TOM CONNELL: Well, as mentioned at the top of the hour, good news today for 150,00 customers with AGL. They have announced there will be automatic discounts, a so-called safety net for people on those standing offers- the higher default offers. Now, we'll be getting discounts up to $150 per household. That has come after a government threat to use this so-called big stick of divestment if savings weren't offered upfront and by 1 January. Joining me now is the Energy Minister Angus Taylor for more on this. Minister, thanks very much for your time. Obviously, we've had the Government - the Prime Minister, already gloating over this. Is this everything you wanted in terms of this 1 January offer?

ANGUS TAYLOR: Look, it's a very good step in the right direction, Tom. And I commend AGL for this move. Their standing offer, they're the prices you get if you don't negotiate, don't have time; too busy taking the kids to school or getting home from work. You get put on a standing offer; those prices have been too high. And what AGL has announced today is a 10 per cent cut in New South Wales and Victoria to those standing offers, and similar cuts in other states; in Queensland and South Australia. So, this is great news for 150,000 households and 27,000 small businesses. We shouldn't forget the small businesses here, Tom. Because there's many small businesses that end up on standing offers...

TOM CONNELL: Yep.

ANGUS TAYLOR: ...End up on probably very high price contracts because they simply bare too busy to be able to remember to negotiate every year. Good cut here, we want the other companies to follow, though. We commend AGL, but we need the rest of the industry to follow suit, to take away this loyalty tax which has been pernicious for so many customers.

TOM CONNELL: Let's just go through what they're offering. First of all, you mentioned the magnitude of it; it does vary from state to state. Is that the amount you wanted; up to 10 per cent? Were you hoping for more?

ANGUS TAYLOR: It's a good down payment. I mean, I always said we we are bringing in the default market price as a change to the pricing regime which will bring down prices of 1 July. But we needed a down payment from 1 January, and that's exactly what we've got here from AGL. I think the crucial thing now, Tom, is for the other companies to follow suit. And that's absolutely essential.

TOM CONNELL: Right.

ANGUS TAYLOR: Look, there are just too many customers out there - 20 per cent of small business customers who have been hit with this loyalty tax. The price you pay if you haven't got time to negotiate your contract each year. We want to see similar discounts coming from the other companies.

TOM CONNELL: Just looking at the press release from AGL, it does mention that it ensures customers who remain on a standing offer for a year automatically get a better deal; does that mean, as your understanding, [audio skip] to be paying the higher amount for a year before this kicks in?

ANGUS TAYLOR: No. it just means if they're on a standing offer for that year, they get the discount. I mean, it's pretty straightforward, don't need to complicate it. But the - as I say, the really crucial thing here is that we said to the companies, as an act of good faith, we've had some bad blood between the energy companies, customers, and the Government in recent times; as an act of good faith, a step in the right direction. A signal that they're serious about their customers. We need this loyalty tax, these standing offers reduced. AGL stepped up to the plate; they've been the first to do it. And as I say, we want the other to follow. Now, this is part of a broader package that is focused on, over time, bringing down these electricity prices for small businesses, for hard working Australian families. We saw those wholesale prices increasing in recent years, and it's time for the big companies to step up and do the right thing. And that's exactly what we've seen from AGL today.

TOM CONNELL: So - yeah. I'm not trying to complicate it; I'm just trying to clarify the situation. So, you're on a special offer - if you like - you go to a standing offer. Is it the case that the first three quarters of that year would be the higher one, and at the end of the year, you'd get a refund for the whole year, so that whole year of the standing offer would be subject to the refund; is that what we're talking about?

ANGUS TAYLOR: Yeah, you get a refund if you are on this - you get a discount if you're on a standing offer. And you end up on a standing offer if you haven't had the time to negotiate what's called a market offer. The way that [inaudible]...

TOM CONNELL: So, to the whole year's bill though, Minister, that you're getting the money back on.

ANGUS TAYLOR: Yeah, sure. You're getting your money back on the standing offer for that year.

TOM CONNELL: Okay. And this [inaudible] covers electricity; what about gas?

ANGUS TAYLOR: No, gas is separate. Our focus has been on electricity, Tom. And the reason for that is we have seen some particularly high increases in electricity in the last little while. I'm talking here today in West Ryde with Formula Chemicals, and they've been doing a great deal to bring down their electricity bills; been a real focus for them. I was talking to a Mitre 10 businesses right near here, just a little earlier, and we've seen electricity bills really hiked for these small businesses, and that's why we have such a strong focus on it. There's other work going on in gas, as you're aware. The Domestic Gas Security Mechanism, which is making sure there's enough gas available for Australian manufacturers and households. And we're dealing with that separately.

TOM CONNELL: Right. And just the other companies that you mentioned, you hope they follow suit; if they don't, is that when you use the much spoken about big stick?

