Australia's power price fight

The Energy Supply Association has refuted claims that Australia's power prices are among the most expensive in the world, arguing the value of the Australian dollar is skewing critical assumptions.

Electricity suppliers have taken a softly, softly approach to dealing with sensational recent claims that Australian power bills are among the most expensive in the world.

The Energy Supply Association, without fanfare, has published a commentary on its website rebutting widely-publicised views expressed in March by the Energy Users Association of Australia.

The EUAA asserted then that it was “exposing the myth that Australia has low or even mid-range electricity prices".

Power, it said, was becoming less affordable for business as well as households and “a source of national weakness".

Future price rises plus the impending carbon tax, it added, are “likely to make our electricity prices the highest in the world,” a claim leapt on in the media.

The association argues that electricity consumers are “paying for waste and efficiency and for a broken regulatory regime that can’t control the excesses of energy monopolies".

Subsidies paid to renewable energy suppliers and the Gillard government's carbon tax are also on its attack list.

Using purchasing power parity (PPP) exchange rates – hypothetical estimates of what can actually bought with money in various countries – rather than currency exchange rates, ESAA now counter-claims that Australian household prices are actually “mid-range".

The energy association says that they are 11 per cent below Japanese residential rates and 14 per cent below those in the European Union.

It adds that this is consistent with International Energy Agency data released last year – which looked at 2010 household prices.

The IEA data show that five countries – Canada (the cheapest), Norway, the United States, South Korea and Switzerland – have lower residential electricity bills than Australia and another 25 have higher charges, with Germany the second highest behind the Slovak Republic.

Back in March, when the EUAA report made headlines around the country, the Energy Supply Association rejected the assertions as “sensationalist” and “designed for shock and awe".

Now, in the website rebuttal, it argues converting international energy prices in to today’s Australian dollars make the overseas charges look cheaper than if the same comparisons were done a decade ago, irrespective of price changes.

When the market currency rate is above the PPP rate as it is at present, ESAA says, Australian prices appear to be higher.

The association says the EUAA report overstates the prices many Australian households pay because it uses regulated rates when residential account holders can also access market tariffs from retailers in most states and territories. These are often at discounts – as much as 10 to 20 per cent – to regulated rates.

It also points out that household energy prices are typically higher than industrial prices due to their smaller volumes and different consumption patterns.

It quotes NUS Consulting Group, in its 2011 comparison of industrial prices, rating Australia as the fifth cheapest out of a basket of 16 countries surveyed, although this was a decline from 2010 when it was third cheapest. Canada again ranks lowest in the NUS price comparisons with France, the US and South Africa also less expensive than Australia.

The Energy Supply Association says Australian electricity prices have fallen or remained constant, when adjusted for inflation, over most of the past 50 years with the long-running trend reversed in the past four years. Reasons for the change, it argues, are the need to upgrade aged networks and other infrastructure, continuing increases in peak demand, higher finance costs, a shift to lower emissions energy technologies and increases in the cost of fuels.

“The best way to manage rising energy costs,” the association says, “is to be smarter in using energy.” This requires policymakers allowing households to be empowered with smarter technologies and letting them shop around for the best deals in competitive energy markets.

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