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David Headberry, representing the Major Energy Users, asked the the Australian Energy Market Commission: "Where is the lack of investment that needs encouraging by all of these rule changes?" One of the high-level (NEM) principles was to encourage investment, he said. "Do you know what the key driver investment is? It’s money. So what we had a look at is how the utilities index has been going over the last five years compared to the ASX 200 which is the base line, and the red line – quite clearly, the red line is the one that really shows how the utilities index is tracked. When you convert that and put it into perspective and you look at who’s in that utilities index – Duet, Hastings, Alinta, AGL and the others – they’re the biggies at the top other than the government-owned ones, and what’s more, they comprise more than 90 per cent of that index."

"They (the distributor-retailers) were all awarded a market risk premium (MRP) of 6 per cent and a beta of 1 per cent. The ASX shows an MRP of 6.05 over the last five years, and CommSec calculated a beta of 1.08. When you look at the utilities index, it’s a different story. They have actually shown an MRP of 11 per cent and have a beta of .31.

So where is the problem? "So they’re being overly rewarded compared to the rest of industry. Do we have to change the rules just to encourage further investment, and that’s really the point we’re coming to. Is there a problem?"

Reference: Australian Energy Market Commission, Transcript Of Proceedings, 8 March 2006, Public Hearing Rule Proposal, Draft – National Electricity Amendment (Economic Regulation of Transmission Services) Rule 2006. Contact: Mr J. Tamblyn, Chairman; Ms L. Carver, Commissioner; Mr I. Woodward, Commissioner.

Erisk Net, 8/3/2006, p. 31

The big news this week is the release of the Stern Review on the Economics of Climate Change. This report goes into the drastic effects of increased temperatures due to climate change on Australia. To read the review and access Sir Nicholas Stern’s presentation and speaking notes, click here.

This is what the newspapers are saying:

Analysts sceptical about report’s impact in US

Julian Borger in Washington

Monday October 30, 2006 

Guardian Unlimited The news that Sir Nicholas Stern would be coming to the US to promote the recommendations of his global warming study was welcomed by environmentalists yesterday but there was widespread scepticism that it would contribute to a change of policy while George Bush is in office.
The White House issued a non-committal statement welcoming the Stern review as a contribution to the body of knowledge on climate changing, but did not address its calls for fundamental change in policy. "The president has long recognised that climate change is a serious issue. He has committed the nation to investing in new technologies," it said.
After initially expressing doubts, the Bush administration now accepts that industrial emissions are contributing to climate change, but it remains opposed to mandatory caps on greenhouse gas emissions and the sort of carbon trading scheme outlined in the Stern report. The White House argues that such measures would impose crippling costs on the US economy, in return for uncertain gains. "

A new Kyoto but let’s not exaggerate: PM

Phillip Coorey and Stephanie Peatling
November 1, 2006

The Sydney Morning Herald   JOHN HOWARD will announce today $60 million in spending on 42 projects aimed at reducing greenhouse gases as he seeks to combat Labor accusations that the Government has dragged its feet on global warming.
Climate change leapt to the top of the political agenda yesterday after the release of an alarming report by a former World Bank economist, Sir Nicholas Stern, warning of global economic depression should the problem not be dealt with within 10 years.
As the Prime Minister warned his back bench not to be "mesmerised" by the report, the Opposition Leader, Kim Beazley, accused the Government of not being fair dinkum.

Stern report a call to action: Greens

Oct 31, 2006 

TVNZ.CO.NZ The Greens are hoping the Stern report on climate change will light a fuse under New Zealand’s politicians.

Pay now or pay much more later to avoid the economic costs of global warming is the stark warning in the much-heralded report from former World Bank economist Sir Nicholas Stern. He says rising temperatures could shrink the world economy by 20%. However, the economist says immediate action will cost just 1% of global GDP.
Stern says we know enough now to be aware of the magnitude of the risks, and how to act effectively. He says there is still time to avoid the worst impacts of climate change, if we act now and act internationally.

Stern report on climate change costs

28 Oct 2006 20:04:59 GMT

LONDON, Oct 28 (Reuters) – Ignoring climate change could lead to economic upheaval on the scale of the 1930s Depression, underlining the need for urgent action to combat global warming, a British report on the costs of climate change said.

For highlights of the report, a summary of which was obtained by Reuters, click here .