Queenslanders ‘paying 40pc too much for electricity’

A NEW report has found the overvaluing of Queensland’s electricity networks has left consumers paying 40 per cent more for power than they should.

Unless power prices are reduced, more and more consumers will turn to solar energy, driving the electricity industry into a “death spiral”.

A NEW report has found the overvaluing of Queensland’s electricity networks has left consumers paying 40 per cent more for power than they should be, but there could be a glimmer of relief, with price deregulation coming.

Consultant Hugh Grant, a member of the Australian Energy Regulator’s consumer challenge panel, this week presented a 150-page report to the Palaszczuk Government and Queensland Productivity Commission detailing how households and small businesses are punished by artificially inflated regulatory values applied to state-owned Powerlink, Energex and Ergon.

The problems began in the 1990s when regulators began assessing the value of electricity networks at their replacement cost rather than at a price that reflected their actual state. Picture: Steve Tanner

“This forensic analysis exposes major deficiencies in the methodology that determines the networks’ regulatory asset bases (RABs),’’ the 30-year industry veteran said. “It should serve as a major wake-up call.

“A reduction in the RABs of 50 per cent is needed to reach realistic levels. That would produce a 40 per cent cut in power prices to consumers.’’

Mr Grant said the problems began when the networks were corporatised in the 1990s and regulators set valuations at replacement cost, rather than reflecting the actual state of the networks, resulting in starting values more than three times those in the UK.

That was compounded by changes to investment incentive rules in 2006 that encouraged “extraordinary’’ levels of gold-plating of networks, particularly by government-owned entities such as those in Queensland, further increasing the assumed value.

Energex is now valued at $11 billion, Ergon at $9.8 billion and Powerlink at $7 billion.

Because the regulation system provides electricity networks with guaranteed returns on the RABs, they are a key driver of consumer bills, accounting for up to 75 per cent of prices.

Mr Grant’s report calls on the Government to reduce the networks’ values – and therefore consumer prices – or face a “death spiral’’ of an increasing number of people generating and storing their own solar energy.

Energy Minister Mark Bailey is on leave and has not seen the report.

Meanwhile, online research and rating service Canstar Blue says southeast Queensland consumers should look forward to savings, with greater competition after price deregulation on July 1.

For more information, visit canstarblue.com.au/energy/electricity/qld-providers/a-comparison-of-queensland-electricity-costs.