**Poll** Do you think energy prices are too high, about right or too low?

Do you think electricity and gas prices are:

  • Too high?
  • About right?
  • Too low?

0 voters

We also welcome your comments about how the energy market works.

The Australian Energy Regulator (AER) is a government organisation that determines the amount of money energy networks can charge to efficiently build and maintain the networks.

Questions

  • What do you know about the AER and how it works?
  • Do you think the AER is doing a good job in deciding network costs?
8 Likes

Energy prices have risen much faster than other prices over the years and this puts a lot of pressure on consumers with limited incomes plus businesses who rely on energy

8 Likes

If some of the money paid for electricity had been spent on improving the network to take on consumer renewable generated power and supporting more renewables then perhaps the price paid may have been worth it. Instead we have a system that at times and places struggles to accept this type of inflow. Why don’t we have micro-grids (localised power supply systems)? Why hasn’t the network been upgraded to support small scale energy production?

Further why do we pay for so many middle men in the distribution of power (gas and electricity) to users. Each retailer adds a further cost burden to the supply cost, they each need to pay for offices, management, salary and wages, returns to investors (profits and dividends). My personal opinion is that it should be moved back to a single entity, publicly owned business (State based if needed).

As we move off fossil fuelled energy production I think these are necessary changes we need to cater for and we need to demand of our energy supply system.

So no I don’t think the AER is doing a good job!

PS Tweeted about the poll so hopefully some more input.

15 Likes

Without doubt, everyone would like cheaper electricity bills, but if one considers what 1kW gives (and it’s price compared to other consumer items), overall I believe the price of electricity is possibly reasonable. Notwithstanding this, the amount that consumer’s pay in the electricity has increased considerably over the past 20+ years. Some of this increase is due to costs of supply and generation, but I suspect that a considerable portion of increasing electricity bills is due to increasing domestic consumption (as evidenced in the past 18 months due to Covid). Increased consumption = higher electricity bills.

As Australia’s standard of living has increased, we now expect to use devices/appliances which support this increase in standard of living. Invariably, these devices/appliances use electricity causing a substantial increase in usage and hence increased bill amounts. The increasing domestic consumption has resulted in a shift in peak demand from early to afternoon hours (caused a few decades ago by business/industry) to the late afternoon/early evening.

Domestic consumption and the cost of an electricity bill will continue to rise as more and more appliances/devices/consumer products shift from traditional forms of energy to electricity. This includes transportation, if electric vehicles uptake is as predicted, and other types home equipment and heating. The pressure on the network will also increase through the phasing out of traditional forms of energy due to public policy. This includes in some jurisdictions, gas which will be replaced with electricity - and likewise for calls for wood fired heating.

The increased domestic consumption will place further pressure on network costs (to meet a potentially higher peak demand), storage (as variability of renewable generation requires higher reliance on storage) and generation (including adequate) redundancy to maintain reliable supply.

Yes, I have worked with a network operator on a planning and development perspective, including assisting with information compiling for resets.

Yes and no.

For the no. It is challenging in the existing environment which is in a state of flux. Network infrastructure has a life of 50+ years and up to more recent times, there was certainty with long term forecast. More recently, there seems to be an impression that the network infrastructure should respond immediately to potential changes which may be temporary or suit the current operational or political environment.

Adapting to regular changes isn’t often practicable, or where it is, could be costly (where costs are passed onto the consumer).

The AER hasn’t been overly successful in

  • change management and expectations (from a consumer perspective - why are changes needed, why are electricity costs structures slowing changing to the historical model (e.g. higher peak time costs), what is practicable/impracticable (there are many commentators who don’t understand how the electricity industry works but seem to have all the solutions to fix the problems)
  • consistency in approach over reset areas (this is particularly the case in recent times where different approaches to peak demand management are employed (e.g. Demand charges/levies on top of base tariffs to Peak period tariffs). Consumers looking over the fence see others are doing it differently (even though many networks are interconnected) thinking that the charging system adopted for their own location penalises them compared to others.

