Senator MILNE: Just for the benefit of the department, my questions are, in particular, about the RET review. It may be appropriate that Mr Archer comes to the table.
Ms Cross : He is coming from the room next door.
Senator MILNE: Thank you for that. What has been the total cost of the RET review?
Mr Archer : The figure I have for the total cost of the review is $587,329. That figure does not include the salaries of the staff on the secretariat but it does include the majority of the other costs of the review. I guess other exceptions would be some overheads such as IT and accommodation and things like that that are provided by the Department of the Prime Minister and Cabinet.
Senator MILNE: Can you run through for me how much the members of the review team were paid, so Brian Fisher, Dick Warburton et cetera.
Mr Archer : Mr Warburton received fees in the order of $73,000; Mr Fisher $39,900; Ms In't Veld, $43,900; and Mr Zema, $29,700.
Senator MILNE: Can you tell me the total amount paid to ACIL Allen for their modelling?
Mr Archer : The figure for the modelling consultancy is $287,468.
Senator MILNE: What was the overall budget that was allocated for the RET review?
Mr Archer : We did not really have a fixed or predetermined budget. The first thing to note is that, leaving aside the salaries of the secretariat staff, it is actually the Department of the Environment which has funded the costs of the review. The department had done some planning around the possibility of a review and had, I guess, provisioned for that possibility. I do not have with me, and I am not sure we had, a fixed or predetermined budget to work to, although we had some idea of what the review might cost.
Senator MILNE: But it came out of the Department of the Environment's budget?
Mr Archer : Correct. There was no additional money provided to the department for the review.
Senator MILNE: In its terms of reference the government requested the review to put forward options that would reduce electricity prices. Has the department raised with the review panel the fact that they misled the government in answering the terms of reference? In particular, it is said that the review should provide advice on the extent of RET's impact on electricity prices and the range of options available to reduce any impact while managing sovereign risk. Then, of course, the review recommended the two most expensive options rather than the cheaper ones. Did you take it up with the review panel that they misled the government in their terms of reference?
Mr Archer : The short answer to that is no. I do not think it occurred to the government that it had been misled.
Senator MILNE: Given that they were asked to put forward the options to reduce any impact while managing sovereign risk, the two options that would drive down prices were ignored, and they were the options in figure ES5 of the ACIL modelling report. So why would that not have been taken up with the review panel?
Mr Archer : Ultimately the report looked at a range of considerations broader than simply the impact of the renewable energy target on electricity prices-which is an impact, but there are other impacts that the scheme has. The report looked at the impacts of the scheme more broadly than just its impacts on electricity prices.
Senator MILNE: But the term of reference said specifically that the review should provide advice on the extent of the RET's impact on electricity prices, and the range of options available in relation to reducing them, and yet it did not. In terms of the secretariat, did you try and point out or inform the panel that the recommendations that they were making were the two in the reverse of what they were asked to do?
Mr Archer : I think the panel was well aware of the recommendations it was making. As I have explained, they were framed against the broader range of considerations in terms of the costs and benefits of the scheme.
Senator MILNE: Did the secretariat draft a report for the review members to sign off on?
Mr Archer : The secretariat did prepare draft material for the report, under the guidance of the panel.
Senator MILNE: When you drew up your draft report for them to consider, did you in fact point out that the cheaper options raising to 30 per cent or keeping the existing scheme would actually drive down prices more than the two that they recommended?
Mr Archer : I do not think we made a point of drawing that to the panel members' attention, but all the information about the various options was there for them to see in the modelling analysis and in the draft material for the report.
Senator MILNE: So the options that were put forward to the government from the review panel were the ones that would result in the most pollution, the least amount of investment and jobs, the highest electricity costs and a position that was opposed by 99.5 per cent of the submissions?
Mr Archer : The recommendations and the analysis behind them are spelt out in the report. I do not know that I can do more than direct you to the report for the analysis and the recommendations.
Senator MILNE: I have seen that, but I am interested in the secretariat's role in drawing up the analysis. Did the secretariat inform the review, the panellists, as to who would most benefit if their recommendations were adopted?
Mr Archer : Once again, the panel members had access to and did consider all of the information that was put forward from the modelling and through stakeholder submissions. So all that information was available to them. Again, I do not think it was a case of a secretariat pointing out any particular impacts or issues.
Senator MILNE: Is it true that page 48 of the ACIL report says:
The shift to the lower mandated LRET improves coal-fired generators values by around $9.3 billion present values terms ($6.6 billion for black coal; $2.7 billion for brown coal).
Is that what the report actually says?
Mr Archer : I could pull the report out and check that precise reference, but otherwise I am willing to take your word for it.
Senator MILNE: On that basis, here we have the people who would most benefit if the higher electricity costs were adopted-the recommendations that would provide the highest electricity costs were adopted-being the coal-fired generators.
Mr Archer : The two brief observations I will make are that the outcomes for electricity prices in the report reflect a certain set of assumptions, and there was sensitivity analysis done around those assumptions which did show that different outcomes were possible in terms of the impacts of the RET scheme on electricity prices, and I guess the other point I would note is that the fact that a certain sector of the economy benefits substantially from potentially winding back the scheme I think simply reflects the fact that the effect this scheme has when you introduce it on that sector.
Senator MILNE: So what we have is the beneficiaries of cutting back the RET are the coal generators and the losers are the community who will pay higher electricity prices.
Mr Archer : Again, at the risk of repeating myself, the panel looked at a broader range of considerations in terms of the impact of the scheme throughout the economy than just its impact on electricity prices.
Senator MILNE: Even though the terms of reference required them to specifically address that?
Mr Archer : I think the report does address the impacts of the scheme on electricity prices, but they were asked to look at the costs and benefits of the scheme, not just specifically in relation to electricity prices.
Senator MILNE: In terms of the role of the secretariat, who developed the assumptions that went into the modelling exercise?
Mr Archer : Ultimately, the assumptions were agreed by the panel and they were developed, I guess-not 'I guess'-through discussions between the modelling consultants, the secretariat and the panel.
Senator MILNE: So the modelling consultants and the panel. What input did the secretariat have to the assumptions?
Mr Archer : The secretariat does have some expertise in electricity market issues and so did review the assumptions. May I take a step back. For most of the major assumptions used in the review, the panel took the decision to draw on projections that were released through official agencies or entities. For example, the electricity demand projections or assumptions were literally taken from estimates that had been released by the Australian Energy Market Operator and by the Western Australian Independent Market Operator. Estimates of technology costs were taken from BREE's Australian Energy Technology Assessment. It was very much the case that the panel made a decision about the approach it would take with the assumptions. Rather than develop their own assumptions they would draw on assumptions that reflected projections or estimates that had been prepared by authoritative entities such as the entities that I have mentioned.
Senator MILNE: Did any of the panellists change those assumptions?
Mr Archer : No.
Senator MILNE: They just took them as they were?
Mr Archer : There were some minor technical amendments made to ensure that the assumptions, in a sense, fitted into the model and aligned with the concepts that were being used for the model. I could not repeat the details of those here. But they were very minor adjustments.
Senator MILNE: Thank you.