Still no solution for power bill shock

It's been two years since Julia Gillard promised to tackle rising energy costs for households. Yet cost-saving initiatives like smart meters and time-of-use tariffs are a long way off the political agenda.

This time last year, Julia Gillard was telling us she had a big stick waiting for the other ministers if they didn’t go along with her plans to deliver households an average $250 a year in savings on their electricity bills from 2014.

Her threat involved the use of the Australian Electricity Regulator and the Australian Competition and Consumer Commission to force change if the premiers didn’t bow to her wishes.

She never explained how this was going to happen. The basis for her claim was a draft Productivity Commission report calling for the embrace of critical peak pricing and the rollout of smart meters.

But Gillard also misused the Commission’s comments. It actually suggested the savings from these steps, carefully implemented over a number of years, could be between $100 and $200 per household annually.

By the middle of this year, when Gillard was no longer referring to the issue, the Commission had issued a final report in which it scaled back the saving to between $100 and $200.

Yet the core quandary – that a large share of residential power bills (as much as 25 per cent in New South Wales) is required to meet the infrastructure cost of as little as 40 hours a year of very high demand – remains unresolved.

Time-of-use tariffs are still just a topic for discussion.

The rollout of smart meters – other than in Victoria, where it remains on the nose – is always just over the horizon.

The Coalition government's focus is on the savings that can be achieved from killing off the carbon tax/price regime. But consumers are getting mixed messages here, too. 

Prime Minister Tony Abbott says the move will save householders $550 a year. But a briefing note recently published on the Department of Industry website suggests this move will save $200.

The immediate driver of unpalatable price rises – the effect of a more than $40 billion infrastructure investment by networks flowing from re-written regulation in 2006 and the successful efforts of the trade unions to get Labor state government to elevate reliability standards to unnecessarily high levels – is being mitigated right now by political intervention at state level in New South Wales and Queensland, home to half the residential customers, to suppress expenditure.

Consumers in these two states will know by about February what regulated price rises will look like in 2014-15.

While the NSW figure is expected to be rise not much more than the inflation rate, there are suggestions that the Queensland one could again be a double-digit number.

Victorians already know their bills will be higher from New Year’s day, mainly as a result of increased retail costs.

The trio of states collectively account for seven million of the nation’s nine million household account holders.

All are bearing the brunt of the 'price shock' of recent years. After experiencing most of a half-century of bills declining or holding steady in inflation-adjusted terms, we’re now seeing the average, regulated household cost of 15 cents per kilowatt hour rise past 25 cents.

Which is why the CSIRO’s Future Grid Forum report published last week gives pride of place in its recommendations (after consultation with 120 representatives of industry, government and the community) to implementation of a “sustained, long-term program to increase consumer awareness of the benefits and mechanisms of cost-reflective pricing and demand management”.

Media coverage of the report has made a song and dance about the sci-fi aspects of a mid-century power system that has lots more renewables (but no nuclear reactors), energy storage and consumers who could be completely disconnected from the grid. Yet it has ignored the here-and-now need for action on time-of-use charges and widespread adoption of smart meters.

The ABC’s Tony Jones, who compered a Q&A-style presentation of the CSIRO report in Sydney, said en passant that “the media doesn’t deal well with complexity,” a point illustrated by the coverage of the publication.

Federal, state and territory energy ministers are sitting down on Black Friday under the somewhat tattered umbrella of the Council of Australian Governments to discuss the state of reform. No doubt there will be a collective fainting fit behind closed doors over the political implications of east coast gas prices doubling – or worse – in the rest of the decade. One can probably write the communique in advance: serious concern, determination to push ahead, complex issues, needs more time, etc.

The CSIRO report – the 60-page full version, not the eight-page glossy fed to the media – observes that readying consumers for cost-reflective pricing “might require more than deregulation”.

It adds that “information campaigns over several years, perhaps similar in scale to those implemented to increase awareness of energy efficiency measures, might be warranted”.

Consumers’ knowledge is low, it says, and they “can be cynical about new technologies such as smart meters”. “Change could be politically challenging."

Should Abbott & Co not succeed in repealing the carbon tax/price regime, we face reaching the second anniversary of the Gillard promise. There’s very little happening to deliver a real change in household costs except for the self-help measure they have been following since the price shocks hit: cutting back on electricity usage.

More will go for solar PVs, but down this road lies a need to rework the tariff structure to recognise the impact of the phenomenon on network economics. Also, users living in rented accommodation don’t have this opportunity.

Having talked up the power bill issue to the point a poll has the community saying it is their “scariest problem” – and wouldn’t it be interesting to have psychologists plumb that mindset – politicians have yet to come up with a resolution.

The clock is ticking.

Keith Orchison, director of consultancy Coolibah Pty Ltd, publisher of the This is Power blog and editor of OnPower newsletter, was chief executive of two national energy associations from 1980 to 2003. he was made a member of the Order of Australia in 2004 for services to the energy industry.

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