Residential power prices have gone up 63 percent in the last decade, as anyone who pays the power bill would know only too well. And now, the ACCC has given the clearest indication yet as to why we've all been gouged.
The ACCC released this Monday the "Retail Electricity Pricing Inquiry Preliminary Report". Its findings are clear.
- The number one reason behind surging power prices is network costs. Or in other words, the cost of maintaining the transmission network, or "poles and wires";
- The number two reason? Higher retail margins. So in other words, yes, your power company is partly to blame;
- The number three reason? Higher wholesale prices. These are largely due to old coal stations being put out of service. Gas has made up the shortfall, but gas prices have been pushed up by shortages in the domestic gas supply (due to most of it being exported);
- Environmental costs are a minor factor.
The graph below paints the picture. It illustrates the breakdown of an average $1,524 annual power bill in the National Electricity Market. As you can see, the biggest slugs to consumers are network costs, retail costs & margins, and wholesale costs.
Speaking at the release of the report, ACCC Chairman Rod Sims to urge people to contact their power providers to haggle for a better deal.
"If there's one thing people can do immediately, it's call your retailer," he said.
But the wider problem is essentially the government's to fix, because it's past governments who caused it. The report made it clear that bad decisions in the past were now to blame for the soaring network costs.
"To a significant extent, decisions of the past relating to network investment are 'locked-in' and will burden electricity users for decades to come," it said.
Finance Minister Matthias Cormann said the Government would "ensure the system is as competitive as it possibly can be, of course we will". He provided no specifics on how.
Greens deputy leader Adam Bandt was more pointed in his comments. He said "power prices are going through the roof because big companies are gaming the system".
"It's got nothing to do with renewable energy subsidies. If the government were serious about bringing down power prices, it would use this report to regulate electricity prices in this country and say to the big companies that are operating in this system, this is an essential service, it is not an excuse to play the electricity market like the stock market," he said.
The focus now turns to the Clean Energy Target (CET), which was put forward by chief scientist Alan Finkel in June in the Independent Review into the Future Security of the National Electricity Market (aka The Finkel Report).
The Finkel Report said that "uncertainty around emissions reduction policies was pushing up prices", and that "pushing more energy into the system would help put downward pressure on power prices".
So in other words, the Government's own chief scientist said the more we invest in renewables, the cheaper power will be for everybody. Energy Australia's managing director Catherine Tanna said exactly the same thing in February.
Monday's ACCC report identified several factors which have caused rising power prices, but offered few solutions. Clean energy has been identified as the potential circuit breaker the system so desperately needs. Yet the government appears poised to turn off the switch.