Subsidies for renewables add $100 a year to power bills

Subsidies to renewable energy are adding about 7 per cent to electricity bills, or an average of $100 a year.

Subsidies to renewable energy are adding about 7 per cent to electricity bills, or an average of $100 a year, but the competition regulator says a lack of competition and poor planning among the big electricity companies is the main reason power bills are soaring.

A draft report from the Australian Competition & Consumer Commission released yesterday ahead of cabinet deliberations on energy policy shows power costs have been rising an average of 8 per cent a year for the past ­decade, which is more than three times the average inflation rate over that period.

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In the past year, prices leapt 14.2 per cent as the National Electricity Market struggled to deal with the closure of the Hazelwood plant in Victoria, the rise in gas prices and what the ACCC said was “the potential for strategic conduct by large generators”.

power bills cost for the states

The ACCC report, which was commissioned by Scott Morrison to find out why retail prices were rising so rapidly, shows the average residential power bill has risen by $514 a year to $1691 since 2007-08, after allowing for inflation.

Electricity costs are highest in Tasmania and Queensland where retail customers pay about 30 per cent more than they do in Victoria.

power bills cost for the states

“It is clear that electricity prices in Australia have gone from a source of competitive advantage to a drain on business productivity and a serious affordability concern for households,” the report says, adding that the burden of ­rising prices disproportionately affects those segments of society least able to afford it.

power bills cost for the states

“Over the past decade successive Australian and state governments have failed to balance competing priorities of security and reliability, universal access to affordable energy services, and reduced emissions, often making decisions with limited regard to the impacts of those decisions on the overall affordability of electricity,” it says.

A huge rise in the cost of maintaining the network of poles, wires and associated infrastructure is the biggest single cause of rising prices, adding $208 to the average bill in that period, after allowing for inflation. The cost of environmental subsidies, ranging from the renewable energy target to solar feed-in tariffs and various state schemes, has soared from $18 to $103 over the past decade.

The wholesale cost of the actual electricity has gone up only $89 in the period, rising to an average of $530 per retail consumer.

Retailers’ margins and costs have added a further $133 to the power bill.

The ACCC says that in the early stages of deregulation of the electricity market, it appeared that the privatised businesses in Victoria and South Australia were gaining efficiencies and, when competition was introduced to retailing, that consumers were gaining more competitive pricing and a better choice of services.

“However, it is clear now that many of the policy, regulatory and business decisions over the past decade or more have, on balance, led to higher prices for all consumers.” The ACCC is particularly concerned about the lack of competition between the three big ­private sector companies — AGL, Origin and Energy Australia — which between them control in excess of 60 per cent of generating capacity in NSW, South Australia and Victoria and have large retail market shares.