Budget boosts needed to solve energy pricing crisis

Friday 2 June, 2017

Over the past six months, electricity pricing has become a hot topic, dominating much of the Federal Government’s rhetoric leading up to the 2017-18 Federal Budget in May. However, despite all the posturing, the Budget was energy “lite”.

Queensland Treasurer Curtis Pitt will deliver his third State Budget in 10 days and it will be interesting to see how the Queensland Government handles the problematic issue, given that electricity bills for small businesses have more than doubled over the last decade.

Electricity pricing is Queensland is a complex beast with Federal and State regulators, legislation and agendas crisscrossing the National Electricity Market (NEM). Queensland is currently split into two pricing areas, South East Queensland and Regional Queensland (Ergon).

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Since deregulation in 2016, SEQ has seen several new retailers enter the electricity market for both residential and commercial consumers.

Regional Queensland is still regulated, therefore pricing is set by the Queensland Competition Authority (QCA) yearly. The 2017-18 determination this week handed down an 8.2 per cent increase. The QCA is bound by the Minister for Energy’s direction to heed the Uniform Tariff Policy and ensure regional users are not penalised for living in remote areas, meaning consumers will not be charged more than there SEQ counterparts.

This undertaking requires the Queensland Government to pay over $500 million each year under a Community Service Obligation (CSO). This subsidy is provided to Ergon Energy, the transmitter and distributor of energy, and a government-owned corporation (GOC).

To borrow a phrase from Employment and Industrial Relations Minister Grace Grace, the CSO in its current form is a ‘’handbrake” on competition in Regional Queensland.

Market deregulation allows private enterprises to enter the lucrative energy market, which in turns allows for consumers to shop around for the best product, creating competition and better services.

Though, no matter how much competition is introduced, both SEQ and Regional Queensland are experiencing increasing prices. This has been putting exponential pressure on businesses, being crushed by the burden of red tape and operational costs forcing some to exit the market and / or take their business overseas.

Electricity transmission and distribution is a big cash cow for the State Government, injecting billions of dollars in revenue into the state’s coffers. Currently 55 per cent of a consumer’s bill is made up of the transmission and distribution charge. The government could immediately reduce its take of revenue from Ergon and Energex to see immediate price relief across Queensland for all users.

consumer bill

This is a short-term solution. The Federal Government and all State Governments need to come together and harmonise their approach to the energy market. This will require a cohesive approach to energy and climate change policy. With each state pursuing individual clean energy and carbon emission targets and different forms of electricity generation, the “national’ network becomes less “national”, and a compromised, asynchronous market is being created, which could have disastrous consequences.

Complete market reform is a long way off and while we wait for political agendas to align and for all stakeholders to come to the table ready to make proactive changes it is on Queensland small businesses to find ways to put downward pressure on their electricity bills.

CCIQ has made several recommendations to businesses and government, including:

  1. In SEQ, shop around to get the best deal.
  2. Engage with sustainability programs, such as CCIQ ecoBiz, and energy auditors to trim inefficient appliances in the business.
  3. Write to politicians and express concern over energy pricing.
  4. Introduce competition to Regional Queensland.
  5. Reduce revenue from transmission and distribution networks.
  6. End the Solar Bonus Scheme.
  7. Continue funding education initiatives, such as CCIQ ecoBiz.

CCIQ welcomes any feedback and commentary as it examines the future of energy and how to achieve downward pressure on electricity prices.

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