CHOICE membership

Electricity Price Increases


#21

Totally agree. When looking from the outside in it’s easy to see the difference between a circle and a line. When you on the inside and on the merry go round everything looks like a curve.

The risk of pressure from the outside is random abandonment of the ride and there will be lines drawn all over the place. Hopefully enough fall off on the same and right place.


#22

Just to be argumentative in analysing it from my armchair, network charges include physical maintenance as well as dividends to governments. I am one who thinks government infrastructure should be cost recovery, or funded from taxes, but not profit driven. Ausnet is my local network, private and seems stingy with maintenance because of many outages, hence my possibly jaundiced viewpoint.

Wholesale electricity includes investment in plant, maintenance and fuel. Would anyone be more comfortable if this was shown as a base and fuel surcharge? Could be interesting!

Environmental charges are for the betterment of everyone when done seriously, not as a partisan exercise. Evidence suggests this government fails badly in this regard.

Retail costs - of advertising, billing systems, offices, sales staff, web sites and delivery/cost of product

Retail margins - would this be other than 9% (16%-7%) more profit going into pockets.?


#23

I have the same view. When I have raised this in the past, the response has been these dividends reduce taxes, levies and fees which would otherwise be taken by government. I can see this point bu also how high electricity costs impact on parts of the community. Maybe those in the community highly impacted, wouldn’t necessary be subject to these other higher government taxes etc?

The network charges include all operational and maintenance costs, and the net profit (dividend) to government after all network charges and collected and distributed.

I suggest that the retail costs include things like wage rises and all other operating/business costs. The first 5 years of the decade in question, wages generally increased greater than inflation.

In relation to inflation, the only increase which possibly is greater than inflation is the network charges. The others would have been equal to or less than the rate of inflation.


#24

Which is a shortcoming of the private sector. The public sector doesn’t have the luxury of deciding they don’t want to play.

It seems to me that a lot of the problem can be attributed to corporatisation of the networks. They might have stayed under public ownership, but the controlling bodies were restructured along commercial lines. They therefore began acting like the private sector and gamed the regulations, leading to sky-rocketing network costs.


#25

The electricity industry is interesting as it is possibly one of the most regulated or governnent controlled industries in Australia. Ausnet in Victoria for example can’t charge what they feel like for the use of their network. Their charges are regulated and their income is determined by the Australian Energy Regulator, through what are called resets. As their total revenue is regulated, I suspest that the only way to maximise profits for Ausnet’s shareholder(s) is to minimise operating costs. One such was is to minimise maintenance such that it meets the minimum standards to achieve the current network reliability requirements. However, there is opportunity to have force majeure when the network fails under such times protecting the provider from regulatory or consumer action.

Likewise, the wholesale energy price is also controlled directly and indirectly by AEMO, through generation requests (supply) to meet network demand. When the supply = demand and supply is forecast to increase, AEMO can instruct generators to increase capacity. This is when high cost generation such as gas enter the generation pool to ensure sufficient supply to meet demand (failing to do so would result in network shutdown to protect the network).

Those who think that a private companies, as generators or network providers, are ripping off the consumer has been mislead by the media. The only part of ones power bill which is not regulated is the retail charges, but these amount to a small percentage of the bill. Some retailers can manipulate other charges, such as access/connection/supply charges, meter reading charges or solar infeed rebates etc to try and maximise their returns on that component of the bill. Thisnis why comparing one retaiker with another has been very difficuot6as it may not be comparing apples with apples.

There is also the non-regulated supply which is known in the industry as the contestable market place (namely not on a tarriff). In such case, the cost of electricity used is set by the retailer and based on ones use profile. Retailers ay apply an additional charge in relation to the purchase and onward selling of an energy unit from the pool to the consumer.

Most domestic consumers are still on a regulated energy price structure, but there has been a move towards shifting consumers to the contestable market (namely through installed smart meters where the electricity charges are based on, in effect, the pool price at the time of use). I beleive that Victoria there has been move towards contestable market for domestic users. Businesses, particularly those with higher usages have had the opportunity to enter the contestable market for a decade or two.

Contestable is potentially a lot cheaper when generation capacity exceeds demand, but could potentially be more expensive when generation capacity is restricted or doesn’t meet demand and one consumes electricity at times of peak network demand (e.g. uses most of their electricity at peak demand times such as late afternoon or hot/very cold prevailing weather conditions).

The above is az simple as I can try and explain how the industry pricing works. For much jore detail, the ACCC report outlined in a earlier post will give a better and more detailed explanation.

The electricity industry price structure is complex and could easily be rationalised. Whether such rationalisation benefits the consumer is for the industry experts to analyse and could be a recommendation of a government inquiry.


#26

I don’t doubt Ausnet is regulated, but what they spend their money on is not as much for maintenance as might be preferred by us customers. Evidence? We went for many years with a very reliable and stable supply, then the frequency and duration of localised interruptions has been continuously getting worse.


