a 7% added GHG adsorption-release of IR potential. It is definitely a GHG, but only a very moderate one, in a differential sense.
NO – The current atmospheric concentration of CO₂ is alarmingly low.
Not at all, unless you look back 8 major ages in Earth’s planetary/life evolution. 400 ppm is pretty well raised. It does have precedent in the last million+ years (which I will argue is a REASONABLE window for comparative purposes) in some of the interglacials. But it is not alarmingly low. Near the peaks of many of the interglacials. Perfectly well represented.
YES – Life … has flourished with significantly higher CO₂ concentrations over the past 600 million years.
Are we referring to the “Carbonaceous” eras amongst others? Yes, life has so flourished. But the spectrum of species having lived thru the Cenozoic (–66 Ma to present) is not wanting 2,000+ ppm of CO₂ to suddenly be inextricably surrounding them. 400 – 600 ppm? Sure. Almost all plant life is already adapted and waiting.
YES – The “pause” is completely natural
NO – (… it is arrogant) to think that we can change the climate on this planet
Oh sure we can! We could salt the great oceanic “blue deserts” with iron. Could turn 400 ppm CO₂ to 300 in less than 10 years. IF WE WANT TO.
NO – There is no change to the magnitude and frequency of significant weather related events.
YES – Forest fire and wildfire counts in the US has been dropping for 30+ years.
YES – Areal extent of droughts and floods has not changed in the past 30 years.
I’m not sure that these points actually bolster the “we don’t care” movement. They just suggest that better forest management and land management is tempering the increased plant-growth (fire fuel) trend at the same time.
GoatGuy
GoatGuy, thank you very much for the feedback and definitely no insults in either direction.
: )
Thank you very much again, I do appreciate the feedback, always want to better understand and you have given me lots to do (a good thing).
Goat Boy, with regards this statement – Further, “who cares?” about 500 million lives in some planet-wide assortment of shantytowns or hardpan sustenance villages? Humanity has been going at that since time began.
It is my assumption you suck from the teet of atheism. It is my hope that if push comes to shove, you are one of those 500 million “useless eaters,” as Kissinger used to call them, because actually, you sound like one. Not sure about the goat, but you do sound like the boy.
Again, GoatGuy, thank you for the response.
With regards to the greenhouse effect of CO2, I have the following links that are of interest:
http://www.mannkal.org/downloads/environment/carbondioxideisnotapollutant.pdf
http://www.ilovemycarbondioxide.com/carbondioxide.html
Enjoy. Hans Schreuder has the following quote regarding CO2:
“To state the obvious, there is in fact no such mechanism as the greenhouse effect in our open
atmosphere and neither carbon dioxide nor water vapour are so-called greenhouse gases.”
And:
“The only true “greenhouse gas” then is air itself (oxygen and nitrogen). Gases such as water vapor
and carbon dioxide have gained the reputation of being “greenhouse gases” (GHGs) because they
do react to radiation at various frequencies and thus gain heat directly from sunlight as well as via
conduction. In laboratory tests this means that any enclosed space of air heats up more when
there are more of these GHGs present in the space of the enclosure of the experiment. But there is
no experiment possible that mimics the open atmosphere, by definition!
In the open atmosphere, the so-called GHGs actually work to increase the scattering of any solar
heat, quite the opposite of what we are led to believe. Imagine an actual greenhouse with low
humidity and another one with high humidity (any difference in level will prove the point). Actual
experiments have proven that a greenhouse with lower humidity takes less energy to heat. This is
obvious as water vapor, a celebrated GHG, in reacting to energy warms up but then dissipates this
energy to the air that’s holding it – quite the opposite of what we are led to believe, heat is not
“trapped” – it is dissipated. Carbon dioxide reacts similarly to water vapor and dissipates any
acquired energy. See below for further information about absorption.
Carbon dioxide is not a greenhouse gas; it does not absorb infrared nor near-infrared in a way that
a sponge absorbs water and it does not transmit visible light – it is transparent to visible light.
