Australians are paying too much due to electricity price hikes. In the five years to 2013, the average household power bill rose 70 per cent, from $970 to $1,660 annually, according to a Grattan Institute report More recently, a Federal Court decision handed down in May means NSW and ACT households could expect electricity price hikes of hundreds of dollars from July. These will almost certainly be followed by increases each year until 2024.
Energy regulator vs electricity networks
Australia’s electricity price hikes crisis has been significantly influenced by the power struggle between electricity networks and the Australian Energy Regulator (AER).
Significant problems began in 2015, when AERannouncedit would cut revenue to state electricity networks for the next four years by roughly 30 per cent below what they requested in some cases.
he power utilities argued the size of the cuts imposed on their spending plans were too steep and would compromise network reliability. This would raise the prospect of power interruptions and failures, and so they took legal action to force the regulator’s hand.
An appeal by the NSW networks to the Australian Competition Tribunal was upheld last year. In overturning the AER decision, the Tribunal declared:
“In the Networks NSW matters, the Tribunal’s conclusions on the grounds of review indicate that in significant respects the AER has formed its decision on foundations that are not properly established. Put another way, its decisions have been reached on complex factual bases and/or the exercise of discretions giving rise to very significant outcomes which, by reason of the Tribunal’s conclusions on the grounds of review, are not appropriate to support the ultimate decision of the AER.”
AER appealed the Tribunal decision, taking it to the Federal Court, but the court upheld the earlier finding. This decision means the AER revenue cuts to networks are reversed, and networks will be able to charge households hundreds of dollars more per year, starting July 2018.
Networks need to fund their own maintenance: AER
In NSW the friction between the AER and the electricity networks is pronounced. When issuing the AER’s decision on price cuts to consumers on April 30 2015, AER Chair Paula Conboy singled out NSW, saying 50 per cent of costs to households related to the maintenance of the network’s poles and wires – not the cost of generation.
She said the AER decision made adequate financial provision for the maintenance of the network. “Any costs above efficient levels will need to be funded by the network owners, not customers,” she announced.
“The demand for electricity has fallen and is expected to remain reasonably flat over the 2015 to 2019 regulatory control period. This puts less strain on the network and requires less investment to provide a reliable supply of energy. This final determination reduces the spending proposal to ensure that only prudent and efficient costs are recovered from consumers.”
As the regulator and the networks drag each other through the courts, the decisions passed down particularly affect consumers living on the poverty line and in lower socio-economic circumstances. Smart meter technology can now disconnect electricity supply remotely. Combined with rising electricity prices, this means more people are likely to have recurring periods without electricity if they don’t pay their bills on time.