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ENERGY PRICE INCREASES DON’T MAKE SENSE !

THE DEVIL IS IN THE DETAIL WHICH DEFIES OUR UNDERSTANDING !


We have recently learned that electricity prices will increase from 1st July 2023 by 20 to 25%.

What most people would not understand is that not all States are covered by the national regulator of energy, the AER. Here’s what AER say their duties cover:


  • regulate electricity networks and covered gas pipelines in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.

  • enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of market participants and the effectiveness of competition.

  • has a key role in enabling consumers to make informed choices about their energy supplier.

  • protect the interests of household and small business consumers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland. The AER sets standing offer prices small business and residential customers pay in areas where there is no other retail price regulation – South Australia, New South Wales and south east Queensland (Energex).


So, Victoria has its own regulator as does Tasmania. WA was smart enough to retain control of its energy market through 3 government-owned companies: Western Power, Synergy and Horizon Power.


Power price increases have been largely blamed on the Russian invasion of the Ukraine which to most of us is unclear. Needless to say, the global energy spot prices are hard to fathom and they flow through to Australia’s energy market by way of black coal and gas prices that power generators pay to run their power plants. Contracted prices apply as well but outside of those, spot prices dictate power pricing based on the highest cost generator each quarter.


Labor in December 2022 endeavoured to contain the pain felt by consumers and small business by introducing coal and gas price caps for 12 months. So, at present the cost of coal in power production is capped at $125/tonne and gas is capped at $12/GJ.


It should be noted that as at the time of writing this article, the spot price for black coal on the export market was $134/T but back in September 2022, it was as much as $457 so a cap is beneficial in restricting retail price increases. The problem though is that when the AER release their upcoming standing offer prices (retail), we are always in the dark as to what the previous costs were and on what the percentage increases are based. In other words, it would be nice if we all knew what the basis is every quarter and how the percentage was calculated. If these increases apply even though we have price caps, then what the hell kind of increases would we be forced to endure? These caps expire in December 2023 – so what next?


It should be noted that the regulator is charged with determining prices which for the producers include a ‘reasonable’ profit margin! Now that is a conflict of interest! How can the AER be focused on consumers and their pain while ensuring ‘reasonable’ (unspecified) margins for the electricity producers? We often hear platitudes from the AER chair Clare Savage about their concern for the consumers and yet they happily trot out increases that far exceed even CPI!


Enough is enough. While we pay through the nose for our power, the coal and gas producers and suppliers are getting away with monstrous margins. It is high time the Government implemented sizeable profits taxes on exporters and suppliers.


Only then will we see energy prices fall before Labor’s energy relief package (as per their Powering Australia Plan) takes effect and the promised 2025 price cut of $275 and 2030 drop of $378 occur. (Yes, that’s right. Dutton and his rabble would have you believe that Albo has already failed on that promise – but then since when did context ever bother Dutton and Ley?)


If the government needs more money to help reduce energy prices, perhaps they could review all their subsidies and tax deductions that are provided to the energy and mining sectors. We feel sure there are millions to be saved there too.


GB / AB



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