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.