Any energy that hits a carbon dioxide molecule will create, at the same instant, an equal and
opposite emission spectrum, giving the casual observer the false illusion that energy has been
“absorbed”, whereas it has merely been scattered. Some of the energy that hits the carbon dioxide
molecule may well increase the temperature of that molecule (depending on how the energy hits
the alignment of the molecule), but that gained heat (theoretical only, can not be measured) will
also be instantly dissipated by means of conduction with surrounding air molecules and at less than
400 parts in a million parts of air, those 400 carbon dioxide molecules would collectively need
to reach several hundreds of degrees to warm the million parts of air by even a fraction of a
degree, all at the same time, all over the world, all the time …. (all the while when the warmer air
is rising and sharing its gained heat with ever higher altitude molecules of air and trace gases).”
With regards to the “insanely arrogant” statement, I am much more referring to the undeniable fact that even if our entire species stopped consuming hydrocarbons immediately (that includes coal), the impact to atmospheric temperature (if, and only IF, you believe that there is a “greenhouse” component to CO2 (which I do not believe to be the case) would be below the level of accuracy of atmospheric temperature measurements, or 0.1 C.
“Who cares”? Anybody with an eye to the future. If these 500 million cannot find a future for their children they will go elsewhere. You might have noticed the huge influx of migrants into Europe? Do you think they are the only ones? They are just the end of a huge pipeline carrying possibly tens of millions.
Helping people develop and have a better future where they are is a far better solution than trying to deal with a huge migration problem.
Go away Tom O. You are not needed here. (And, by here, I mean Earth.)
I’m waiting for Chris to tell us that fossil fuels only “seem” cheaper because externalities are never counted.
In reality, the externalities are almost entirely positive.
The tiny bit of warming caused by CO2 is good.
Plus the greening of the planet is very good.
Well, this sets a minimum price on the con.
Not a major player in Oz generation – only operate two gas fired peaking generators – one in SE Qld(diesel too) other north of Perth.
http://www.ermpower.com.au/about-us/generation/
5 year share price shows a battler –
https://au.finance.yahoo.com/echarts?s=EPW.AX#symbol=EPW.AX;range=1y
They would have to be buying wholesale power from coal fired stations to supply customers.
Wholesale rates are rising as the worst emitting coal fired stations are closed. Our grid is sleepwalking towards a more unstable future with more erratic and higher power prices.
“an investment in a growing industry is money better spent than a financial penalty that has no return.”
Whether those funds provide a meaningful return will depend on what the Clean Energy Regulator will do with the proceeds of the penalty. Does it get rebated to customers, or will the Regulator throw it away on “investment” in a growing green sinkhole?
I guess those regulators are p!ssed off because they won’t get to chose what will be done with it. Politicians will, instead.
These green certificates sound a lot like indulgences. Many people have noted the similarity between CAGW and religion. I’m mildly surprised that nobody has been burned at the stake yet, although there have been many martyrs, Saint Judith being the latest.
Difference are, indulgences were one way to the top, a part of the money was used to make a few great things (St. Peter’s Basilica for instance) and you had a choice to buy them or not.
green certificates are closed loop, used only for dumb things, and you have no choice to buy them, you get fined if you don’t.
We love this church
Mac
There may be more to this than at first obvious. From Fin Review:
“But Citigroup analyst Michael Dargue told clients ERM was “taking a position on the outlook for LGC prices”.
“With EPW [ERM Power] paying the penalty rate (i.e. the maximum possible) in FY17, any reduction in LGC prices over the next three years allows EPW to benefit,” he said.
At the same time, Mr Dargue took ERM to task for “clear omissions” in its previous profit guidance and said the impact of accounting for the penalty fee is constitutes in effect a “very material profit downgrade”.”
The law allows ERM to get its money back by tendering the certificates at any time in the next three years. Basically ERM buys an option, redeemable if the $90 price falls.
I still wonder: why would anyone buy a certificate at higher price than the fine? Or: how the price got higher than the fine?
Sounds like the managers of ERM are a lot smarter than the people who wrote the law.
“Sounds like the managers of ERM are a lot smarter than the people who wrote the law”
It may have been intended. It would smooth fluctuations, and put a ceiling on spikes due to shortage.
If it was intended, why is the regulator’s chair, Chloe Munro, whinging about “the spirit of the law and an undermining of the objectives of the scheme”?
By the way do you have any evidence that it was intended, Nick, or are you just speculating and trying to put a positive spin on the situation?