#27

Which is consistently the case when government tries to distance itself from its responsibilities. For mine, the level of regulation merely shows that government should be in more direct control. Interposing commercial or quasi-commercial entities isn’t working.

Meanwhile, renewables continue to disrupt the market:


#28

Yes, they may minimise their maintenance expenditure such that they increase their profits whilst still meeting their AER set reliability target.

If one experiences an outage which does not meet the Guaranteed Service Level, one might be able to claim compensation for the disruption to supply. For more information on Victoria, see this website:

Other states also have compensation schemes where the supply does not meet the Guaranteed Service Level. The guaranteed service levels and compensation schemes for other states can be readily found by googling the state and local distribution/transmission network provider along with the term Guaranteed Service Level.

Irrespective of who owns the network (private or public), the network has unplanned outages from time to time from equipment failure (such a catastrophic failure at a substation or generator), natural weather events or disasters (storms, cyclones or high wind events, bushfires), human intervention (e.g. car accidents or malicious damage) etc. These outages and response times are recorded (such as major incidents) and are used to determine if the provider meets its legislated obligations for network reliability.


#29

When one is used to reliability at 99.9 for a decade and it reduces it is noticeable. One of the truisms of computers and services is that the more reliable they have been, the more reliable they need to be for user satisfaction. Meeting minimum standards is not impressive.

Your references appear to be a macro-view that does not capture localised events that do not affect the grid or a long haul/major distribution network.

The service guarantees are a fairly low bar, and the few dollars of compensation requires recording keeping each time (and many begin and end while we sleep) to know when one can lodge a claim, and regardless if they happen while we are working and our (eg.) disc gets corrupted going through the motions to get those few dollars vs the pain of restoration is not very well balanced IMO.

My partners multiple PVRs also crash when they lose power (surprise!) and lose in-progress recordings. Shows not on Freeview? Too bad, but she can get $30-40 in compensation p.a. if she keeps her records.

:roll_eyes:


#30

They exist.

Here are the recent Ausnet ones:

https://www.outagetracker.com.au/outagelist

This website also provides information on current outages:

https://www.outagetracker.com.au/

While I agrees that the service guarantees may not be as high as ones expects (say 100% reliability), these service guarantees allow for unplanned outages outside the control of the network provider. For a distribution network, it is near impossible to have a 100% reliable system.


#31

I am familiar with that site, being routinely referred to it fairly often from SMSed outage notices., but they are not historic, and trying to find my recent 8 hours outage was not rewarding to see what detail is published.

yes, but providing all the reasons for less does not change my service experience, nor explain why there are seemingly increasing problems.


#32

As I view it, the basic problem is that public services prioritise optimising service. Commercial (or quasi-commercial corporatised former public service bodies) focus on minimising costs. Whatever the nominal standards, the former consistently outperforms the latter on quality and reliability, in my experience.


#33

An interesting proposal:


"For-profit energy retailers have not improved the quality of our lives "

“They have simply captured profits instead of creating value.”

Government has a responsibility (Hayek notwithstanding) to control markets. One good way to do that is to participate as a competitor.


#34

#35

Not sure this is a good idea?
https://www.sbs.com.au/news/greens-want-public-owned-power-retailer

Ask anyone in Qld who is a customer of Ergon Energy. It’s a subsidiary of Energy Queensland Limited, owned by the Qld State Govt.

The prospects of a national retailer competing with private business is not novel. It is no different or as likely of coming to be as any other public solution to competition eg a Commonwealth petrol retailer. Whether the proposal from The Greens has been floated is little more than attention grabbing is a separate question?

The best solution may be something very different that addresses the underlying issue more directly. @TheBBG has pointed to the real issues.

In context national household spend of petroleum fuel is more significant for many of us than the cost of electricity. Considering also recent price rises in LPG/NG, road tolls, etc there is a broader area of concern.

Critically the notion of a mechanism to introduce a state owned competitor that is intended to reduce retail prices appears counter intuitive to the driver of higher retail electricity prices encouraging solar PV uptake.


#36

A Government owned power retailer?

We have had that since electricity first became available in FNQ and it is still business as usual.

So much for Di Natale and the rest of his ship of fools.


#37

Not necessarily a bad idea. Leaving everything to “market forces” hasn’t worked. Total State control doesn’t work. It’s a question of where the line is drawn. We certainly don’t have it right at present.


5 reasons you may be paying too much for electricity
#38

The Federal Government is increasing taxes on gas and oil projects from 01.07.2019.

Hopefully some of this extra tax take might trickle down to benefit consumers.


#39

Yes, there are mixed reports about Ergon.

What invariably happens is the owner of the GOC (e.g. government electricity retailer) is pressured by the shareholding government to maximise returns to assist with filling the government’s coffers.

The greens proposal is unrealistic and won’t change electricity prices.


#40

The AER wants to hear from you.