News and Views

The clock ticks on power prices as the anger and evidence mounts

As sugarcane farmers and other irrigators nervously wait to know what 2017’s electricity tariffs will be, the body of evidence pointing to an unfair and flawed pricing system is growing.

Another study reinforces CANEGROWERS message that the pricing system is neither cost-reflective nor efficient and needs to be overhauled.

“The evidence should serve as a major wake up call to Australia’s energy policy makers,” CANEGROWERS Head – Economics Warren Males said. “Farmers need electricity prices to be substantially reduced, not lifted.”

The Queensland Competition Authority (QCA) is due to rule at the end of May 2016 on the prices irrigators, businesses and households will pay in 2016-17. In a draft it indicated a 10.3-11.5% cost rise for irrigated agriculture which would be on top of the 96% increase imposed over the past seven years.

“These further proposed rises will again hit the production capability and profitability of Queensland farmers hard with a flow on effect to the whole state economy and regional areas in particular,” Mr Males said.

“What makes farmers most angry is that the basis for the unsustainable and huge price rises is false. The QCA has substantially overestimated the actual cost of supplying energy to Ergon and that has unnecessarily inflated the retail cost component of prices.”

Professor Ross Garnaut said the first step towards rational pricing would be to write down the value of redundant network capacity. This message has been reinforced by energy industry analyst Hugh Grant who writes that the values of most networks are over twice the efficient level.

“The Queensland Productivity Commission has identified that around 6% of Ergon’s network capacity is used for only 0.1% of the year,” Mr Males said. “The rules must be changed to require Ergon to write down the underlying value of redundant assets in their underused network.

“Why should farmers be paying for something they’re not using and, in the process, contributing to massive profits for Ergon and Powerlink?”

While the QCA considers 2017’s pricing, CANEGROWERS has written to the federally-run Australian Energy Regulator (AER) urging it to reject Ergon’s proposed tariff structure. A report from the Sapere Research Group found the proposal failed to meet the mandatory requirements of the network pricing rules and the National Electricity Objective.

“Queensland actually has abundant supply of low cost energy but to look at power prices, you wouldn’t know it,” Mr Males said. “This supply should be an asset to our economy and agricultural production but instead we have a flawed pricing system holding us back.

“It is important that the regulated cost of electricity delivery stops undermining the growth and development of Queensland’s regional economies and reducing the living standards of the communities they support.”

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