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Posts Tagged ‘electricity bills’

Why might your power bills more than double by 2020?

Monday, October 11th, 2010

The Institute of Public Affairs last week issued some research, based on Australian Bureau of Statistics data, that revealed that retail electricity prices increased by 51 to 61 per cent in the most populous states of Australia between 2005 and 2010. These increases were up to four times the 16 per cent inflation rate over the last five years.

We believe that this trend of spiraling electricity prices will continue over the coming decade, with electricity rates to at least double and perhaps triple over the next 10 years. This would mean the average household can expect to pay an extra $1500 per year for electricity by 2020, equivalent to about an extra $30 per week taken from the household budget.

Such a large increase in retail electricity prices is expected due to the following five factors:

  1. Australia’s population is forecast to continue to grow, which means more investment is needed in the electricity network (transmission, distribution) to provide power to more people. This has to be paid for by the end user – households and businesses.
  2. Whilst many electrical appliances are twice as efficient as they were 10 years ago, Australians are using more power at home due to:
    • massive growth in purchases of large, power guzzling, flat screen TVs, often with two or three TVs in the same house
    • rapid growth in number of people installing air-conditioners and dishwashers in their homes (only about one third of homes currently have these)
    • increased multi-tasking especially among younger generation e.g. watching TV and surfing the Internet whilst listening to music
  3. Australia currently produces the majority of its power from cheap coal but the price of coal is likely to increase as fast growing countries like China and India demand more and more coal to fuel their rapidly growing energy needs. Local power generators are likely to have to pay prices for coal at higher international levels.
  4. State governments have in the past often kept consumer electricity prices artificially low but this trend has now come to an abrupt end as evidenced by the 15 to 20 per cent price rises in New South Wales and Queensland in July this year.
  5. The Federal Government’s mandatory renewable energy target dictates that by 2020 Australia must produce 20 per cent of its energy from renewable sources such as wind or solar. This will mean much higher costs to produce and distribute power to households and businesses because:
    • renewable energy power plants cost more to build and run as they are relatively new technologies
    • the networks that carry electricity from these new power plants to homes will need to be upgraded and extended at significant cost
    • wind power can be unreliable and would likely require back up power plants to ensure reliable supply

What can you do to reduce the heat?

There are two ways to keep your power bills under control:

  1. Reduce what you use at home – we recommend reading our electricity savings tips as well as requesting an energy audit to better understand where you might be wasting power at home.
  2. Reduce what you have to pay for this usage - regularly compare energy suppliers to ensure you are getting a good deal.
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ESC calls for submissions on smart meters

Wednesday, February 17th, 2010

The Essential Services Commission of Victoria (ESC) has commenced the process of reviewing the consumer and small business protection regulations in Victoria to ensure they adequately take account of the new state of play where manually-read meters are being replaced by remotely-read (smart) electricity meters.

The current regulations were designed to support manually read meters and quarterly billing of customers. However, smart meters will offer the opportunity for meters to be read electronically in 30 minute intervals. This could lead to greater bill complexity should retailers decide to introduce detailed time of day pricing to reduce risk by better reflecting their wholesale purchase costs, some of which can vary in real time.

The objectives of the review are to ensure that:

  • Customers are provided with clear information on their electricity consumption and pricing in order for them to make informed decisions about how much power they use and when;
  • Customers are protected from accidental remote disconnection of their power supply; and
  • Customers with payment difficulties are protected should their billing frequency increase from the current quarterly cycle.

The ESC is requesting submissions from interested parties but you better get moving as the deadline is 24 February 2010. You can read more on the ESC website.

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Smart meters – are they worth the cost?

Thursday, September 10th, 2009

As smart meter roll-outs commence in Victoria, concerns are being raised about the additional charges that will be levied on households and businesses to cover the cost of buying and installing the smart meters.

According to the Australian Energy Regulator’s draft determination on Victorian smart meter costs and charges, an average household would be charged around $53 per year extra for metering charges in 2010 to contribute to the cost of the smart meter roll out. The extra charges would be payable by all households in 2010, regardless of whether a new smart meter has been installed at the property – in many cases this might not happen until 2012 or 2013.

The proposed new annual charges for 2010 would be as follows for each of the five Victorian electricity distribution networks:

  • Citipower – Melbourne CBD and inner suburbs - $104.79 pa
  • Powercor – outer western suburbs and western Victoria - $96.67 pa
  • Jemena – northern and inner western suburbs - $67.79 pa
  • United Energy – eastern/south eastern suburbs, Mornington Peninsula - $71.80 pa
  • SP Ausnet – outer eastern and eastern Victoria - $75.88 pa

A further $25 average annual increase is expected in 2011.

What will Victorian consumers get in return for parting with this extra cash? Smart meters are claimed to offer consumers the ability to better manage their power usage by having more detailed information on the amount of electricity they use at different times of day and the associated costs. This would lead to reduced power consumption at peak times (due to higher costs) and thereby lower the overall cost to the consumer. However, there are some problems with achieving this claimed benefit:

  1. Whilst we can all do our bit to reduce our power usage (e.g. switching off appliances at the wall), how much can households really change their consumption patterns in a meaningful way? Consumers who are usually at home during the day might have some flexibility on when they decide to turn on certain appliances. However, if you are at work during the day you are most likely to use most of your electricity outside of peak periods so there’s unlikely to be much benefit for you.

    It is important to note that wholesale electricity prices are largely driven by peak demand and the main impact households have on peak demand is at times of extreme weather conditions, such as those experienced on Black Saturday earlier this year. People aren’t going to stop turning on their air-conditioners when it’s 45 degrees outside (but they will be able to see how much it might be costing them!).

  2. It appears we are years away from having the necessary systems in place to communicate pricing information from wholesale electricity markets to distributors, retailers and ultimately back to the home. Without price signals there won’t be any real change in consumer behaviour.
  3. In all parts of Australia, except Victoria, retail electricity prices are still regulated by state governments. For smart meters to perform their role requires government action to remove price caps and allow the market to set prices, which can be a politically difficult decision to make.

For retail and distribution companies there do appear to be some cost saving opportunities from smart meters including:

  1. Reading meters remotely (electronically) would save a significant sum compared to the current quarterly home visit.
  2. Remote connection/disconnections would save costs, especially where home visits are required, but there may be some union issues to overcome, especially in Queensland.

    The objective is for such cost savings to eventually offset the additional costs of the smart meters and that consumers would benefit in the medium- to long-term. It will be interesting to observe what actually transpires in this regard over the next 5 years.

    An important flow on benefit would be more regular & more accurate billing. This would improve cashflow for retailers and theoretically remove all the problems and customer support costs associated with estimated bills & billing errors.  However, this assumes that any solution implemented would be done properly and does not create more issues than it solves.

    I would appreciate your feedback on whether you think smart meters would be of real benefit to you and help you use electricity more wisely.

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