Still no solution for power bill shock

This time last year, Julia Gillard was telling us she had a big stick waiting for the other ministers if they didn’t go along with her plans to deliver households an average $250 a year in savings on their electricity bills from 2014.

Her threat involved the use of the Australian Electricity Regulator and the Australian Competition and Consumer Commission to force change if the premiers didn’t bow to her wishes.

She never explained how this was going to happen. The basis for her claim was a draft Productivity Commission report calling for the embrace of critical peak pricing and the rollout of smart meters.

But Gillard also misused the Commission’s comments. It actually suggested the savings from these steps, carefully implemented over a number of years, could be between $100 and $200 per household annually.

By the middle of this year, when Gillard was no longer referring to the issue, the Commission had issued a final report in which it scaled back the saving to between $100 and $200.

Yet the core quandary – that a large share of residential power bills (as much as 25 per cent in New South Wales) is required to meet the infrastructure cost of as little as 40 hours a year of very high demand – remains unresolved.

Time-of-use tariffs are still just a topic for discussion.

The rollout of smart meters – other than in Victoria, where it remains on the nose – is always just over the horizon.

The Coalition government's focus is on the savings that can be achieved from killing off the carbon tax/price regime. But consumers are getting mixed messages here, too. 

Prime Minister Tony Abbott says the move will save householders $550 a year. But a briefing note recently published on the Department of Industry website suggests this move will save $200.

The immediate driver of unpalatable price rises – the effect of a more than $40 billion infrastructure investment by networks flowing from re-written regulation in 2006 and the successful efforts of the trade unions to get Labor state government to elevate reliability standards to unnecessarily high levels – is being mitigated right now by political intervention at state level in New South Wales and Queensland, home to half the residential customers, to suppress expenditure.

Consumers in these two states will know by about February what regulated price rises will look like in 2014-15.

While the NSW figure is expected to be rise not much more than the inflation rate, there are suggestions that the Queensland one could again be a double-digit number.

Victorians already know their bills will be higher from New Year’s day, mainly as a result of increased retail costs.

The trio of states collectively account for seven million of the nation’s nine million household account holders.

All are bearing the brunt of the 'price shock' of recent years. After experiencing most of a half-century of bills declining or holding steady in inflation-adjusted terms, we’re now seeing the average, regulated household cost of 15 cents per kilowatt hour rise past 25 cents.

Which is why the CSIRO’s Future Grid Forum report published last week gives pride of place in its recommendations (after consultation with 120 representatives of industry, government and the community) to implementation of a “sustained, long-term program to increase consumer awareness of the benefits and mechanisms of cost-reflective pricing and demand management”.

Media coverage of the report has made a song and dance about the sci-fi aspects of a mid-century power system that has lots more renewables (but no nuclear reactors), energy storage and consumers who could be completely disconnected from the grid. Yet it has ignored the here-and-now need for action on time-of-use charges and widespread adoption of smart meters.

The ABC’s Tony Jones, who compered a Q&A-style presentation of the CSIRO report in Sydney, said en passant that “the media doesn’t deal well with complexity,” a point illustrated by the coverage of the publication.

Federal, state and territory energy ministers are sitting down on Black Friday under the somewhat tattered umbrella of the Council of Australian Governments to discuss the state of reform. No doubt there will be a collective fainting fit behind closed doors over the political implications of east coast gas prices doubling – or worse – in the rest of the decade. One can probably write the communique in advance: serious concern, determination to push ahead, complex issues, needs more time, etc.

The CSIRO report – the 60-page full version, not the eight-page glossy fed to the media – observes that readying consumers for cost-reflective pricing “might require more than deregulation”.

It adds that “information campaigns over several years, perhaps similar in scale to those implemented to increase awareness of energy efficiency measures, might be warranted”.

Consumers’ knowledge is low, it says, and they “can be cynical about new technologies such as smart meters”. “Change could be politically challenging."

Should Abbott & Co not succeed in repealing the carbon tax/price regime, we face reaching the second anniversary of the Gillard promise. There’s very little happening to deliver a real change in household costs except for the self-help measure they have been following since the price shocks hit: cutting back on electricity usage.

More will go for solar PVs, but down this road lies a need to rework the tariff structure to recognise the impact of the phenomenon on network economics. Also, users living in rented accommodation don’t have this opportunity.

Having talked up the power bill issue to the point a poll has the community saying it is their “scariest problem” – and wouldn’t it be interesting to have psychologists plumb that mindset – politicians have yet to come up with a resolution.

The clock is ticking.

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. he was made a member of the Order of Australia in 2004 for services to the energy industry.

