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Time for action on the price of electricity

By Damian Sullivan - posted Friday, 7 December 2012


For many of us, the neighbourhood swimming pool provides a retreat from rising temperatures. But for ''Jenny'', a householder who contacted the Brotherhood of St Laurence recently, the local pool is more significant. She is so worried about the cost of running her electric hot water heater that she has switched it off completely - and resorts to taking her daily shower at the facilities at her local pool.

While most householders aren't switching off like Jenny in a bid to curb electricity bills, low-income households are increasingly telling us that they struggle with energy prices which have risen over 50 per cent in the past 4 years.

Fortunately, for Jenny and others worried about how to pay their next bill, we seem to be at a rare moment when energy market reform may be possible. It's a chance the nation's political leaders must not let slip away.

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Today, when state premiers meet with Prime Minister Julia Gillard at the Council of Australian Governments meeting, it's essential they don't let disagreement over some issues - such as the institutional location of a national watchdog, the Australian Energy Regulator - derail other key reforms.

The causes of recent energy price hikes have been picked over, with rising network costs identified as the main reason behind higher prices in most states. There is no shortage of prescriptions for action, either. On Sunday, the PM weighed in with her own plan to address rising prices, which drew from work by the Australian Energy Market Commission, the Productivity Commission and the government's own Energy White Paper. The Brotherhood of St Laurence has also been active in this area, joining with the Australian Industry Group, the consumer group Choice and the Energy Efficiency Council to propose our own Plan for Affordable Energy.

Beyond the politics of the PM's reform plan which has been much debated this week, six substantial measures lie at the heart of the package. They include rewarding businesses who cut consumption at peak times, giving the energy regulator more resources to crackdown on energy networks and increasing consumer involvement in the regulatory process.

The plan also proposes benchmarking energy networks expenditure, introducing new independent reliability standards, and promoting the introduction of time of use pricing.

In a move widely supported across a number of reviews, the Federal Government proposes changes to enable big electricity users to sell a reduction in their electricity use to the wholesale electricity market at times of peak demand. This should make electricity more affordable for everyone by reducing price spikes during periods of intense demand and by reducing the need to build new generation.

To provide a counter balance to the power and resources of the energy networks, Canberra is also proposing to increase the resources available to the existing Australian Energy Regulator. This is an important move to level the playing field with the well resourced networks.

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The institutional location of the energy regulator, however, looks set to be one of the most contentious issues at COAG and could derail the package, with states pushing for this body to be shifted outside the Australian Competition and Consumer Commission.

It would be a great pity if a technical stoush over the location of the regulator - a concern far removed from the everyday worries of people like Jenny - was allowed to sidetrack other negotiations.

The Prime Minister has also proposed introducing a new consumer challenge panel along the lines of a similar panel in the United Kingdom. The challenge panel will be made up of experts who will be able to intervene in network determinations to put forward the case for consumer interests.

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About the Author

Damian Sullivan is the Senior Manager, equity in response to climate change program in the Research and Policy Centre of the national welfare body, the Brotherhood of St Laurence.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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