Devine's misguided Brown attack

Higher electricity bills are not entirely the fault of Bob Brown and the Greens, as suggested by Miranda Devine, but instead stem from the failure of both Labor and Liberal state governments to come to terms with the peak power problem.

How far should we blame Bob Brown and the Greens for rising electricity bills?

All the way, suggests Miranda Devine in the Sunday Telegraph: "Sky rocketing energy prices thanks to the Greens-mandated carbon tax and clean energy follies.”

Well, using New South Wales prices as an example, not least because the state regulator has just explained how the new round of increases have been measured, the true answer seems to be not so much.

Average prices for NSW households and small businesses will rise 16.4 per cent on 1 July, the day the carbon price also kicks in.

The Independent Pricing & Regulatory Tribunal says the carbon charge will contribute nine per cent of the rise while network charges will add 8.4 per cent and higher retail costs and margins 1.2 per cent.

Yes, that adds up to 18.6 per cent, not 16.4.

IPART has also included a 2.2 per cent cut for wholesale energy prices – the electricity sold in to the competitive market by power stations – because they have softened a fair bit in the past 12 months.

Superficially, these numbers appear to support Devine’s accusation.

The carbon price share of the rise will be even worse than the continuously-badmouthed network charges.

However, as IPART explains, the average residential power bill in Australia’s most populous region – running from Wollongong and the Illawarra in the south, taking in sprawling Sydney and extending to Newcastle and the Hunter Valley in the north, accounting for about 30 per cent of the nation’s homes – will go up to between $1,946 and $2,101 a year.

The contributors to this cost will be (1) network charges at $860 to $1,042, (2) wholesale energy at $526 to $565, (3) retail costs and margins ($211 to $227), (4) the federal carbon price at $168 and (5) other 'green costs', including the renewable energy target, at $139 to $142.

Households are promised federal compensation for the Brown/Gillard carbon charge.

The RET – in essence initially a market-based subsidy to drive construction of wind farms – was invented for Australia by John Howard and his environment minister, Robert Hill, increased by Kevin Rudd and is supported at its present level by the Coalition.

True, Bob Brown’s Greens actually wanted it to be much higher than 20 per cent by 2020.

The 'small' RET – the segment of the policy that throws money at rooftop solar PVs – is an open-ended nuisance that has glutted the renewable energy certificate market, stalled investment in wind power and feeds inefficient costs in to every household bill.

It is the invention of Kevin Rudd, Penny Wong, Julia Gillard and Greg Combet.

Also included in 'other green costs' in NSW is the daft solar bonus scheme dreamed up by Nathan Rees and pursued by Kristina Keneally until it dawned on her that the measure was an out-of-control waste of money – and then she made a botch of lowering the boom on it.

The O’Farrell government is recovering the costs through a levy on network charges -– $100 million in the new financial year and another $150 million in 2013-14 (bringing the total imposed on households to $400 million with about another billion dollars to come).

IPART is highly critical of the RET.

It isn’t cost-effective, the regulator argues, particularly the small-scale scheme. It "promotes very expensive abatement and relatively expensive energy production, which has a considerable impact on retail electricity prices”. The RET involves "a significant transfer of costs from renewable generators to electricity customers".

If you want to provide industry assistance, IPART tells the Gillard government, do it transparently through taxpayer-funded grants rather than hiding it in electricity bills.

The regulator sums up the whole green scheme scene like this: "Given that reducing emissions in the electricity sector and the wider economy comes at a cost to electricity consumers, government budgets and ultimately economic growth, it is important that (it) is achieved in the most efficient and cost-effective way.

"Many existing green schemes have additional objectives, ranging from providing industry assistance through to addressing social hardship.

"We are concerned that many of these schemes may add unnecessary costs to energy bills without necessarily addressing a market failure that will not be addressed by the carbon pricing mechanism and thus may create investment-distorting complexities in energy markets.”

That’s a long-winded way of saying we consumers are copping the cost of politicians not being able to get their act together.

In the case of the RET solar scheme, three certificates are created for every megawatt hour of power actually produced.

"The retailers then have an obligation to buy these phantom certificates and pass on the costs to customers. This means they are paying for energy that was not generated.”

Now there’s a point to excite the tabloid headline writers and the commentators like Miranda Devine. Trouble is they would need to read to page 85 of the report to find the phantom of the carbon opera.

It get’s worse, too.

IPART points out that the RET’s deeming certificate provisions have customers paying today for electricity to be generated over the next 15 years.

The regulator says customers will pay for more than 33 per cent of electricity sourced from renewable technologies in 2012 when the actual power from the mandated schemes is likely to be 10 per cent.

Now Bob Brown, Christine Milne and the Greens gang, left to themselves, might very well have created a much worse situation for customers, but the fact is that the current one is not to their account but mainly to various members of Labor.

Ms Devine’s weekend 'J’accuse' is also misguided because the biggest cause of price rises by far is extra network costs – and would be even if Ross Garnaut and others are right about some elements of 'gold plating', a charge the networks hotly dispute.

Not the least of the networks' hassles is the fact that state governments of both hues, but mostly Labor, have failed over a decade to come to terms with the peak power problem and the major impact it has on capex and eventually prices.

Bottom line?

When the end-of-winter power bills roll in this year – and they are always the ones that hurt, especially if it has been a really cold winter – cursing the retired senator in Hobart may not be entirely fair.

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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