Power prices set to rise by up to 60%

The NSW Energy Minister John Robertson said last Monday that he had received verbal advice from the state’s pricing regulator that power prices could rise by up to 60% in the near future. According to the Sydney Morning Herald this would add about $400 to the annual power bill of the average household over the next three years.

Electricity prices to retail customers (households and small businesses) are regulated in NSW by the Independent Pricing and Regulatory Tribunal (IPART). Although anyone can choose their retail supplier by taking up a market-based offer, households and most small businesses are able to remain on, or return to, their standard supplier at prices regulated by IPART.

IPART makes pricing decisions based on a thorough process that considers the many elements that effect and are affected by power prices. For instance, how much it actually costs to produce power, how much money is needed to build and maintain power infrastructure such as power stations, poles and wires, and what is an acceptable profit margin for power companies.

The initial advice of a possible 60% price rise from IPART is subject to review and eventual government approval, and so is not set in stone and is probably at the high end of estimates. However, it is a sign of things to come. Australia, and in particular NSW, has ageing power infrastructure that will require billions of dollars of investment for maintenance in future years. New infrastructure also has to be built as our population continues to grow. Ultimately consumers have to pay for all this to happen through higher power prices.

Another large component of price rises will be due to climate change regulation and the evolution of our system away from highly polluting coal. Australia currently has some of the cheapest electricity in the developed world, and this is principally due to the fact that our power is almost entirely supplied by the burning of coal. Not only is coal plentiful and cheap in Australia, but we also burn some of the worst and most highly polluting coal to generate our power. In addition the coal industry and our electricity generators have effectively been subsidised as governments have and continue to build most of the infrastructure the industry uses such as ports, railways, mines and the power stations themselves.

So we have in effect been taking part in a polluting party that now has to end. Unfortunately this means we will all have to pay higher prices for our electricity, but in truth, we should have been a long time ago. That is because at the moment nobody pays for the environmental damage that is caused by our highly polluting consumption of electricity, but this damage does have a cost. Only once we pay the cost, will we start doing less of it.

As Christopher Zinn of Choice was quoted in the SMH as saying œit shows the need to have energy-efficient appliances, to insulate the home and to use solar hot water and the like. If power prices rise at these predicted rates, it will make these measures all the more worthwhile.” Even more significantly, once we start paying the real price for brown power, green power such as solar starts to look from our pockets like a much better option.

Don’t be fooled by the politics of this either. Prices will have to rise regardless of whether it’s the Governments proposed Carbon Pollution Reduction Scheme or the Opposition’s hinted strategy to just force industry to do what the CPRS is meant to do anyway (but avoid the nasty œtax word).

So the bad news is power prices are only going one way, up. But the good news is you can finally put those solar cells you wanted on your roof and not be punished for it.

Kobad Bhavnagri
Solar Energy Consultant
Solar Choice Pty Ltd

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