Network response to RBA report into electricity prices

The Energy Networks Association (ENA) has responded to Reserve Bank or Australia (RBA) report published in December 2010 focused on electricity prices.

“Electricity prices continue to be a major domestic political issue and a report that has been released that makes for useful reading in dealing with this contentious issue is the Reserve Bank of Australia Bulletin, December Quarter 2010—Developments in Utilities Prices,” ENA CEO, Andrew Blyth said.

“The Reserve Bank report provides useful information for our purposes. Firstly, it is a report from a respected independent source; and secondly, the report confirms that while international comparisons are not straightforward, the level of electricity and gas prices in Australia do not, however, appear to be particularly high compared with prices in a number of other advanced economies. The report also highlights a number of acknowledged drivers of price increases, and provides a medium-term perspective on the proportion of income household consumers need to meet energy costs,” he said.

According to the report, large increases in the prices of utilities have been a notable feature of consumer price inflation in Australia in recent years and further large increases are anticipated over the next few years.

“The recent price rises reflect the move towards cost-based pricing, the need to replace and expand infrastructure to meet demand and rising input costs. At times, these increases in utilities prices have had a significant effect on aggregate inflation. While international comparisons are not straightforward, the level of electricity and gas prices in Australia does not, however, appear to be particularly high compared with prices in a number of other advanced economies,” the report states.

There are a number of factors behind the large increases in utilities prices over recent years, according to the report. While the specific factors vary across each of the utilities and from state to state, there are some common themes. These include an element of ‘catch up’ for the below-average price increases and under-investment in infrastructure during much of the 1990s – when in real terms, utilities prices fell by 7 per cent – as well as changes in the structure of the market, and rising investment and input costs.

To assist key stakeholders in understanding some of the reasons behind recent increases in network charges, the ENA recently wrote to every state and federal politician in the country providing them with a copy of the ENA Energy Prices Statement.

“This was a large task but the initial feedback has been encouraging,” Mr Blyth said.

ENA director for smart networks, Tanya Barden recently gave evidence before a Senate committee hearing into the National Broadband Network Companies Bill 2010.

“Tanya was accompanied by Andrew Deme from Ergon Energy, and both are to be congratulated for their efforts in arguing the case for our members,” Mr Blyth said.