The sparks of sensibility in the power debate

A Senate submission by the Energy Efficiency Council could provide a sensible middle road amid the sensationalism surrounding network costs.

Players in the electricity debate have axes to grind or actions to defend. As a consequence, what they have to say becomes part of the general blather rather than signposts on what Bill Shorten has started to call “the sensible middle road”.

One could have a fun time canvassing just how often the Rudd-Gillard-Rudd governments, with Shorten as a key player, deviated off the “sensible middle road” when in office. Yet it is a useful shorthand for the path that needs to be travelled to get electricity back to an acceptable service, rather than a battleground.

In this context, there is a late entry to the inquiry the Senate is running on electricity networks through its standing committee on environment and communications that should be digested by all of what then-treasury secretary John Stone used to label “the meretricious players” when I was in another life.

The author is the Energy Efficiency Council, which is focused on helping us to save money on energy bills rather than saving our souls by embracing solar or whatever.

If you leave aside the extra costs imposed on power users by various state and federal green schemes -- almost all of them badly planned and poorly managed -- the major source of today’s vexation over electricity bills is network costs.

The Energy Efficiency Council kicks off its submission by reminding senators that the network investment is now condemned. This is because of excessive flows from (1) an industry and policymaking bias to the supply side, (2) a lack of adequate regulatory incentives for networks to balance demand- and supply-side investments, (3) a failure to manage the big peak demand spikes (driven mainly by air-conditioning) 12-15 years ago through sensible tariffs and better standards for homes and air-cons, and (4) a lack of insight into where electricity demand was really heading as consumer behavior changed (an element of hindsight in this one, but it’s not untrue).

The council offers a six-legged plan for addressing the situation that now exists. It is noteworthy for the lack of name-calling and insinuations of bad faith that characterise so much of the debate.

The starting point, the council suggests, should be to set up incentive structures for networks to deliver quality services to customers rather than to build infrastructure. This, it says, requires decoupling network revenues from the amount of energy consumed.

This, it adds, needs to be supported by a reporting and benchmarking system that highlights what is being done to reduce power demand (peak and otherwise).

The next step, it argues, is to enable tariff structures that “are fair and encourage efficient investment by both consumers and suppliers”.

The council also wants the regulatory system to address how the DBs deal with distributed generation and non-network solutions. It says this is an area where they are exerting inappropriate market power and making life difficult for competitors.

And it wants policymakers to build flexibility into network supervision because, as it rightly says, you can’t predict what the energy market is going to look like in five or 10 years time given ongoing changes to technology and to consumer demands and behavior.

Not surprisingly, the Energy Efficiency Council also wants policymakers to do more to boost actions that can save energy, reduce its use in government agencies and ratchet up appliance and buildings standards. 

The unwillingness of politicians to go the whole hog in the efficiency area, with inevitable upfront costs for consumers and, in some cases, taxpayers, while prating about their commitment to climate change prevention is one of the features of our times.

What sticks out for me in reading this submission is the onus it places on politicians, especially those now in government, to come to terms with the seachange in electricity supply that has swept in this decade rather than to apply sticks, stones and epithets to the network managers.

Everything that has happened in the network arena since around 2005 has its starting point in politics. Politicians have dodged the need for essential expenditure until the downside of that emerged. and then cut a set of rules that ultimately encouraged sending power bills through the roof. Then they took forever to pursue necessary remedial action, like tariff reform.

The boxing ring adage is that you can run but you can’t hide. However, politicians across the board have been doing their best to prove otherwise when it comes to their responsibilities in power supply.

In this they are aided and abetted by a media mindset that is attuned to mud-throwing at easy targets, but lacks the inclination (and increasingly these days the budgets) to pursue insightful research and by platoons of vested interest and ideological boosters.

The new Senate inquiry has been set up for all the wrong reasons, but the Energy Efficiency Council submission is an opportunity for senators to actually contribute to sorting out the mess we are in by a bit of honest reflection.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of OnPower, 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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