The AER has also been lacking in identifying/forecasting problems caused by domestic PV on the network. If the AER had hindsight (say 20 years ago), the approach taken for domestic PV systems may have been different and the current impacts of such systems on the network could have been potentially avoidable.

And the Yes, the AER has been placing pressure on network operators to reduce network charges. The AER reset review process is an example where the AER independently critiques information provided in the reset to determine if there is opportunity to reduce the Reset costs and thus consumer costs. The AER ability to set the Reset amount irrespective of what the network operator asks for is positive and should be continued into the future.

7 Likes

While we are a large continent most of us live along the coastal areas. I’ll avoid using mobile coverage claims, but I will compare our electricity prices with the USA where 'The Average Electricity Rate in the U.S. is 10.42 cents per kilowatt-hour.’ with a variation of $0.07 to $0.30, all USD, so make it an average of $AUD0.17 (inclusive of GST/taxes). That is roughly half our prices.

Differences are in the networks, generation, and so on, but using Alaska as a benchmark for comparison our costs are similar. Is Australia as ‘frontier’ as Alaska?

8 Likes

I cannot answer the quiz above as it requires one answer to two questions.

I think the AER has done a fair job managing electricity costs overall but has failed in some respects, one standout was the network ‘goldplating’ that ran riot for several years. This is a symptom of a natural monopoly being sold off to private enterprise without adequate planning or regulation.

The gas domestic market is a shambles with all other parties being played by the industry like a violin so that a country with vast supplies of gas is now paying absurdly high prices. Gas was much cheaper and more readily available before there were vast new fields opened in QLD and WA. So we have the ridiculous situation where it is proposed to build gas import terminals. This is a failed market. The solution proposed of developing more east coast supply is also absurd as it assumes that additional supply will go to domestic consumers whereas history tells us that if the price is right the industry will sell it offshore in a flash.

Some may claim that these flaws are a result of government policy or inaction, or that other alphabetical agencies are responsible instead of AER but whether that is true or not the fact remains we have have a need for proper regulation that is not being met very well or in some cases at all. The consumer and dependent industries are left to deal with consequences.

6 Likes

I know nothing about the AER and how it works. But that poll is just a bit silly… who is going to say they should pay more for energy?

I’m completely unimpressed with the regulator, when there are proposals about to make people pay to have their solar sending to the grid, and in a country where profit is put before people. In no way is it acceptable to sell our gas supplies offshore before the domestic market is satisfied. And I was horrified to read @syncretic comment above that import terminals are proposed. We have plenty of gas, we dont need fracking or importing.

6 Likes

At one level we all want to pay less for energy. But we also know a lot of new network elements are going to be needed for connecting more solar and other renewables and this has to be paid for. It can become a question of do current consumers or future consumers pay for the upgrades?

1 Like

As an aside, our energy ‘competition’ seems to be essentially selling power from generators and distributed by grid operators that provide and distribute electricity, with retailers being no more than layers of sales and marketing by myriad companies that do nothing but billing, while adding their overheads including seemingly substantial advertising in cases, and their profits on the top of the product.

Is pointing that out off topic or partly relevant to why we pay as much as we pay? If the market was re-regulated would it be much different? If it was nationalised (state or federal) could we expect only actual costs to be recovered? If more would it (even if only in theory) provide funding for public benefits? Some note shareholders benefit from profits, including in super, but it is never clear who are the key beneficiaries - energy consumers or only the investors with comparatively more shares?

4 Likes

But how would this market have the semblance of competition without that? You couldn’t sell off monopolies for ready cash with no such fig-leaf. There would be objections, “Sire, sire the peasants are revolting!”

And then there is the problem of employing those who do not have the talent or energy to make something useful to sell. Who is going to employ advertising executives and out of work salesmen and politicians if there are no opportunities like this?

