Lost in NSW's power price labyrinth

Carbon tax complexities are only part of the reason for confusion about NSW power bill hikes, and the state will have to wait some time to know how much costs will be mitigated by Canberra.

Contrary to what you may have gleaned from media reports elsewhere, a substantial number of citizens in New South Wales, the largest power market, are not confronting a rise in their electricity bills of just 18 per cent or more from July 1.

Some two million of them living in the large swathe of the state that covers western Sydney, and extends into the Illawarra, the Southern Highlands and the Blue Mountains, will be paying an extra 11.8 per cent as a result of the new price-fixing determinations of the Independent Pricing & Regulatory Tribunal.

The 18 per cent, you see, is the notional average for the state as a whole worked out by IPART.

But a larger number of the New South Welsh living in the Sydney CBD, its non-western surburbs and the Central Coast – about 3.5 million of them – will be paying an extra 20.6 per cent.

The balance, living in the other 75 per cent of the state, will cop a 19.7 per cent.

Confused? You should try living here!

The 'lucky' recipients of the 11.8 per cent rise are stubbornly described by IPART as living in the Integral Energy franchise area – except they don’t because the name was sold to Origin Energy in the Keneally government’s 'gen-trader' deal and the distribution business of this name rechristianed itself Endeavour Energy.

It gets even more confusing because this name is going, too, because Endeavour, Ausgrid (formerly EnergyAustralia) and Essential Energy (formerly Country Energy) are all now being melded in to Networks NSW by the O’Farrell government at it searches for a way to cut costs.

Still, the original corporate titles live on because Origin and TRUenergy, purchasers of the retail segments, are trading under them.

If by now, you are muttering ‘But what the hell does it all mean?” along with the majority of three million residential account holders in the 'premier state', the answer is that the bills are going up an average of $208 a year in the 11.8 per cent area, up $364 per cent in the 20.6 per cent area and up $427 in the sticks.

The costs are higher if you are a small business operator – and about a half million New South Welsh are both a small business person and a householder – in which case your corner shop or whatever is also going to be shelling out between $270 and $555 extra a year.

(Rural people pay the most because it costs more to transport power to them than to the Wollongong-Sydney-Newcastle urban conglomeration. Across the Murray River, Queensland gets round this politically awkward problem by homogenising the tariffs and sticking those living in the south-eastern corner with about an extra $400 a year to subsidise those living in 97 per cent of the state.)

Almost half the latest price rise is attributable to the current $35 billion round of investment in distribution networks, an operation that even the IPART chairman Peter Boxall insists on calling "the poles and wires” although a huge part of it is made up of sub-stations, transformers and switchgear, each component costing millions of dollars.

Notoriously, the other half is due to rising wholesale electricity costs – the electrons coming from the power stations – as a result of the federal government’s carbon tax, also starting on July 1.

Greg Combet’s attempts to explain that the burden of the carbon tax will be mitigated by all the federal government’s handouts may or may not be impacting on the holders of pinched NSW purses – we will have to wait for the federal election to find the answer to this.

Meanwhile, the O’Farrell government is increasing the low income household rebate to $215 from 1 July and throwing in a "family energy rebate” of $75, too.

All of this has to be seen against actual annual power bills in the state that will now range for households from $1,972 in the lower-cost areas to $2,127 for most of Sydney and the Central Coast to $2,590 in rural and regional areas.

The IPART estimates of total bills is based on a household using seven megawatt hours of electricity a year.

There are some using quite a bit less than this and others – the ones with three air-con units, a swimming pool and a myriad of plasma TVs and other appliances – using up to 10 MWh.

IPART calculates that the price rises will cost the heavier power users about $700 a year.

Cue the solar PV power mob singing their green hymns – but hundreds of thousands of NSW homes are rented and the occupants can’t access solar because the landlords are not about to spend the capital.

These folk do, however, wear the burden of the extra cost of subsidising solar smeared across all users.

IPART reckons that the solar scheme and other, non-carbon tax green programs are contributing about 0.3 per cent of the average 18.1 per cent increase for the state.

All up, including the tax, carbon schemes will be adding an extra $317 a year to the average NSW household bill in 2012-13.

Buried in the IPART report announcing the price rises is a serve for the federal government and the renewable energy target, the gist of which is that the RET could be better designed to minimise its impact on customers.

Also in the report is the IPART estimate that some low-income households are going to be spending about 8 per cent of their disposable money on energy bills (that includes gas) in 2012-13.

Out in the rural areas, the regulator calculates about 11 per cent of households are likely to spend more than 10 per cent of disposable income on electricity in the new financial year, a figure calculated to make some state and federal politicians wince.

It is also worth pointing out that, waiting down the track (assuming a federal election after winter 2013) will be yet another round of power bill rises because the impact of the present tranche of network investments – expenditure not just overseen by the Iemma/Rees/Keneally government but boasted about in a different political environment – continues until the middle of 2014.

Just how far Team O’Farrell’s slicing, dicing and merging of the network businesses will impact on the trajectory of future bills presumably will have emerged by this time next year.

The bloke handed the job of overseeing the new Networks NSW is Vince Graham, currently chief executive of Endeavour Energy (previously Integral Energy) and better known to most New South Welsh as a former head of the state’s railway system.

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.