Residential electricity prices in Australia increases on top of inflation: ACCC

Energy efficient house — Ben Cormack stands in the doorway of his home on the Isle of Eigg, Inner Hebrides, Scotland May 27, 2014. Reuters/Paul Hackett

According to the Australian Competition and Consumer Commission (ACCC), residential electricity prices have risen by 63 percent on top of inflation over the past decade. This is primarily due to higher network costs, which comprise 48 percent of a household bill.

The Australian reports that an interim snapshot found a “severe electricity affordability problem” across the electricity market. It also indicates that the higher prices over the past decade are putting both Australian consumers and businesses under unacceptable pressure.

The snapshot also indicates that huge increases in electricity prices have not been matched by price increases in other aspects of the Australian economy, nor in salary growth. Those segments of the society least able to afford it are disproportionally affected by the burden of higher electricity prices.

The report also shows a 63 percent jump over the past 10 years, and it breaks down the components of a residential power bill of $1,524. Forty eight percent of that bill was network costs, 22 percent wholesale costs, 16 percent retail and other costs. Eight percent are retail margins.

Most of the public attention has focused on green schemes in recent times. But it makes up only seven percent now.

When it comes to the power price impact of green schemes, Australia’s competition watchdog notes that subsidies to achieve sustainability objectives “have also increased costs and created cross-subsidies.” It emphasizes that the costs of policies such as the feed-in tariffs adopted by some states for solar photovoltaics have been “passed through to all electricity users.”

"Some measures to improve environmental sustainability have been overly generous and poorly targeted, with outcomes that appear inequitable," the report says. Rod Sims, the ACCC chairman, said there was currently “ill-informed commentary about the drivers of Australia’s electricity affordability problem.”

Meanwhile, Treasurer Scott Morrison said that a final report from the ACCC would help to further drive action from the Turnbull government to secure more affordable and reliable energy for Australian households and businesses. The report is expected to be released in the coming months.

“Ensuring we keep the lights on and that the prices Australian families pay for energy are affordable is central to the Turnbull government’s approach to energy policy.”

The government is expected to put its new energy policy to cabinet this week. Its policy is expected to include carefully overhauling the national electricity market rules for more dispatachable energy.