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Keith

I'm not sure that the basis of your argument is all that helpful in dealing with the impending price rises (on top of the currently bloated prices).

While many Australians will no doubt continue to mourn the loss of a government controlled electricity supply, most Australian State governments have long ago let the entity adrift from State budget and departmental control.

As State governments continue to hollow out their bureaucracy, there is a decreasing capacity for politicians to be sufficiently informed on the topic of price rises.

This lack of authoritative capacity by government to make credible comments on electricity pricing means politicians tend to resort to soap-box rhetoric as a means to quell public disquiet.

That the government instituted electricity 'price commission' is but a plaything of the generating and distribution sector, politicians bereft of knowledge have nowhere to go but to merely support their (industry controlled) 'umpire'.

Cheers

The media is always cheering higher house prices. Higher electricity prices are hurting me far less than the rampant rise in house prices we have 'enjoyed' over the past ten years. Three cheers for inflation.

Last January, I installed a 6.5 kw PV Solar system for $11,400. It was taken from my available, but small capital as I wanted to reduce the quarterly expense bills as much as possible. The bills started coming down and my last Oct - Dec quarter bill was just less than $30. I did not install the equipment because of "government rebates", although they were 0.16c per kwh.

I have also taken to turning off my Controlled Tariff hot water meter for two days and turning it back on for one day. My hot water remains hot for the whole period. And my hot water Tariff bill has reduced.

I wonder what would happen if everyone turned off their Hot water Controlled Load Tariff for two days, and turned it on for one day?

Neil

The issue is not whether you are consuming less electricity, but how much you are paying in standing costs to have electricity available.

For example, in Sydney, NSW, the 'availability' charge for electricity is some $360 per year. For those outside Sydney, the NSW 'availability' charge is $500. No NSW politician can explain the big difference.

Each state has similar 'availability' charges.

Cheers

The cost difference in reticulating rural vs metro is obvious. What's harder to explain is why the margin is so surprisingly small.

The main causes of electricity price rises are:
1) over-investment in electricity infrastructure.
2) The Carbon Tax.
3) The Renewable energy targets, subsidising Wind and Solar power, with Gas Turbine backup.
The last has done more to force up the price of electricity than the other two put together. Forcing power companies to pay more than the retail price for intermittent unreliable power sources means they have to recover this cost from the consumers.

Al Black your lies or ignorance is shocking. "Renewable energy targets have done more than the other two put together". Must have been a pretty small overall increase then since it accounted for 0.3% in 2012
The residential pricing determination from IPART for the 18% price rises in July 2012 in NSW stated: Generation -0.8%, Carbon Price 8.9%, Green Schemes 0.3%, Network 8.4%, Retail 1.2%.
An AEMC report outlining price rises between 2010/11-2013/14 has a national increase of 37.2% with Feed-in tariffs, the LRET, SRES and other state schemes contributing 3% of that.

Don't let facts get in the way of your BS rant though Al.

We still await an explanation as to why huge LNG projects were approved when there was no excuse for the decision-makers not knowing that most of us would derive nothing but extra cost from the Eastern States LNG export push that is driving up Eastern States domestic gas prices to international levels, from which the only obvious beneficiary are energy transnationals.

Keith appears to make no meaningful comment on what is a far more important cost driver than peak infrastructure.

It is clearly the case with Big Energy that “We [most certainly DO NOT] … decide who comes to this country and the circumstances in which they come”, or as Abbott put it, “this is our country and we determine who comes here.” Big Energy “decides who comes to this country and the circumstances in which they come”.

Incidentally, global energy costs have risen similarly to ours.

Smart meters are a con on consumers. Smart meters save the suppliers money, no manual meter reads, and the rollout is paid for by consumers.

So what do we consumers get in return? Nothing good! A small window late at night where power is a little cheaper than now, the rest of the time the price of power is dramatically higher. It really is a very crude sledge hammer to move power usage off peak and shoulder periods, it is so blatant.

As for power price rises in general? Network upgrades play a part, a lot would be to deal with the peaks and troths caused by PV.

Tristan Edis goes on about PV reducing prices with schemes such as the Merit Order Effect. What this does is make traditional generators get paid money for power most of the day then they are called onto supply power only when renewable power has a problem. It is TOTALLY stacked against baseload power systems even though they produce the lowest cost power.

So prices rise and renewables and renewable related schemes are the reason. Now that is fine if they were honest and emissions were falling as a result. But no, they blame other factors for price rises and if emissions are falling it is due to the death of industry and the unaffordability of power.

Good on the Author for pointing out that the rapid rise in network expenditure is being driven by regulatory rules put in place by Labor which allowed state governments to embed indirect taxes into your electricity bill. Peak demand does not justify what has happened.