Despite what is said here, the RET in Australia is a well regarded scheme. It was introduced by Rudd, but has survived through changes of government, including Abbott and Turnbull, with minimal changes. To be acceptable, it has to not pose excessive risk to the retailers, so I think a cap on their liability is essential. I think Chloe is just engaging in routine jaw-boning.
A few other items from the Fin Review
“ERM opted to pay the penalty rather than source 1.9 million LGCs at a cost of about $86. Citigroup analysts said the move means the company is shifting $37 million of costs out of its gross margin into the tax line for fiscal 2017. It can now wait to purchase certificates if or when the LGC price falls.”
“Federal Energy Minister Josh Frydenberg signalled he saw ERM’s case as a one-off because of its desire to accelerate the use of tax losses and noted the high rate of compliance for the RET scheme until now, totalling more than 99 per cent in 2014 and 2015.
…
ERM said on Tuesday its decision wasn’t driven by a view on the RET, nor on future LGC prices, which surged last year.”
ERM shares, which sank 9.6 per cent on Tuesday, lost another 3 per cent in early trading on Wednesday.”
I asked for evidence of original intent, Nick, not whether you thought it was a good idea. Quit playing dodge-ball.
If the RET is such “a well regarded scheme,” why the need for “jaw-boning?” And doesn’t “failure to comply with the spirit of the law and an undermining of the objectives” sound rather censorious in regard to something that was a supposedly intended aspect of the law?
“I asked for evidence of original intent”
I said it may have been intended. Since the promoters of the law (and Chloe) want people to comply, a let-out is not something that they will speak loudly about. But an unlimited liability would have made the scheme unacceptable.
There is a more detailed article here, which has various people saying with Chloe that it is not in the spirit of the law, but has ERM saying
“that the flexibility built into the system, under which it has opted to make the penalty payment for its 2016 obligations, helps bridge this gap.”.
Another article here has more on ERM’s motivation:
“In a statement announcing its intention to pay the LGC shortfall, ERM noted the differential between the non-tax deductible shortfall cost of $65/LGC and a market price of over $90/LGC.
“By electing to pay the shortfall charge of $65 per certificate in place of surrendering 1.9 million LGCs, ERM Power has adopted an approach which accelerates the utilisation of tax losses and preserves the right to purchase and surrender certificates for 2016 within the prescribed three – year window,” it wrote.
“The impact is an incremental tax charge of $37m which is recognised at 31 December 2016. A consequence of this strategy is that franking credits are made available for future dividends.”
In the real world what the legislation actually says is the dominant factor in unambiguous situations, not the “spirit and intent.” It’s hard to fault businesses for seeking to reduce their costs, especially when legislation is based on dubious premises and involves very large amounts of money. If lawmakers fail to understand that loopholes they leave in their legislation are likely to be exploited, that does not reflect well on their competence.
Also note that the first article you cited (Renewable energy groups mobilise as ERM’s RET shortfall looms as major test) talks about “unintended consequences.” The fact that the lawmakers didn’t recognize and address such possibilities is an additional negative indicator.
So far all you have accomplished is to support my original conjecture:
Re: Nick Stokes January 26, 2017 at 2:10 pm
“scheme”
Good word. May not imply that which you wish to imply, but then, it’s your word.
Nick, your narrative is that the legislation excluded some draconian provisions because they would have prevented its passage. However now that the law has successfully been passed in its weakened form, businesses should still be morally required to comply with the omitted parts that would have killed the bill.
Isn’t that rather arbitrary and capricious–kind of like something out of Alice in Wonderland? Perhaps Chloe Munro is the Queen of Hearts? And which character might you be, Nick?
Ralph,
“businesses should still be morally required to comply with the omitted parts that would have killed the bil”
No, I’m not saying that at all. The thing is, people designed this mechanism. It is designed to reach a target, but they have to include some provision for the possibility that we are falling short. No one wants to drive the retailers bankrupt. So there is a mechanism, which ERM is using, of in effect reverting to a carbon tax, but also with a recovery in case the shortage of certificates is temporary, as it seems to be. That gives time for the government to revise the target, or whatever else is needed.
Nobody is getting their head chopped off. Scarcely even a haircut.
Since you keep jumping around, Nick, it’s kind of hard to tell what you are saying. However Chloe Munro is sending the “moral obligation” message and you seem to be trying to deflect criticism from her absurd position.
