Since Crikey revealed that a senior bureaucratic taskforce was investigating the electricity sector’s claims about the impact of the CPRS and the financial crisis, the sector has tried to ramp up the apocalyptic rhetoric about the Government’s ETS and its need for an increase in assistance because capital markets have turned against them.

They’ve receive plenty of coverage — admittedly not uncritical — from the AFR.

We’re not just talking about any increase in assistance. Currently, the sector will receive $3.9b in handouts from the Government under the CPRS. Lenore Taylor reported in The Oz that the sector wanted another $5-20b in assistance.

The signals from the Government aren’t promising. There is no interest in tripling or quadrupling the level of assistance to the power sector and something considerably less would, by the sector’s own rhetoric, not do the job. The Government is convinced the problem is with capital markets, not with the CPRS, and it’s for the companies to deal with themselves.

But if it was successful, the prime beneficiaries of this multi-billion dollar try-on would be foreign power companies.

One is British company International Power PLC, which owns Hazelwood in Victoria. That generation facility alone will score nearly $1b in handouts under the current CPRS arrangements.

Last year International Power made over £1b in profit, including £168m from Australia. Earlier this year, in a note to investors, the company noted the changes to the CPRS announced by the Government and said nothing about their implications beyond that it would continue to engage with the Government on the issue. Its portfolio was “operating well” and performing “in line with our expectations.” No alarm bells for investors there.

The next biggest beneficiary is the Chinese company CLP Power International, which owns Yallourn. CLP will get $738m in handouts from the Government under the CPRS. Last year CLP made HK$9.7b (about $1.5b). The company told investors late last year that it was preparing for the introduction of the CPRS (at that stage on 1 July 2010), spoke of the transitional assistance it was receiving, and that it was examining long-term low-emission solutions for Yallourn.  Nothing about the dire impact of the CPRS.

Judging by the threats to “walk away” and complaints that “this is not a haircut, they’re chopping us off at the neck”, clearly things have got a lot worse in the intervening months.

The problem that the owners of coal-fired electricity generating facilities is not that the CPRS will have some sort of unintended effect on them that can be remedied with some assistance. The problem is that the CPRS is fundamentally targeted at them. They are at the heart of Australia’s carbon-dependent economy, in a way that no other sector except the coal industry itself is. If the CPRS did not discourage investment in coal-fired power stations then it would have no point whatsoever.

The reluctance of capital markets to invest further in coal-based power is exactly the sort of market signal an ETS is supposed to foster. That’s the point of an ETS — the market makes rational investment decisions, without Governments arbitrarily intervening to pick winners.

And the rational investment decision here is that coal-fired power, in the absence of carbon capture and storage technology, is going to be more expensive as we move to a low-carbon economy.

That’s why even a Government that has caved in at virtually all points to industry on the CPRS is determined to let the power generators wear the consequences of a carbon price, something which no investor in the last decade in Australia could have been unaware would arrive at some point. Maybe they weren’t paying attention in London and Hong Kong.