Will the News Ltd campaign bring down power prices?

A News Ltd campaign to cut power prices has a bright side, but the focus on the carbon tax is rather blinkered.

Crikey

Energy experts have poured cold water over a News Limited-backed campaign that aims to use people power to “wipe out” the impact of the carbon tax on electricity prices.

The campaign is a partnership between News Limited tabloids The Daily Telegraph, Herald Sun, Adelaide Advertiser and One Big Switch, a for-profit company founded by Sunday Telegraph columnist and former Kevin Rudd spin doctor Lachlan Harris. Former Choice spokesman Christopher Zinn is leading the initiative, which aims to drive down power prices by negotiating collective agreements on behalf of thousands of energy users.

The Daily Telegraph yesterday reported Zinn saying he believes it will be possible to negotiate price cuts of 12 per cent if 25,000 households and business join up. However, the veteran consumer affairs warrior told Crikey that that number is “more their figure than ours”.

People can get already get offers of 10 to 12 per cent by switching now. We might beat those and we might not … We’re deliberately not saying how big any discount might be because we don’t know,” he said.

Hugh Outhred, a professorial visiting fellow in energy systems at the University of NSW said: ”It might help a few people if particular retailers see it as a manufacturing opportunity but it can’t help a majority of people.

The people who sign up for this may get a 5 per cent net reduction in their bill, but they could probably get that by shopping around themselves. If people are really interested in reducing their energy bills, the really important thing they can do is reduce consumption — especially at times of peak demand.”

Outhred says the major driving force behind electricity price rises is not consumer apathy but increased spending on electricity transmission and distribution networks (the so-called “poles and wires”).

Roman Domanski, executive director of the Energy Users Association of Australia, told Crikey: “People shouldn’t see this as an easy way out. It’s always best to do your own shopping around rather than rely on something like this; it won’t always give you the best outcome.

I wouldn’t say I’m excited by it, no.”

Domanski says readers should note that One Big Switch will earn a commission from electricity providers for each customer that signs up for an offer.

“These people are in business. They’re not in it for the good of humanity,” he said.

Not all energy policy experts were so sceptical. John Foster, a professor of economics at the University of Queensland, says he recently saved 10 per cent on his power bill by switching to a new provider. He thinks a campaign raising awareness about how to switch electricity providers is a good idea.

For once, maybe the tabloids are doing something that isn’t so bad,” he said.

Zinn told Crikey One Big Switch’s partnership with News came about through “Lachlan [Harris] and his terrific contacts” at the Tele, where he writes a regular column.

Although The Daily Telegraph yesterday claimed the campaign is “designed to effectively wipe out the impact of the carbon tax,” Zinn says the tax is “not a bogeyman”. 

”Our campaign is about electricity bills, not the carbon price,” he said. “We’re agnostic about the carbon price.”

Nevertheless, in its news report on One Big Switch yesterday, the Tele thundered:

Many households are dreading the carbon tax, which starts on July 1, because the pace of price rises will be so rapid it will be all but impossible to contain bills by cutting consumption – despite their best efforts … Two thirds of Australians oppose the controversial tax, a recent poll by the independent Lowy Institute revealed. Yet despite this, the Gillard government has refused to even consider reducing its impact.”

The News Limited papers did not point out in their reports that low-income earners will be over-compensated for the impact of the carbon tax and that nine out of 10 households will receive compensation or tax cuts.

Roger Dargaville, from the Melbourne Energy Institute, says Australian energy prices are “fairly standard globally”.

We used to have among the cheapest electricity in the world; now we have fairly standard electricity prices,” he said.

Earlier this year, One Big Switch announced that 1,600 people – out of the 40,000 who signed up – had taken up the company’s offer to switch mortgage lenders.

This article was originally published by Crikey on June 19. Republished with permission.