TICKY FULLERTON: Retail energy bosses will be forced to lower their power prices or face more aggressive federal legislation. Energy Minister Angus Taylor gave the ultimatum to energy bosses today with an agreement reached to standardise comparison rates for all customers. Mr Taylor also says the loyalty tax will be gone by 1 July next year, with retailers told to put something on the table by 1 January.

Well, for all the details regarding today's Energy Roundtable, pleased to welcome the Energy Minister Angus Taylor who joins me live from the Sydney studio. Angus Taylor, thanks for joining us there. You've obviously had this big meeting with the gen-tailers today; what will your policies and this agreement mean for consumers around electricity prices?

ANGUS TAYLOR: Well, Ticky, there's two problems consumers are facing that the meeting today was addressing: number one is that they're paying a loyalty tax often times, particularly customers who haven't had time to negotiate a better offer - they get stung with what I call a loyalty tax. They trust their energy retailers to give them a fair deal, their contract rolls over, and they get hit with a real premium. Well, that's unfair. It's particularly prevalent amongst small businesses - 20 per cent of small businesses are getting stung with this loyalty tax. We want to see that gone by 1 July with a down payment on 1 January. And we've made it very clear to the retailers that we will act as we have to, to make sure that happens. The good news is they stepped up today on the discussions on that.

And a second issue...

TICKY FULLERTON: Yep.

ANGUS TAYLOR: Which is the confusion that customers face. Because so many customers struggle to compare offers with each other.

TICKY FULLERTON: Alright, well - yes.

ANGUS TAYLOR: It's because the offers aren't comparable. They're compared to different base lines, different reference prices. And so 20 per cent discounts from...

TICKY FULLERTON: Alright. Well, let me unpack all that, because for ordinary people, what is really confusing is a reference price, which is one thing where you've got a clear comparison, which I think Cath Tanner at EnergyAustralia was suggesting that by 1 January, maybe the industry could look at some sort of reference price. And as I understand it, you've now accepted that offer, or said that's a good idea?

ANGUS TAYLOR: Well, we want to see comparable prices across different companies. So, if I'm offered a 20 per cent discount from one company, 25 per cent discount from any other, I know the 25 per cent discount is a better price. That's not how it works at the moment.

TICKY FULLERTON: Yeah. So, government and industry move into the same page on that, but I mean we all knew that this was going to be tense in one particular area, which is: what that price actually is; what this reference price is. And the industry itself is very concerned that that reference price will be set too low, particularly given rising wholesale prices.

ANGUS TAYLOR: Sure. But look, there's two things here - we shouldn't confuse them. One is what you're benchmarking your price against. It's just got to be apples with apples. Customers have got to know what they're getting, Ticky. And that confusion is costing customers a lot of money. Unfortunately, ...

TICKY FULLERTON: But I think the industry has accepted that they'll work on that; that they'll deliver that.

ANGUS TAYLOR: They've got - it's got to be comparable. Now, the second issue is the price you pay if you haven't negotiated an alternative; the standing offers, as they're called.

TICKY FULLERTON: Yes.

ANGUS TAYLOR: These are the un-negotiated prices. And we've said very clearly: we want to see the loyalty tax built into those standing offers gone by 1 July, with a down payment on 1 January. Now...

TICKY FULLERTON: What do you mean by down payment?

ANGUS TAYLOR: Well, look, I'm not going to get into setting prices on your program; much as I Iike your program, I'm not going to get into setting prices on the program. But what I'm going to say is: we do - those prices have been too high, particularly in some markets, and we want to see them come down. We'll have discussions one on one.

TICKY FULLERTON: But what you're asking for is some sort of…Sorry to interrupt, but what you're asking for is a collective down payment. In other words, all the industry moving at the same time. Got to be very careful, obviously, about signalling. It's a bit like banking and rates, I think.

ANGUS TAYLOR: Exactly.

TICKY FULLERTON: But moving collectively, or is it about: what's your best offer, Origin? What's your best offer, AGL? I want to see a down payment?

ANGUS TAYLOR: Well, we're not going to be in breach of our competition laws by coming up with a collective price. But what we are going to do is talk individually with the companies to make sure that they're offering a fair standing offer; a fair price for those customers. As I say, these are the ones who really are small businesses. I speak to lots of them; working very hard every day, haven't got time, and deserve a better price than the one they're getting.

TICKY FULLERTON: So, does this actually mean that these small businesses will actually be looking at lower prices on 1 January?

ANGUS TAYLOR: Well, we want to see those standing offers down by 1 January. If the big companies don't do the right thing, we'll make them do the right thing in the follow up, Ticky.

TICKY FULLERTON: How will you do that?

ANGUS TAYLOR: Well, we'll regulate it. We'll be as heavy-handed as we have to. Now, we don't want to do that.

TICKY FULLERTON: So, that's a cap on prices?

ANGUS TAYLOR: It's not our natural instinct to do that, but we will do it if we have to. I am confident-

TICKY FULLERTON: That regulation, is it a cap on prices that you'd look at?

