Essential Services Commission of SA inquiry finds generation cost rises justified higher power bills for SA customers

HUGE rises in the cost of energy generation justified power retailers’ decisions to greatly increase consumer bills, an independent inquiry has found.

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HUGE rises in the cost of energy generation justified power retailers’ decisions to greatly increase consumer bills, an independent inquiry has found.

Treasurer Tom Koutsantonis ordered an inquiry by the Essential Services Commission of SA last year, after retailers announced double-digit price rises for households and businesses.

The increases by AGL, Origin and Energy Australia, adding up to $230 to household power bills last year, have been followed by a new $350 increase announced last week.

When he triggered the inquiry in June last year, Mr Koutsantonis said the increases “add significantly to cost of living pressures” and must be explained.

The cost of “wholesale” electricity, or what it costs to buy from power stations that produce it, is a major part of a standard bill. Other charges include transmission and the management of bills, and connections.

In a report quietly published last Friday as attention was focused on Chief Scientist Alan Finkel’s review of the national electricity market, ESCOSA found that closure of the Port Augusta coal-fired power station had combined with the rise of unreliable renewable energy to push up SA bills.

It warned further price increases and possible blackouts were likely in the near term.

“The July 2016 South Australian retail electricity price increases announced by the specified retailers can be justified by movements in the wholesale cost of electricity,” ESCOSA found.

“The primary reason for the announced retail electricity price increases is an increase in the wholesale cost. The spot price of electricity in SA has increased significantly since the closure of the Northern Power Station. Wind-powered generation has displaced coal-fired generation, making the state more reliant on gas-fired generation to meet baseload demand. The wholesale cost of gas has increased significantly, making gas-fired generation more expensive.

“Wind-powered generation has ... driven out less expensive forms of generation and contributed to more volatile spot price outcomes. That trend is likely to continue.”

Mr Koutsantonis has seized on a finding that a lack of competition is also pushing up SA power prices, as the Opposition says ESCOSA’s report proves he should have accepted an $8 million per year offer from the Port Augusta power station owners to keep it open and stabilise the grid.

He said his new power plan would add competition to the local market.