In three years time the amount of revenue electricity network companies can charge customers will be reduced, which according to the Australian Energy Regulator in its Draft Rate of Return Guideline "could [not would] result in household customers’ bills decreasing by around $30 to $40 per year".
Remembering all the other failed assurances that the cost of residentail electricity would come down, it is a brave individual who takes this latest prediction at face value.
Australian
Financial Review,
10 July 2018:
The Australian Energy
Regulator has moved to significantly cut the amount of revenue electricity
network companies can charge customers in a bid to take the pressure off
households and businesses enduring high power prices.
AER chair
Paula Conboy said it would reduce average household
electricity bills by about $30 to $40 a year….
But energy
network companies claim the new guidelines will strip about $2 billion
in revenue over the next five years and threaten future investment in the
energy sector.
Morgan Stanley said the
rule, if confirmed, would cut valuations of listed grid owners such as Spark
Infrastructure and Ausnet Services, while adding it "could have been
worse".
Energy users welcomed
the move as a sign the regulator is prioritising the interests of
consumers although Energy Consumers of Australia acting head Lynne
Gallagher said the proposed reduction in the rate of return able to be earned
on capital could have been bigger.
"There is no doubt
that there could be some disappointment from some consumer groups with this
decision, but it is a much better outcome than we've seen in previous years on
this issue," Ms Gallagher said....
AusNet said that if the rule is confirmed, the reductions would apply to its power distribution network from the beginning of 2021, in transmission from April 1 2022 and in gas from January 1 2023. Spark said the rule would apply to its various assets in 2020, 2021 and 2023….
Australian Competition and Consumer
Commission, Restoring
electricity affordability & Australia's competitive advantage,
11 July 2018, excerpts:
Australia is facing its
most challenging time in electricity markets. High prices and bills have placed
enormous strain on household budgets and business viability. The current
situation is unacceptable and unsustainable. The approach to policy, regulatory
design and promotion of competition in this sector has not worked well for
consumers. Indeed, the National Energy Market (NEM) needs to be reset, and this
report sets out a plan for doing this…….
There
are many causes of the current problems in the electricity market. At all
stages of the supply chain decisions have been made over many years by many
governments that set the NEM on the wrong course.
In networks, the framework that governs
regulation of monopoly infrastructure was loosened, leaving the regulator with
limited ability to constrain excess spending by network owners. The limited
merits review (LMR) regime allowed network owners to appeal regulatory
decisions and recover billions of additional dollars from consumers. It led to
significant increases in prices, has drawn out the length of time taken for
revenue determinations, and has created significant uncertainty around network
pricing. In addition, increased expenditure on networks was driven by
reliability standards for some networks that were set too high, without due
regard for consumers’ willingness to pay for marginal increases in reliability.
In generation, against ACCC advice, the
Queensland and New South Wales (NSW) governments made decisions regarding the
operation and ownership of generation assets giving rise to concentrated
markets. In Queensland, the government consolidated the generation assets of
three businesses into two. In NSW, as one example, both generators owned by
Macquarie Generation were sold to AGL, missing an opportunity to deliver a
competitive market structure by selling them to separate buyers.
Most
state governments put in place excessively generous solar feed-in tariff
schemes with a view to encouraging consumers to install solar photovoltaic (PV)
systems. Under these schemes, the subsidy paid to consumers for the energy
produced by their systems outweighed, by many multiples, the value of that
energy. Take up of the schemes exceeded all expectations, in part due to
dramatic declines in solar PV installation costs. The substantial cost of the
schemes continues to be spread across all electricity users.
The
main enduring policy instrument for encouraging low-emissions electricity
generation is the Renewable Energy Target. While it has been effective at
encouraging wind and solar generation capacity installation, it has also
distorted the investment that has occurred in the transition from higher carbon
technologies to lower ones. The subsidies received for installing wind and
solar made the business case for doing so compelling but did so in a way that
was indifferent to the ability to provide energy to the market when demand
requires it.
At
a time when gas-powered generation has become more important with the exit of
large coal-fired plants, the extent of LNG exports from the East Coast and
government moratoria on on-shore gas exploration and development have stifled
the availability of gas at a low price.
Electricity
retailers have also played a major role in poor outcomes for consumers.
Retailers have made pricing structures confusing and have developed a practice
of discounting which is opaque and not comparable across the market. Standing
offers are priced excessively to facilitate this practice, leaving inactive
customers paying far more than they need to for electricity. Pay on time
discounts, which have emerged as a response to attempts to constrain late
payment fees, are excessive and punitive for those customers who fail to pay
bills on time. [my yellow highlighting]
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