ANGUS TAYLOR: It's the ACCC's recommendation on this issue, which is called a default market price. So, it's effectively a price which works as a de facto cap, that's right. Now, if we have to do that, we will do it. We will do what it takes to make sure those customers are getting a fair price. But I'm confident that the companies will do the right thing. I think they realise we're serious about this. We are not bluffing. We'll do what it takes to make sure customers are getting fair prices.

TICKY FULLERTON: Well, as I say, they got behind Cath Tanner's idea, but they seem very reluctant to get behind some sort of down payment on price.

ANGUS TAYLOR: Well look, at the end of the day, if the standing offers for those customers don't come down, we'll make them come down. It's as simple as that, Ticky. We've made it clear and 1 January is an opportunity for these companies to demonstrate they can do this voluntarily, they can do it without heavy-handed intervention from the government, which is why we want them to do it on 1 January.

TICKY FULLERTON: Okay. Now, you wrote a very interesting opinion piece today where you said: look, the three largest gen-tailers have more than 70 per cent of the market; it's unprecedented, it's unhealthy. Any classical liberal or conservative should be incensed by this sustained use of market power. Can I put it to you that any classic liberal or conservative would be quite incensed at the level of government intervention around the place at the moment?

ANGUS TAYLOR: Well, I'm dealing with the world as it is, Ticky, not as I would like it to be. And the hand I have right now is that this is a market that's had lots of distortions. The truth is, if you go to any country around the world, the electricity market has a lot of regulation because every customer in that market buys that product, that service. So it is subject to lots of regulation, in every country in the world. But, you know-

TICKY FULLERTON: And what would it take for you to use the break up big stick? What would it take for you to use the ACCC power, you know, to actually force these companies to break up? Because as you mention, they have 70 per cent of the customers and the generation.

ANGUS TAYLOR: Well, we have a very concentrated market here. We've got three players with the vast majority of all of our markets and that is a situation which is leading to bad behaviour. Now, I'm saying to these companies: you've got to change or we'll use the big stick and we'll make sure those powers are in place. Now, do we want to do that? Only if we have to, Ticky, but we will.

TICKY FULLERTON: Okay.

ANGUS TAYLOR: They are on notice and I think they understand that.

TICKY FULLERTON: Alright. Angus Taylor, look, another very important part of this meeting was the Government's idea to underwrite new generation investments. Now, you were talking to banks, retailers, generators, investors - all sorts of people. How far did you get? What is that underwriting actually meaning and what's it going to cost government? And who will be selected?

ANGUS TAYLOR: So, this comes from a recommendation from the ACCC where they pointed out there's not enough competition in these markets - as we've just discussed - and in some markets there's not been enough supply and in fact we've seen supply withdrawn from markets on short notice, like Hazelwood in Victoria. So, we've got to make sure there's enough supply in the market to keep price down, to make sure that there is reliable 24/7 power there for customers. Now, we have said, again, we're prepared to step in and underwrite investment in generation if we have to to make sure there's enough competition and supply.

TICKY FULLERTON: So, the taxpayers sit there as a buyer several years out on the contract, yeah? That's how it works?

ANGUS TAYLOR: Well, the objective here is to make sure there's no- yeah, we minimise the burden on the taxpayer of course, Ticky, but we do need to make sure there's enough supply in these markets and unfortunately in recent years we've seen supply withdrawn from markets, like in Victoria. The price was hiked far more than every economist said it would be, and that-

TICKY FULLERTON: Yeah. And so you're technology-agnostic about this?

ANGUS TAYLOR: Total- well look, what we need is reliable power. Power that's there when you flick the switch. There's lots of different technologies or fuel sources that can provide that. We don't care about the fuel source. What we want is reliable power that's available and affordable when you need it.

TICKY FULLERTON: And have you got a lot of interest?

ANGUS TAYLOR: There's a lot of interest, Ticky. There are a lot projects out there that are potential candidates for enhancing our supply - it's got to be in the right market and it's got to be under the right circumstances, but there's no shortage of interest.

TICKY FULLERTON: Alright. Before I let you go, can I just ask you about - sort of related to energy - it's the decision that Josh Frydenberg as Treasurer has just made today, preliminary decision to knock back the CKI bid for APA, the massive pipeline business. It's against the public interest, he says, and largely because, once again, APA is such a sort of monopoly or so powerful.

ANGUS TAYLOR: Well, and you know it is a very big business. It has the majority of our pipelines that are moving gas around Australia - of course, that's a very important industry for the electricity sector, but also for exports and for manufacturing.

TICKY FULLERTON: Also intelligence.

ANGUS TAYLOR: Well- and Josh- the Treasurer makes this decision on national interest grounds. I have no doubt that he received a lot of very high quality advice on this and considered it carefully. We don't like to reject investment offers; it's not something we like to do. But there are some circumstances where in the national interest the Treasurer has to do it, and I'm confidence that Josh went through this very carefully and has made a carefully considered decision.

TICKY FULLERTON: Angus Taylor, really important meeting today, I think. Thank you very much for sharing a little bit of it with us.

ANGUS TAYLOR: Thanks, Ticky.