Blueprint to Reduce Electricity Prices

The ACCC’s recommendations to significantly improve electricity affordability for consumers and businesses are out in the form of its final Retail Electricity Pricing Inquiry report.

And it’s scathing of government and past government inactions and adds that policies associated with the objective of reducing carbon emissions have been problematic.

The report found that significant take up of rooftop solar PV has seen both benefits and costs for consumers as state governments implemented very generous solar feed-in tariff schemes that paid consumers many multiples of the value of energy produced by their systems.

“The substantial cost of the schemes continues to be spread across all electricity users.”

It says there has been a failure to facilitate an orderly transition from carbon-intensive generation technologies to cleaner ones.

The Report makes 56 recommendations as a result of investigations which have been underway for the past year and three months.

ACCC Chair Rod Sims says wholesale and retail markets are too concentrated; regulation and poorly designed policy have added significant costs to electricity bills; retailers’ marketing of discounts are inconsistent and confusing and most have left many consumers on excessively high ‘standing’ offers.’

“The National Electricity Market is largely broken and needs to be reset. Previous approaches to policy, regulatory design and competition in this sector over at least the past decade have resulted in a serious electricity affordability problem for consumers and businesses.”

Further, the report found that Australia’s 2.2 million small to medium businesses could save an average of 24 % on their electricity bill.

Key recommendations include:
• Premium solar feed-in-tariff schemes should be funded by state governments and the small scale renewable energy scheme should be phased out, saving non-solar consumers $20-$90 per year.
• Voluntary write downs of network overinvestment, including by the Queensland, NSW, and Tasmanian governments (or equivalent rebates). This could save consumers at least $100 per year.
• Restructuring of Queensland generators into three separately owned portfolios to improve competition.
• Once created, the Queensland Government should ensure that the three portfolios are separately owned and operated to maximise competition in the wholesale electricity market. The sale of any portfolios should be in line with recommendation
• Government support to make bankable new investment by new players in generation capacity to help commercial and industrial customers and drive competition.
• Abolishing the current retail ‘standing’ offers (which are not the same between retailers) and replacing them with a new ‘default’ offer consistent across all retailers, set at a price determined by the Australian Energy Regulator (AER).
• Improving the AER’s powers to investigate and address problems in the market and increasing penalties for serious wrongdoing.

Mr Sims says the recommendations require some difficult decisions.

‘As sound economic reform usually does. Despite poor decisions over at least the past decade creating the current electricity affordability problem, it now falls to current Commonwealth and state governments to make the difficult decisions to fix it.”

“We must move away from narrowly focussed debates; addressing affordability requires change across a broad front.”

The ACCC estimates its recommendations, if adopted, will save the average household between 20 and 25 % on their electricity bill, or around $290-$415 per annum.