ANGUS TAYLOR: Well, we've made absolutely no apology about the fact that we're bringing forward legislation in the Parliament that will deal with some of the bad behaviour we've seen in the past. We've seen market manipulation. We've seen very serious penalties for customers because they pay one or two days late. I mean, they're the kind of practices we want to see the end of. We have said that we'll use that big stick if we have to. What's great about today is we've seen the first of the companies stepping up and doing the right thing; and that's what I, as a member of a Coalition government, want to see. We want to see business do the right thing. Government can then step out of the way.

TOM CONNELL: Yeah.

ANGUS TAYLOR: Everyone gets on with doing what they do best, which is running their businesses...

TOM CONNELL: Right. But we've got-

ANGUS TAYLOR: ...for either the customers...

TOM CONNELL: Yeah.

ANGUS TAYLOR: ...or the energy companies themselves.

TOM CONNELL: We've got these companies- that's the first one out of the box. This possibility of divestment power - is that something you'd consider if other companies don't follow suit? There could be a big company following suit that means a lot of customers don't get this.

ANGUS TAYLOR: Well, divestment power is about something different. So one of the problems we've got in the electricity market, Tom, is that we haven't had enough supply coming in. We've had supply leaving the market. We saw that with Hazelwood in Victoria. We've seen that with Northern and South Australia, supply leaving the market, and it hasn't been replaced; and when that happens, prices go up and customers pay the price. We want a refocus on that customer. If companies are going to shut down their generators without replacing them, without replacing that supply, to hike prices, then we'll take what action we need to. And one of the actions - and it's only in extenuating circumstances - is when you force asset divestment. Now, other countries have used these powers. The US and the UK have used these powers in the past and they would only be used in the most dire of circumstances, but we have seen some very, very undesirable behaviour in recent times in the electricity market.

TOM CONNELL: So what actually happens, Minister- returning to the issue of the companies that haven't yet followed AGL, what happens if they don't?

ANGUS TAYLOR: Well, I think we're talking about two things here. One is keeping enough supply in the market and we'd made clear that if companies are going to withdraw supply from the market and hike prices, we'll take action and we'll use a big stick if that's what is required. In terms of the pricing, which is the issue we're talking about today, we'd made very clear that we will bring down appropriate regulation of prices on 1 July, which will be suited to what we see on 1 January. So, if companies don't do the right thing on 1 January, then we'll have to take harder edged approach on 1 July. We've made no apology about that. The good news is that AGL has taken a really positive step in the right direction so small businesses like this one I'm seeing here today in West Ryde, in John Alexander's electorate, these businesses - and households right across New South Wales, Victoria, South Australia, and Queensland - can get a better deal.

TOM CONNELL: So there's nothing that you would either be willing or able to do for 1 January for the rest of the customers not on AGL? The action would come later in whatever legislation takes effect on 1 July, that's where we're at?

ANGUS TAYLOR: Yeah. What we've asked for on 1 January is a reduction in the standing offers. The first step towards eliminating what we call a loyalty tax, the price paid by customers who don't get time to negotiate, and on 1 July we want to see further reduction of that. The heavy-handedness of the regulation will depend on what we see on 1 January. We also want to see, Tom, reductions in costs passed through to the customers. So we're seeing a reduction in network charges in this area, where I am right now, from Ausgrid. Their charges are coming down and we want to see that passed through the customers as well in the middle of the year when we see a price change here in New South Wales. So, there's both the standing offers...

TOM CONNELL: Okay.

ANGUS TAYLOR: ...the un-negotiated offers as well as the negotiated ones.

TOM CONNELL: Just finally on the looming summer, Minister, we've got the latest AEMO plan about how much so-called backup or reserve power we'll need for the possibility of blackouts. It's actually going to be less than next year, they say, mainly because of, in particular, solar rooftop panels. So are they playing quite a good part in reducing that risk for those peak times?

ANGUS TAYLOR: They play some role. Look, we've got an extra 2000 megawatts of capacity that's come into the market in the last 12 months and there'll be more coming in in the next 12 months. That can help on some days at some times but actually it's the similar reserve requirement in total required versus last year. It's not- it hasn't moved a lot. It's slightly lower. But this is an ongoing challenge, Tom, and this is why it's so crucial we get enough supply in the market to keep prices down and to keep the lights on. We've seen in South Australia where the government- Labor government there put a 50 per cent renewable energy target in place without thinking about how to turn that into 24/7 supply - supply that can be there when you turn the lights on - and we're not going to stand for that. That's why we've got AEMO working hard ahead of time to make sure there's enough supply in the market but it's also why we've said we'll underwrite new, firm, 24/7 capacity into the marketplace to keep the lights on and keep prices down.

TOM CONNELL: Energy Minister Angus Taylor, thanks for your time today.

ANGUS TAYLOR: Thanks, Tom.