A Sydney-Melbourne energy clash

Most households would say their power bills are too high, but a new comparison between energy usage in our biggest cities shows many consumers still don't understand where the cost comes from.

There are few questions in Australia today to which you would get a more unanimous answer than “What are you paying for electricity?” Most of some nine million households would reply “too bloody much”.

However, unanimity is not necessarily a reflection of reality.

There is near-equal agreement on the electricity supplier side that nothing irks customers more than the cost of power until it is suddenly not there for an extended period. Then they don’t care what it costs to turn supply back on, they just want it done – and a promise that it won’t happen again.

Having twice had days of outages in the north-west of Sydney where I live – both the result of major storm problems years ago and with one of them happening when I was still managing the Electricity Supply Association – I am only too well aware of what my neighbours think.

The problem with the electricity price question is that hardly anyone in the public understands what makes up the bill and not very many have a clear picture of their own power use behaviour.

This ignorance isn’t helped by the mainstream media, especially the capital city tabloids, who turn to the big, black type and short, accusatory words whenever they can find an excuse.

Actually, trying to explain the make-up of the power bill is clearly a bridge too far for most mainstream journalists and their editors.

A case in point is the coverage of a new analysis of Melbourne and Sydney power bills. Media attention? Precisely nil.

Published by the country’s largest electricity distribution business, Sydney-based Ausgrid, owned by the New South Wales government, the analysis (found on the organisation’s website) throws up some interesting insights into what we use and what we pay.

“We” is this case is almost half the householders in the country because the Wollongong-Sydney-Central Coast conurbation and its Victoria equivalent – the heavily populated area from Geelong to Dandenong – contain about four million residential electricity accounts.

It helps to understand history when you look at something like this.

There is a big difference between Melbourne and Sydney home energy use because of a bloke named Henry.

Sir Henry Bolte was the Victorian premier in the early 1960s when Esso Australia and BHP Billiton (as they then were) found an elephant of an oilfield in Bass Strait and rather a lot of gas, too. Gas was barely second prize for most upstream petroleum operators in those days.

Bolte ensured he got a really good deal for his voters in gas supply in turn for making nice over the oil deal – which was the first time offshore mineral extraction hit the big time in Australia with all sorts of implications for Commonwealth/state relations.

A half-century later Bolte’s coup still affects the Victorian scene.

Ninety-two per cent of Melbourne homes are connected to gas while in Sydney, with New South Wales importing all but a tiny fraction of its gas needs, 46 per cent of homes are connected.

An average Victorian household uses about 5,700 kilowatt hours of electricity a year versus the Sydney average of almost 7,400 kWh – and a dual-fuel Sydney home uses around 20,000 megajoules of gas annually versus 52,000 MJ in Melbourne.

This complicates the energy cost picture, but Ausgrid sums it up so: “The modelling shows that for the financial year 2011-12, residential customers with small to medium consumption pay about the same to six per cent less on their electricity bills in Sydney than in Melbourne for the same amount of power.”

If you run an energy-thirsty house, the network says, you’ll pay more in Sydney than Melbourne because of tariff arrangements.

Usage of electricity does vary a lot – from as little as 3,500 kWh a year in small Sydney households to more than 10,000 kWh annually in big ones.

The medium range is 5,100 kWh of electricity and 52,000 MJ of gas in Melbourne versus 5,900 kWh and 20,000 MJ in Sydney.

For Sydney homes that are all-electric, as most are, a year’s consumption averages around 8,500 kWh and this includes 2,600 kWh used by the hot water system.

To produce a like-with-like comparison, Ausgrid has coverted the energy use to joules – with the typical Melbourne home consuming 70,360 MJ a year versus 41,240 MJ in Sydney.

Ausgrid adds that, when you take both power and gas costs in to account, a typical residential customer in Melbourne pays up to $100 a year more than a typical dual-fuel customer in Sydney.

These customers are forking out $2,264 a year on average in Sydney and $2,373 in Melbourne on total energy bills.

In round terms the overall cost is between $6 and $7 a day for energy services – about the same as a daily train ticket.

It’s easy at this point to play the 'so what’s all the fuss about?' card, but also a tad facile because there are several hundred thousand residential customers across the two states who are wrestling to find the disposable income to pay energy bills – and their arrival in one large lump four times a year can be stressful.

This is why some in electricity supply think it would make a lot of sense to move to charging monthly instead of quarterly, although there are extra metering and other costs to be borne in mind.

Perhaps the last word on this should go to the Energy and Water Ombudsman in Victoria, which told the Australian Energy Market Commission 'Power of Choice' inquiry: “EWOV receives a significant number of complaints from customers who have received a higher than expected bill. Often our investigation finds that the billing is correct. This suggests a lack of customer understanding about energy use – and belief that the bill is too high is sometimes compounded by a lack of understanding about how much energy appliances use and an inadequate level of customer service.”

True enough, but to my way of thinking, the biggest problem of all is that there are too many players wanting to talk up community anger on this issue – not least among them the tabloid editors and radio and TV shock jocks – or to flog their own special pony and too few providing useful information.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.

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