“Since you keep jumping around, Nick”
No, my first comment was that the provision of a cap on retailers liability was likely intended (which you disputed), and that has been my consistent view. My only comment on Chloe was that she was engaged in routine jaw-boning.
You said above, “It may have been intended.” Now it’s “likely intended,” which is noticeably stronger.
Myself, I didn’t say it wasn’t intended. I asked whether you you had any evidence that it was intended. So far you haven’t provided any.
As for routine “jaw-boning,” consider the following: Suppose you were negotiating a contract with someone. You rejected certain proposed provisions and they were excluded. Afterwards the person you negotiated with wanted you to conform to the excluded provisions, and tried to make you look bad if you wouldn’t. What would you think of the other party who tried to do that to you? Would you just fluff it off as “routine jaw-boning?”
I apologize testing a few things:
Bold
Italic
Underline
StrikeoutSeriously… sorry!
There is a test page. (Scroll up.)
Doing the math, if the penalty of $65 per certificate resulted in a cumulative fine of $123 million, this implies that the cumulative price for buying renewable certificates, at $90 each, would be $170 million. I doubt that the utility customers or shareholders will object to a savings of $47 million dollars. This is especially true since neither the penalty or the certificate offers any net return to the company so both can rightly be classified as a net loss.
Seems like the company was faced with an increased cost, no doubt passed down to its customers eventually, and chose the least costly route. So, the company worked to the benefit of its customers by not paying for green energy. Seems like a win all around to me. Except that the customers might pay $123M less for electricity if this boondoggle didn’t exist. The State should rebate the fine to the citizens and make them whole again.
Jim, I totally agree and it be the end of green certificates overnight!
Green economics, “digging holes and filling them in again”
…for a fee of course
Darrell D. and GoatGuy – They write, if I may say, SUPERBLY WORDED COMMENTS.
Whaw !
Blind faith is vaccinated against common sense beyond parody.
https://wattsupwiththat.com/2017/01/23/study-presenting-deliberately-weakened-skeptic-arguments-increases-climate-acceptance/
In Germany, they pay wind companies to not produce power when there is too much wind, and they pay other countries to take power when they have too much. Millions. It is just as crazy as having a power company pay a fine, just so they don’t have to produce power in a way that doesn’t make economic sense for them.
Chloe Munro, said. “It’s our view that an investment in a growing industry is money better spent than a financial penalty that has no return.”
Well Chloe it is simply cost vs benefit!!!!
Chloe appears to forget that green is an extremely expensive way to generate extremely small amounts of power. Do we need to remind her what her great green experiment did to South Australia?
Chloe’s premise, “…investment in a growing industry is money better spent than a financial penalty that has no return” is wrong, so Chloe’s view is wrong.
The Dutch had the growing industry of the Tulip … investment, re-investment, borrowed investment, subsidized investment and ultimate bankruptcy was end result for a lot of folks that would have been better staying out (or even paying a penalty).
Hype, encouraged by society leaders, does not mean an industry (growing or not) is a good investment.
Sad part is that the fine likely goes into a slush fund for the leaders to further hype/subsidize the scam.
What the F is a ‘clean energy regulator’?
Such creatures need to be purged.
An enema?
These onerous regulations are of the same type we have in Oregon. We are committed by government fiat to have at least 25% of our energy to be from renewable energy sources or face penalty. Wind farms are growing like weeds in the NE part of our state. Ugly bird-killers and with unabated noise when in operation. Most all of our electricity comes from hydroelectric dams on the mighty Columbia river. The ultimate in renewables – but our brilliant green politicians do not consider hydroelectric sources as “renewable” in the calculations! Only morons could come up with those calculations.
When you drive by the plowed/furrowed wheat fields and see the towers going up in a portion of the fields, do you still see the erosion control silt fences installed (to keep the potential construction sediments from running out onto the plowed/furrrowed fields)?
Where are the courageous lawyers when we need them to challenge all these government diktats? High time Australia developed “Legal Foundations” as we have here in the U.S. to go after government excesses (across the board) in the courts. Forcing power companies to choose between outrageously expensive green so-called “investments” and paying a fine is environmental dictatorship of the first order!
