The peak of Gillard's power problems

CEDA's energy paper has thrown a curve ball by highlighting families as the group bearing the brunt of power price pain, just as the government's ability to help seems to have weakened.

Just when politicians, federal and state, are thinking that their "in” tray is already overloaded with energy issues, the Committee for the Economic Development of Australia has thrown an awkward extra problem on to the pile.

It was not really an issue for the federal and state resources and energy ministers to debate when they meet in Melbourne this Friday to look at the energy regulatory reform agenda, a discussion brought forward so that the prime minister and other first ministers can wrestle the power price shock questions before the year’s end, a need electrified by Julia Gillard in her "I have a big stick” speech on August 7.

But the bouncer that CEDA has bowled cannot be easily evaded by Gillard and the premiers in the middle of December.

In the latest of a series of commentaries it has published on energy issues this year, the organisation has called for energy hardship concessions for families to go to the top of agenda.

CEDA chief executive Stephen Martin, a former Speaker of the House of Representatives, says the new review – which was co-edited by chief economist Nathan Taylor and AGL Energy economists Paul Simshauser and Tim Nelson – demonstrates that demand for electricity tends to be high in homes where the principal account holder is 30 to 55 years old and has a dependent family.

In New South Wales, for example, where there is a high proportion of such families in the community, average household power bills have shot up from $1,100 a year in 2007 to $2,230 this financial year.

Given the need for space heating and cooling for young children and "the proliferation of energy-zapping appliances and information technology generally,” the report says, this is the customer area where soaring power bills really hurt and households are most likely to be at risk of hardship.

It is also not a quartile where the customers, in the new environment of smart meters and time of use charges we are promised, can switch off the air-conditioning at dinner time and go to the movies, as the DINKS can.

Simshauser says that a study carried out by AGL and KPMG has found that the family segment of the energy market contains the real power battlers because they have limited disposable income and high use.

"Energy-related hardship policies currently focus primarily on pensioners and concession card holders,” he says, "and our research shows this (activity) is actually working. You don’t see many pensioners in distress (over paying power bills).”

The key CEDA point is that, except in Victoria, where concessions for users vary according to power consumption, electricity-related aid is paid in a lump sum regardless of what people consume.

"This,” says CEDA, "is poor public policy.”

It is a "yawning gap” in the current approach to helping struggling power users. It wants an urgent review of concessions.

It also wants a government/industry-designed "comprehensive education campaign to electricity consumers” aimed at providing information about why electricity prices are rising and why reducing peak demand is in every user's interest.

For governments, of course, this poses a question of where to find the funds to help those in strife.

The issue presents a particular problem for Gillard, who spent August talking up how determined she is that "in December we get action to make a difference for power price rises for families.”

She said at the time: "This is hitting family budgets. It's hitting people hard and I want to see action.”

The energy white paper her government has just released does not duck the hardship issue, it just doesn’t spend much time dealing with it.

Its relevant observation is: "Ensuring that consumers, particularly those who are most vulnerable, are able to manage energy costs effectively is also increasingly important. The continued provision of adequate assistance to vulnerable consumers through a sound general safety net, well-targeted jurisdictional concession regimes and appropriate community service obligations remains critical.”

Yup, and come voting time, if families with power bill hassles don’t feel she has lived up to her promise – and they number several hundred thousand people of voting age, many in federal seats that are a litmus test for the next government’s success – she may feel the heat of their unhappiness.

'Don’t promise want you can’t deliver' is one of the oldest maxims in politics when the time frame for delivery is months not years or decades.

Any number of politicians can tell you that the tough question they have been fielding ever since Gillard grabbed the headlines in this area is "when will power prices fall?”

Avoiding directly answering this question has become a new art form in politics – because prices are not going to fall, rather they will rise more slowly if the regulatory reform works over time. The only one not dancing around the question is Tony Abbott, who ceaselessly reminds us that he will cut the cost of the carbon tax out of the retail price mix... along, of course, with the concessions Gillard and Wayne Swan have provided to most householders as a sweetener.

A disclosure: I am a CEDA trustee and have been engaged with the organisation for about 30 years.