Network levies cause for alarm

The Australian Bureau of Statistics (ABS) recently released its September quarter Consumer Price Index (CPI) and Producer Price Index (PPI) information. According to the Energy Users Association of Australia (EUAA) the results show that electricity prices have continued to rise over the past year, both nationally and in all states, which is the third year in a row for it to happen.

Consumer electricity prices saw 10-to-20+ per cent increases in most capital cities over the past year. Nationally for manufacturing, an area of the economy under severe pressure, electricity prices rose by 10 per cent and gas prices by 6.3 per cent.

EUAA executive director Roman Domanski said the level of electricity price increases shown in the ABS data continue to be of major concern.

“Some of the increases are truly staggering,” Mr Domanski said.

“In Adelaide, we have seen a 48 per cent increase in two years, in Hobart 42 per cent, in Melbourne 22 per cent and nationally 24 per cent. Electricity prices represent the single largest increase in both consumer and producer prices.”

Mr Domanski said the major cause of electricity price increases continues to be the charges levied by electricity networks.

“The AER has acknowledged that the current way of setting these charges leads to excessive claims by the monopoly networks and, as a result, excessive network prices,” he said.

“Over the past year federal and state renewable energy polices, especially those that support small-scale solar installations have also been a major contributor to electricity price rises in all states. A large part of this is due to the generous multiplier that these installations get whereby they are heavily subsidied by those consumers of electricity (the great majority) who do not have such installations. These probably account for one-third of the increase in electricity prices.”

A recent EUAA report states that electricity consumers have paid a subsidy of $3.2 billion under renewable energy schemes and will pay a further subsidy of $7.6 billion, feeding through into electricity prices.

The EUAA estimate that the carbon tax will increase electricity prices by at least $20 per MWh from 1 July next year. Modeling by Deloitte Access Economics, released by the EUAA in June, showed that electricity prices would increase by up to $51 per MWh by 2020, or a 120 per cent increase on the wholesale price (with both a carbon price and renewable energy target in place).

“While there might be compensation for households proposed for the impacts of the carbon tax, this is not the case for either network charges or renewable energy costs. For businesses, only a few very large and heavily impacted ones will get some compensation given their exposure to trade with markets that do not price carbon, but the vast majority will get no compensation for any of the factors driving rising electricity prices,” Mr Domanski said.

“The three factors mentioned above suggest a further electricity price spike in 2012 across the nation, which is not welcome news for electricity consumers,” he went on to say.

Mr Domanski said that electricity price increases such as these feed into both the cost of living for families and disadvantaged consumers, as well as the cost of doing business.