Origin Energy’s CEO, Grant King, is concerned that Australian energy prices might triple over the next 10 years. According to an article in The Australian, Mr King thinks that there are many reasons to expect energy prices to skyrocket:
- Uncertainty over the federal government’s proposed Carbon Pollution Reduction Scheme (CPRS) resulting in investment in higher cost wind- and gas-powered generation;
- Mandatory targets for renewable-energy generation;
- Increased electricity transmission and distribution costs due to the need to invest in more infrastructure to support generation from renewables; and
- Higher input fuel costs (e.g. coal & natural gas).
Mr Grant said that the average consumer is not helping either, using more and more energy by buying energy-inefficient appliances such as plasma TVs.
So it looks like the party might eventually be over for Australian households – historically we have enjoyed some of the cheapest energy costs in the developed world but in the decade to come we might end up forking out as much as consumers in countries like the UK.
Following a meeting with the Consumer Utilities Advocacy Centre (CUAC), Victorian Council of Social Service (VCOSS) and St Vincent de Paul, the Energy and Resources Minister, Peter Batchelor, announced that the electricity smart meter roll-out to all Victorian households would be put on hold indefinitely, effective immediately.
The so-called moratorium was agreed to permit better consideration of the likely impacts of time-of-use charging on consumers, especially those at the lower end of the socio-economic scale.
As we have previously argued in this blog, we are skeptical that the claimed benefits of smart meters are achievable in practice. The Government’s mandated roll-out will add significant cost and complexity to the electricity industry, which will ultimately result in higher power bills for consumers.
We also agree with the argument put forward by CUAC, VCOSS and St Vincent de Paul that many less well off families and pensioners, who often spend a great deal of time at home, would have limited opportunity to change their energy consumption behaviour and as a result would be stung by significantly higher daytime (peak) electricity pricing under a time-of-use regime.
However, we also understand that wholesale costs for electricity retailers can often be significantly higher during peak times, so there needs to be a mechanism to pass on the real cost of the power being consumed. We saw the negative impact on the industry of fixed prices last year when Jackgreen went into administration as a result of the high spot prices it had to pay for the excess power used by its NSW customers during the summer heatwave.
The optimal solution to reducing peak demand would probably be to let the market set time-of-day prices that reasonably reflect cost and for the Government to introduce additional welfare payments to needy households to offset the higher energy bills they will face. This would incentivise households to use energy more wisely but also protect those least able to change behaviour.
You can read the Minister’s media release on The Premier of Victoria website.
New South Wales residents will start paying from 46 to 64 per cent more for their electricity in three years’ time, according to the NSW Independent Pricing and Regulatory Tribunal’s (IPART) final determination released yesterday.
As a result the average NSW electricity bill would increase by $577 to $918 per year in 2013, depending upon where you reside.
Around half of the approved power price rises is attributed to increases in network charges to fund new investment in infrastructure and improvements in the electricity network’s reliability.
More significant, however, is the fact that close to half of the price increase is due to the inclusion of the expected costs of operating under the Federal Government’s proposed Carbon Pollution Reduction Scheme (CPRS). This is the first time that the cost of reducing carbon emissions has been factored explicitly into retail energy tariffs.
It is important to note, however, that should the CPRS (or its equivalent) fail to be implemented within the next three years, IPART says that the CPRS-related price increases will not be passed on to consumers. This would reduce the price increases to a slightly more palatable 20 to 42 per cent.
Key points:
- If you live in Country Energy’s network area, which covers regional and rural areas of NSW, you will see the greatest increase in your electricity bills of 64 per cent or $918 per year in 2013 if the CPRS is implemented as planned (or $601 per year if CPRS is not implemented).
- If you live in Energy Australia’s network area, which includes the Sydney CBD and suburbs, you will see a rise 0f 60 per cent or $754 per annum in 2013 if the CPRS is implemented as planned (or $448 per year if CPRS is not implemented).
- If you live in Integral Energy’s network area, which includes Sydney’s Greater West, the Southern Highlands and Illawarra, you will see the lowest price increase 0f 46 per cent or $577 per annum in 2013 if the CPRS is implemented as planned (or $246 per year if CPRS is not implemented).
These substantial price rises are likely to refocus consumers’ attention to finding ways to reduce their energy use at home or buy a greater proportion of their energy from renewable sources. Of course, this is the main reason for the CPRS in the first place.
As power and gas bills eat up more and more of your family budget it is more important than ever to shop around and compare electricity and gas prices.
