False relief in a power price pinch

Politicians may be relaxing at the thought of a cooling in the rise of electricity bills but an upswing in gas prices and patchwork regulation will see the issue flare again.


The pollies dealing with energy issues can do without mid-year. This is when chickens come home to roost in terms of new, higher prices and when governments scramble for refurbished excuses and reworded promises.

At least this year, most of the politicians can look at their own situation against Queensland’s “shock, horror” saga and say “Well, that’s behind us now".

Price rises around the 3 per cent mark – as now being implemented in NSW and the ACT –  look relatively good when viewed against bills that are more than 22 per cent higher, even if the pesky community advocacy groups will keep pointing out that costs are still going up and are still hurting a not-small chunk of the population.

The real bottom line for consumers is that power bills in Melbourne, Sydney and Brisbane have moved up more than 80 per cent since winter 2007 and are still rising (ACT householders are being told they are lucky their increases have been less than 50 per cent).

The further trouble, the hardheads in the wings observe, is that, even as the power price spikes recede (except north of the Tweed River), the threat of higher gas bills is being voiced ever louder.

The 2013 winter of energy discontent is being marked by NSW retail gas prices rising almost 10 per cent and the Grattan Institute warning that the ripples of the changed gas scene will be felt far and wide on the east coast as we move deeper into the decade.

The core issue for both electricity and gas at present remains the higher charges flowing from capital expenditure on networks – both 'poles and wires' and pipelines – and the Gillard government continues to sit on a key Productivity Commission report on improving network regulation.

As I have written before, the commission handed the report to the government on April 9. It can’t be publicly released until it is tabled in federal parliament. With a little over a week left of parliamentary sitting days before the 'real' election campaign begins, the report seems likely to stay under wraps until October.

Which begs the question: what is in the report that the prime minister, who used its draft version to promise 2014 power price cuts, would rather we didn’t see?

Meanwhile, the Newman government in Queensland continues to wriggle and squirm as its community prepares to cough up an extra $265 a year, on average, to keep the lights on.

The past weekend saw the government pushing out an alleged lifeboat in the shape of restructuring the management of its two distribution businesses and indicating that it might – 'might' being the operative word – pursue a range of reforms such as permitting price deregulation in the populous south-east corner and reducing the $600 million a year subsidies to the rest of the state through the uniform tariff system.

State energy minister Mark McArdle, on ABC Radio to explain the government’s plans, inevitably was asked if he will guarantee that the result will be that power bills go down – and sensibly he dodged and weaved.

The changes, he said, would give consumers a greater choice in finding lower prices themselves.

This has the great merit of being true, but not necessarily welcome to thousands of consumers who view the contracts they are offered by energy retailers with as much pleasure as they do the annual tax returns.

Shorn of all the spin, McArdle and his government are saying to consumers in greater Brisbane, the Gold Coast and the Sunshine Coast that they are going to have to fend for themselves in chasing better deals while the state’s competition authority will referee the game and the networks will be pinched and pushed into a different configuration in pursuit of about $500 million in savings over the rest of the decade.

Not being silly, 'Team Newman' didn’t breathe a word of its plans to the union movement before Sunday’s announcement – and is now having to wear the backlash as the Electrical Trade Union rants about job losses, threats to reliability of supply and possible court action.

The Newman government would be in a better place right now with its voters if it hadn’t been so foolish as to send strong signals about power bill rebates when the much higher 2013-14 prices were signalled by the regulator two months ago.

The need to control budget outlays forced it to renege on what voters will have seen as a promise and the backdown does nothing to improve the trust between the governors and governed, an issue with much wider currency than in the Sunshine State.

The good news for east coast politicians and energy consumers alike is that the present round of regulatory determinations – which delivered more than $40 billion in network capex – is almost over.

Decisions about the next five-year tranche of spending will cover 2015-2019 and the rules are being rejigged to clamp down on permissible expenditure – while the continuing decline in east coast power demand (a product of higher prices) will ease the networks’ construction needs.

Neither politicians nor consumers are in a mood to be told at present that the networks have large swags of infrastructure built in the mid-1970s and early 1980s that will be 35-40 years old by 2020, and nearing the end of their lives.

Meanwhile, the next carriage on the energy rollercoaster is ready to roll in the shape of a substantial spike in wholesale gas prices for the east coast from here on.

The rough ride is far from over.