Why Abbott's promised bill savings are wrong

The Government is promising average households will save $200 per year on their power bill from repeal of the carbon tax. The reality is most households will see far lower savings.

The government has now toned down its claims about what were supposed to be "unimaginable" price impacts from the carbon tax. It now chooses to use the estimates of price impacts which the prior Labor Government used, based on Australian Treasury Department economic modelling. However the  reality is that even the government’s more modest claim of a $200 average annual saving on households’ electricity bills from repealing the carbon tax is likely to be a major overestimate. 

Since 2008, when Treasury originally undertook its economic modelling of the carbon price, households in Australia have become noticeably more energy efficient and frugal in their use of electricity.

The Australian Energy Market Commission provided updated estimates of average household’s electricity consumption in their December 2013 price review report which suggest bill savings from the carbon price abolition that are much lower than Treasury’s.

The table below details average household electricity consumption by state. It then calculates the likely bill saving from repeal of the carbon price based on a simple rule of thumb that for each megawatt-hour of electricity consumed, prices would rise by the level of the carbon price - $25.40. This is likely to be an overestimate because most states electricity emissions intensity is lower than 1 tonne of CO2 except Victoria. But even in Victoria  prices tend to be set by NSW black coal generators who have an emissions intensity of around 1 tonne of CO2 per megawatt-hour.

The only state which manages to see a bill saving above the Government’s $200 is Tasmania, but this is also likely to be a gross overestimate because the emissions intensity of Tasmania’s electricity supply is substantially below 1 tonne of CO2 per megawatt-hour. 

Likely annual electricity bill savings from abolition of the carbon tax

StateAnnual electricity consumption (MWh)Annual bill savingDifference to gov't bill saving

So much for Environment Minister Greg Hunt's characterisation of the carbon tax as some great big horrible electricity tax.

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