Bill, the problem is that the US constitution set out to protect the people from a colonial “tyranny” like the British Empire. The Australian constitution is more about the technicalities of dividing Australia from the British empire. From a legal standpoint we inherited our legal framework from Britain. One of the downsides is that the “Crown” gets to decide when and if she can be challenged/sued. We don’t have a bill of rights or constitutional framework that prevents this sort of monopoly interference in a market.Best we could do is civil disobedience, if every coal generator did what ERM did AND refused to pay the fine then perhaps this could actually be overthrown in the courts, especially if the LGCs was found to be a “Penalty” or a “Tax”, because by law only a legitimate government here can legally levy a fine, or a Tax. Problem is that customers don’t trade LGCs so CUSTOMERS don’t have standing, the power companies need to do it, we have to pay our bills, so why should they care about us enough to tough out expensive court battles with the regulator?.
You talk about Obamacare for example, we have our own version of this where you get fined 0.5 % of your income if you don’t buy private health insurance. For many people the penalty is far less than the cost of the insurance so millions decide to use our public health system instead for which we contribute another percent or so.
Another way to look at the penalty/fine is that the company ERM Power Ltd (ASX code EPW) has 252 million issued shares – so they could have paid a 48c (AU$) dividend with the wasted money.
There is a company in Queensland employing 120 people that is about to close down because it cannot afford the price spikes in electricity, stories like this are unfolding across the country and now we know why.
The only people that could possibly have viewed this plan and thought “thats a good idea” would be those guided by faith, dogma and ideology not by fiscal planning.
Australia is on the verge of collapse from a manufacturing perspective, next to go will be the services sector and unemployment will sky rocket, we are not quite at our nadir but close. Eventually a leader will emerge to guide us out of this mess unfortunately we dont have any Ron Paul or Donald Trump look alikes in this country so we may have to wait for a while.
Who’ that guy from the Ann Rand books?
Crakar
My wife and I are seriously considering a move our of Oz for just this reason- too expensive because of government greed.
It’s ok crakar24, it’s all ok. The housing market will save us. Not sure how people on welfare can afford the median house price of about AU$1mil.
Ford and Holden announced in 2013 to shut shop in 2016/2017, citing labour and energy costs as the main drivers. That has come to pass. Now Toyota is considering shutting down too.
Did you mean Ayn Rand?
Well done them, good business decision. Pay the tax , no overheads , no BS, simples if thats the way it has to be.
Dont spend it on CO2 nonsense, it only encourages the bastards
The obvious solution is for the oz government to increase the size of the fines in the future!.
That way, it will be cost effective for the power company to buy the certs instead of the fine.
Do I need to add a /sarc?
“It said the move was “hugely disappointing” and customers would rightly be outraged to know the company wasn’t using money collected for investing in renewables in the proper way.”
More likely customers are outraged to know their energy bills rising.
This is a good example of a tax setting a cap on the certificates. Any responsible manager would pay the tax if it was less than the cost of the certificates. Two effects are likely now. First, the price of certificates will drop to slightly under $65 and second, the green industry will lobby to increase the penalty tax.
The logical response by those fed up with all this nonsense should be to lobby to reduce the penalty tax to something close to zero. To aid that effort the company should publish a cost to the average household of their share of the $123m penalty, as well as the additional cost to the household had they purchased certificates instead.
This is a perfect opportunity to publicize the cost per household of the green scheme because it’s not buried in obscure accounting numbers. The cost of green is right there for all to see. The company’s decision has made it obvious. This assumes, of course, that the company isn’t earning any green credits with its own operations.
BillTheGeo
January 26, 2017 at 1:38 pm said – [Where are the courageous lawyers when we need them to challenge all these government diktats? High time Australia developed “Legal Foundations” as we have here in the U.S. to go after government excesses]
Oh we have plenty public funded lawyers and some “legal foundations” in the Wide Brown Land but all I can think of fight for the GreenLeft. Also – your US based legal foundations are active downunder – for example fighting against our coal industry with “lawfare”.
UK generator SSE decided to pay £25m to break a government contract to keep a coal power station online because it was cheaper than the losses they would rack up in continuing with the supply contract. The end result both here and with ERM must be cheaper prices to customers.
“We view the intentional failure to surrender certificates as a failure to comply with the spirit of the law and an undermining of the objectives of the scheme,”
Not to state the obvious but the law allows either and leaves the choice to the company.