Energy Networks Association CEO, John Bradley, has released the position paper Towards a National Approach to Electricity Network Tariff Reform and an independent analysis addressing the benefits of fairer electricity prices in Australia.
“Independent analysis released today shows electricity customers could pay up to $250 less per year in the future if fairer network tariffs are put in place now, Mr Bradley said.
“If we don’t act, today’s outdated tariffs will lead to network price increases which are 5 times higher than necessary and result in unfair cross subsidies to some customers of up to $655 per year.“
Mr Bradley said the findings supports recent analysis by the Australian Energy Market Commission which found that network tariffs currently don’t reflect network cost drivers and allow air-conditioning customers to impose costs of up to $700 per year on other users.
“This analysis shows today’s network tariffs will encourage an explosion in unfair cross subsidies, leading to a world of ‘haves’ and ‘have nots’ in 2034.
Customers who have taken up solar and other technologies would pay electricity bills that are $1270 (about 40 per cent) lower than those who have not. About half of that ‘discount’ would be paid for by other customers through unfair cross subsidies.
“The review of pricing options found network tariffs based on customer peak demand would achieve the lowest network charges and cross-subsidies for residential customers,” Mr Bradley said.
According to Mr Bradley, despite recent changes to network pricing rules by the Australian Energy Market Commission, a range of barriers to fairer tariffs needed to be addressed urgently.
“Australia’s electricity networks want to work with their customers to implement fairer tariffs in a carefully planned way that suits local network circumstances.”
“The first step is the removal of outdated regulatory restrictions that prevent the efficient network cost being charged to a retailer, such as default flat rate tariffs.”
“The second step is to develop an industry standard for implementing network tariff reform, including collaboration with electricity retailers, working with consumer advocates on measures to support vulnerable customers and establishing some foundation principles.”
Mr Bradley said consumers had more choices in their energy and technology use and networks would be asking for customer support for fair, technology neutral tariff structures.
“Network businesses have a clear obligation to protect the interests of all their customers by providing fair, efficient tariffs, where customers can choose how they use energy without imposing costs on others.”
“Australia’s world leading rates of rooftop solar installation are both an opportunity and a threat to fair prices for customers, with up to a further 7 million customers projected to install solar panels by 2034.”
“Solar panels require advanced meters that measure the time of energy use, so there would be no additional investment needed to provide a fair network tariff.”
“However, if we leave network tariffs as they are, then Australia faces cross subsidies of up to $655 per year, massive over-investment in distributed energy resources, and higher community costs of up to $17.7 billion,” Mr Bradley said.
He said that the ENA has proposed three foundation principles for consultation with customers and other stakeholders, to fast-track the benefits of network tariff reform.
- A national policy to install ‘smart ready’ meters for new connections or replacement of meters, which can be converted to smart meters when economic to do so;
- The ability for networks to assign customers making new connections or upgrading their existing connection to a cost-reflective network tariff; and
- The ability for networks to assign customers using over 40 MWh per year (approximately $10,000 per year) of electricity, or a capacity threshold, to a cost-reflective network tariff. Networks would specify the thresholds in their regulatory proposal and the tariff structure statement that is required to take effect from 2017 under the new rules.
“With the AEMC’s recent change to network pricing rules, it’s now time to remove the remaining barriers to fairer network prices in Australia.”
“We have learnt the lesson from Victoria which prescribed retail tariffs and retail assignment of network tariffs and fewer than 5,000 customers have taken up flexible tariffs in the year since their introduction.”
“Research shows that not only are most customers better off but vulnerable consumers are more likely than average to be better off,” Mr Bradley said.
Ergon Energy, as a member of the ENA, has supported the proposal and joined other Australian electricity transmission and distribution network providers in proposing “a national approach to fast-track the benefits of electricity tariffs which reward consumers for contributing to lower network costs.”
Download the ENA position paper Towards a national approach to electricity network tariff reform.
Download the Energeia analysis Network pricing and enabling metering analysis.