Over the last five years power prices have risen dramatically. A new Grattan Institute report, Fair Pricing for Power, states that in the five years to 2013, the average household electricity bill increased by 70%.
The Federal Government claims the carbon tax was the major reason for the price hike. If this was so, its abolition last month should result in a big decline in electricity prices. The Government has predicted that average households should expect savings of $550 over the next year on their electricity bills now that the carbon tax has gone. Whether these savings will happen remains to be seen.
However, prices started to rise well before the carbon tax was implemented. Furthermore, the carbon tax was responsible for a mere 9% of the price increase and costs associated with renewable energy (another culprit according to the Government) perhaps 4%. As prices increased by much more than this 13%, other factors obviously had a major role in price rises.
The main reason for the price increase has been the investment in the delivery network – the poles and wires. Since 2009 electricity networks have spent around $45 billion on upgrading the poles and wires. Consumers are paying for this investment in their electricity bills.
The network upgrade was undertaken because of predictions that demand would rise and increased capacity was necessary to meet peak demand. Peak demand occurs for relatively short periods – for example on a hot afternoon in mid-summer – when electricity use rises dramatically because of air-conditioner use. If peak demand cannot be met, blackouts will occur.
However, since 2009, according to the Grattan Institute, electricity demand in eastern Australia has fallen by about 7%.
There are two main reasons for this. Consumers responded to price rises by becoming more careful with their power consumption. And the uptake of roof-top solar (by around 1.2 million households) means many consumers generate part of their household power requirements. So fossil fuel generators have lost market share.
Electricity prices will continue to rise unless governments heed the call for changing the way consumers are charged for their electricity.
- Leonie Blain
This post was published in the VOICES FOR THE EARTH column in The Daily Examiner on Monday August 4, 2014.