Regulator agrees power prices too high

Date
    August 9, 2012


THE federal regulator which approves power price increases says consumers are paying too much for electricity but it is unable to do much about it.   

The chairman of the Australian Energy Regulator, Andrew Reeves, told the Herald yesterday that unless the regulations which govern its decision-making process were overhauled, network operators, including state governments, will continue to overinvest in infrastructure, forcing consumers to cover the costs which the operators receive back as dividends.

''We consider consumers are paying more than necessary for a reliable supply,'' Mr Reeves said.




''We are constrained in our ability to reject excessive demands from businesses.''   


The Prime Minister, Julia Gillard, has given the states until Christmas to agree to a more efficient regime of investment and to adopt measures which empower consumers with more knowledge so they are aware of when power is at peak rates and can better manage their electricity use.

If the premiers fail to agree at a Council of Australian Governments meeting in December, Ms Gillard said she will wield ''the big stick of regulation'' and increase the powers of the Australian Energy Regulator, as well as the Australian Competition and Consumer Commission.

In an attack launched this week to differentiate the impact on power prices caused by the carbon tax from that caused by the states, Ms Gillard said overinvestment in transmission infrastructure - poles and wires - was the prime reason for power prices soaring by 70 per cent in NSW over the past five years.   

The carbon tax, which began on July 1, will add about 10 per cent to power bills this financial year but Ms Gillard says low and middle-income households are compensated for that. They have been given nothing to help them cope with the much larger, state-imposed increases.   

The Opposition Leader, Mr Abbott, blasted Ms Gillard yesterday, saying that because the federal regulator had approved past price increases requested by the states, then the federal government owned them.

But Mr Reeves backed the assertion that his organisation had little power to reject bids.

Mr Reeves first complained in September last year, when the regulator submitted a proposal to the Australian Energy Market Commission proposing a change to the price setting rules.

It argued the original regulations, written by the states and signed off by the Commonwealth, were designed originally to encourage investment in ageing and ailing poles and wires. Now, ''it is time to focus on the efficiency of that investment expenditure to prevent consumers paying more than they should'', the original proposal said.

It argued the regulator was ''currently restricted in its ability to set prices based on an objective assessment of the efficiency or the necessity of the expenditure proposed by electricity businesses''.

The regulator is expecting a response to its proposal next month.

The NSW government has joined Mr Abbott in attacking Ms Gillard but yesterday the state Energy Minister, Chris Hartcher, showed a preparedness to compromise.

''If that means giving regulator more teeth, so be it. … We'll even work with Julia Gillard to achieve that if she was sincere,'' he said.   


comments so far

        All the so-called reforms that have been undertaken in the "electricity market' driven by ideology, not rationality, have led us to this impasse. The "market" for electricity is now being gamed on a daily basis by speculators who aim to make money ultimately out of consumers, by manipulating the wholesale prices of electricity, privatised or corporatised generators, distributors and retailers have no incentive for efficiency because the rules are fixed to favour them and State governments have nil incentive to force that efficiency as the more that is invested the more they reap in dividends. Welcome to world of "greater efficiency" of the ideology that markets, no matter how artificial and contorted they are, are always best!!!!    

    Commenter
        Lesm
    Location
        Balmain
    Date and time
        August 09, 2012, 7:39AM

        I am old enough to remember the old SECV. Remember it? The place that trained young sparky apprentices, provided cheap affordable power prices and did all the maintenance whilst sending back a annual dividend to Govt ie us. Along with the Gas Fuel Corp and everything else Kennett sold off in the name of balancing the books coming off a international recession blaming Joan for everything up to but not including WW2.
        Jeffed again. Victoria was Oz's 3rd biggest business after the Feds and NSW and would have been in the clear a few budgets later if it was left as is and just been patient and frugal for a while.
        But NO (there's that word again) - in true HR Nicholls/IPA style .....sell the farm....everything works better in Private hands. Doesn't it? Everything will be cheaper because of competition won't it. Sell, sell and blame Joan, the ALP, Greens, drovers dog....
        In 2012, apparently not.
        So off you go all you "Liberal" (Haha) Party apparatchiks......on you bike and tell us again of this wonderful Free Market world again and it will solve all our problems just like that Free Market paradise, USA. Just don't get sick when you go there; you may not be able to afford to get saved.       

    Commenter
        Phil
    Location
        Frankston
    Date and time
        August 09, 2012, 7:41AM

        Wel Well Well! At Last someon as the nerveto say it! he Public has been paying fr the GOLD PLATED upgrade to the power supply to NSW......The people are paying for the upgrades....so the Power companies are reaping in nothing but pure profits...and they are determined to see that those profits increase.......remindsme of Victoria whe Kennet took over......can't help but think how much influence he's had on the present Premier of NSW.
        I was always under the impression the Government was/is elected by the people to serve the people...........not to provide excessive profits to companies that should've / should stay in public hands............as they are essential services.....    

    Commenter
        stnc
    Location
        St Peters
    Date and time
        August 09, 2012, 7:42AM

        Yes, of course the carbon tax is responsible for the 70% increase in electicity costs BEFORE it was introduced.

        The coalition rejects all baseless scientific principles like cause and effect and puts it's faith in magic pudding economics instead.   

    Commenter
        Goresh
    Location
        Brisbane
    Date and time
        August 09, 2012, 7:50AM


Read more: http://www.theage.com.au/opinion/political-news/regulator-agrees-power-prices-too-high-20120808-23uou.html#ixzz22zpzvDhA

So the government sets up regulators to give the appearance of accountability and independence when in fact they are rubber stamps. Funny when this was not noticed when the states were labor. Does this mean that the other independent bodies that set prices, wages and regulation are likewise rubber stamps as well? Say the body adjudication of  remuneration of parliamentarians...makes ya think...