Power puzzle: Less investment but higher prices

Date
    May 24, 2013


Electricity prices have increased by an average of 33 per cent over the past five years.      

Going up ... and so are the prices of electricity in Victoria.

Electricity retailers in Victoria are reaping profits four times higher than retailers interstate, including NSW and South Australia, where the electricity market is still regulated.      

A report released Friday morning by the Essential Services Commission also found that retailer costs, not carbon tax as sometimes claimed, was the biggest driver of electricity prices over the the past two years.

Commission chairman Ron Ben-David said the report found Victoria's electricity prices had increased by between 60 and 70 per cent across the state over the past five years and at a similar pace to NSW. This was despite Victorian retailers not undertaking the same heavy investment in network infrastructure as their NSW counterparts.

"We've been looking at electricity prices over last two or three years and asking why is it increasing in Victoria at the same rate as other states even though we don't have the same cost pressures," Mr Ben-David said.


"From this report we've found that retailer costs are driving those prices."      

Mr Ben-David said the analysis found that over the past five years, for every dollar increase in a typical bill, 40 cents in every dollar was driven by higher network costs, 19 cents was due to generation costs, 13 cents to government policies and green schemes and 28 cents to higher retailer costs. Of that 28 cents, 11 cents was attributed to an increase in operating costs and the other 17 cents to profit margins.

"But what we then found is that over the last two years, retailer costs, including margins, have contributed 60 cents for every dollar increase," he said.      

Mr Ben-David said the commission was surprised to find retailer margins had more than doubled in the past two years.

"When, before input costs were driving increase, in the last two years retailer costs have been driving prices. That's been an interesting shift in the market and it's hard to explain in a competitive market why there's been such a marked increase in the retailer share of prices," he said.

Mr Ben-David said the commission would be "delighted" if Victoria's electricity retailers could "put forward any more information" to explain the significant increase in their retail margins.

"We're not jumping to any conclusions. But we will be interested to see if these large increases persist … Over the next 12 months, we'll also look at our own regulatory framework to see if there is anything we can do to make the market more competitive and drive down these prices and retail margins."

Read more: http://www.theage.com.au/business/power-puzzle-less-investment-but-higher-prices-20130524-2k5ej.html#ixzz2UAu0q5Uc

If retail costs are pushing up electricity prices, then why hold an expensive DD to try and remove carbon pricing?

Swagman wrote on May 24^th, 2013 at 1:52pm:



Yet why remove a carbon pricing scheme that has decreased pollution without forcing electricity pricing up.

In the mean time replace it with a direct inaction white elephant, who's costs are already spiralling out of control.

Why is Abbott on a carbon levy witch hunt ... is it because he couldn't win the last election and out of spite, wants to destroy the economy.