What we are experiencing is the legacy of scumbag Labor state governments and union power gone mad.

Keith,

Thank you again. I invariably enjoy your posts.

I think we need to deal with both the short term and the long term. I regard time of use metering as a short term issue when compared with the carbon pricing. Time of use tariffs will come. However, far more important in my opinion is to get rid of the enormous impost of carbon pricing and renewable energy targets. These incur enormous costs over the long term for probably no benefits.

According to Treasury estimates, the net cost of the ETS would be $1,345 billion total to 2050. That is equivalent to forfeiting one year's income per person, or about two years income per worker. How may people would agree to forfeit two years income, while continuing to work as normal, over the period to 2050 if they knew what they were agreeing to?

And it's worse than this because the costs would be higher and the projected benefits less or non existent because the assumptions that underpin the analyses are highly optimistic and will not happen. Furthermore, this is only the ETS component of the total carbon restrain policy mix.

I think you'll find that the $1,345 billion figure was the upper limit of a range calculated by Professor Henry Ergas based on some Treasury numbers. Not all commentators agree with his figures; I don't think it was ever a Treasury figure per se. Reputex estimates that Direct Action will cost three times an ETS.

"" Victorians already know their bills will be higher from New Year’s day, mainly as a result of increased retail costs.""

Oh Yes, the author of the story seems unaware of who owns Victoria's grid these days. Foreign governments, largely. So what do they care about Australians

Not one politician or electrical supplier has told us how we actually save money using smart meters so do we have the right to NOT allow the retailers to put this on OUR property ! Can some smart lawyer look this up !
Smart readers cost $700 PLUS - TIME THIS BY 500,000 units AND YOU GET $3.5 BILLION . WHO PAYS FOR THAT ? WE DO x by 2 or 3 . This is not a saving.
Then they add 3 or 4 or 5 different PEAK tariffs during the day . These tariffs are aligned to our human habits so their is practically no way to work around them unless you stay up later or get up earlier to do your house hold work. There is practically no saving available UNLESS YOU DECREASE YOUR LIVING STANDARDS.
We use light saving globes , we buy 5 star rating electrical white goods we only turn on air conditioners at night when its too hot to sleep (and we need our sleep ) and we have solar panels and because the electrical suppliers are not earning enough money they hike it up every year until my solar panels are saving me no more . We need to be able to say no to smart meters as they only save retailers money and increase their profits. I have adjusted my awareness to usage I always have but the need for greed by the GOVT and the suppliers are forcing pensioners and the low income brackets to suffer and net Year in Victoria the Middle income people will begin to feel the pinch. Our standard of living should not be determined by smart meters and huge unsustainable profits. Can any lawyers get involved in this to find out what rights we have !

When you go off grid you do not need a meter. You do not need to pay electricity bills. It is already economic to go off grid unless you have an attractive feed-in tariff. It will only get more attractive as grid prices rise and solar collection with battery storage drop.

NATIONALISE ALL Govts should own run & deliver essential services to the taxpayer the citizen only then will cost be kept to a reasonable level. They once did & services were excellent still profitable to governments but the greed of corporations feeling cut out of that lucrative sector MSM Corps pushed the LIE governments can't run businesses well plenty of evidence I am sure that they can and did.
The west has ample supply of gas but corporations will get better profits by selling off shore. It is Australia's resource irreplaceable but govts facilitating the Corporate agenda. Australia's interest of no consideration to corporations only investors & profits were is the peoples representative? NATIONALISE.

No one seems to realize that the economic regulation of utilities in this country is a fraud on economics and users. Utilities get a perpetual free lunch by be being allowed to keep writing up the replacement cost of their assets and charging accordingly to give themselves a rate of return on so-called "investment" in assets which in many cases they did not even pay for. The ratepayers and consumers of Sydney paid for things like Warragamba Dam and the basic electricity network. The "cost bases" of utilities are an accounting scam - they can even claim a cost base in revaluing easements over your land.

Dr Terry Dwyer
Dwyer Lawyers
www.dwyerlawyers.com.au

No one seems to realize that the economic regulation of utilities in this country is a fraud on economics and users. Utilities get a perpetual free lunch by be being allowed to keep writing up the replacement cost of their assets and charging accordingly to give themselves a rate of return on so-called "investment" in assets which in many cases they did not even pay for. The ratepayers and consumers of Sydney paid for things like Warragamba Dam and the basic electricity network. The "cost bases" of utilities are an accounting scam - they can even claim a cost base in revaluing easements over your land.

Dr Terry Dwyer
Dwyer Lawyers
www.dwyerlawyers.com.au