  1. Firstly, the AER is a “government organisation” so all the decisions are going to be biased. Basically, it doesn’t matter if the public understand how it works when the AER is not an independent body.
  2. Secondly, No I don’t think the AER are doing a good job in deciding network costs, because here in SA the cost of electricity (with all the renewable power it boasts) is more expensive than all the other states in Australia. Also, the lack of local technicians when there is a blackout or storm damage repairs, takes longer than is should instead of a 2 hour job it takes for example 1 day. The AER is like the UN a toothless tiger. (I used to live in the remote far west of NSW and power was restored in less time than it takes for SA Power to do a repair in an urbanised area).
1 Like

I knew little until researching more recent discussions concerning demand tariffs for smart meter owners and DER initiatives. Effectively the AER is like the ACCC but with a remit that is limited to electricity/gas distribution and pricing. One observation is that the role of the AER is substantially constrained or limited by regulation and Government policy. It is further complicated as the energy industry is subject to Commonwealth and independently each State and Territory.

How it works and for whom it works, the AER exists to provide best interests recommendations, is my lay take. To the extent politicians and Government legislation limits the powers of the AER and defines ‘best interests’ is open for comment. The AER and various reports refer to ‘Consumer Consultation’. It was surprising to note broad consumer organisations such as Choice were not represented. Retail - residential electricity costs and supply reliability are key consumer interests. The majority of organisations mentioned as consumer representative are limited to select portions of the broader community. It’s therefore possible to suggest the AER is not taking in the views of a large portion of residential users.

Is the AER doing a good job?
This depends on whether the AER is being assessed by the responsible Minister’s office against political aspirations, the electrical and gas industries, or by residential consumers. As a consumer making informed decisions needs full transparency behind all decisions and costs. Personally, I don’t believe they are effectively or fully communicated. In instances it appears that one group of stake holders is given a higher priority than others. The general community consensus on reducing carbon emissions has not been fully addressed. Whether this is a consequence of failures by the AER or by impositions of Govt is difficult to comment on. Transparency is key.

It does not work as it should. It struggles due to a lack of support for a secure longer term focus, increasing capacity while reducing GHG emissions at a rate that meets climate needs. There is a conflict in priorities between capital investment, consumer desires for lower pricing, and environment/climate needs.

In accepting the AER had a core role in ensuring fair competition and consumer pricing, it’s clear why or how the third outcome is not a priority. There is no tool in the tool kit of the AER that can force higher rates of Capital Investment to accelerate GHG reductions by the industry. The AER does not work to the maximum benefit of the community (residential consumers) because short term costs to supply have been prioritised.

Investment in energy, in particular electricity, and the green spin offs are firm decisions usually made a decade or more in advance of delivery. They are scaled to meet needs 20 or 30 years distant. The cost to the consumer of future energy may be more or less than it is today. I’ve assumed that is outside of the remit of the AER. It’s a contradiction that in the short term the AER is making competition decisions on delivering lower cost energy by locking in current technology, rather than future investment. I’ll note that the recommendations on DER do in part recognise the future will be different. Even if we must all pay more for our future energy, whether directly through consumption charges, or through government capital contributions. It’s not evident yet that the AER can put a cost on these or alternate acceptable future outcomes.

Thank you for the opportunity to comment.

3 Likes

Is there any relationship between this ‘poll’ with 2 unrelated questions, and this report (what is behind the headline)?

4 Likes

2 posts were merged into an existing topic: Electricity Price Increases

A post was split to a new topic: Energy Prices

Pay to keep old coal fired plants “available” even if they are not producing power?

Even when they are online, they have a bad habit of breaking down when they are most needed.

What a crazy idea.

image

1 Like

No, Energy prices have soared since the renewable energy push. We are unable to get solar and the costs just keep going up and up and up…

Why do you think that?

We will continue to pay ‘above prices’ for electricity while AER and other rules allow electricity generators that have lengthy response times to continue to run while they are not needed by demand.
Another old-fashioned part of electricity & its pricing in Australia is the divorce between wholesale prices that generators are paid versus the prices that retailers charge consumers (including consumers who are on time of day and/or smart meters).

2 Likes

I am reasonably familiar with the NEM for electricity and the various components of the cost of electricity. I have seen that this year in Victoria the generation costs have fallen, the distribution costs have increased and the various imposts for renewable energy and market oversight have increased.

The gas pricing is opaque to me and I have no idea how much is the wholesale cost of gas and how much is the retailer component.

1 Like