Shock treatment - what our electricity companies need
If household bills went up by more than 50 per cent in five years in any other market, governments would be clamouring to fix the problem. But in the electricity sector, the pace of change is glacial.
Electricity bills are the issue that is dominating our conversations, from the bus stop to the boardroom table. They are the number one cost-of-living concern for Australians, ahead of mortgages, rent and groceries.
The debate about how to fix this problem has, however, become bogged down in countless reviews, reports and committees.
And nobody could be happier with this situation than the electricity sector - much of which is profiting from this regulatory inertia.
That is why today’s Council of Australian Governments meeting is so important. It is a rare window for change, coming at the end of several months of the most transparent debate about electricity pricing that we have ever seen.
Terms like “poles and wires”, “peak load” and “gold plating” have emerged from the black box of market economists and engineers and been thrust awkwardly into the political spotlight.
While we’d be foolish to underestimate the ability of COAG to turn a sensible policy debate into a partisan slanging match, the pressure for reform is irresistible.
Everyone from consumer groups to industry bodies, and regulators to the Productivity Commission, has joined the calls to overhaul what is clearly a broken system. On Tuesday, we asked Australians to email the Prime Minister and Premiers ahead of COAG, within 48 hours, more than 5,000 had taken up the invitation.
We should not have a situation where 25 per cent of our household bills fund infrastructure that we only need for about 40 hours of peak demand every year; where consumers are harassed by discount offers but tell us they lack the information they need to feel confident about changing providers.
As for solutions, what is on the table at COAG is far from perfect - but in a system that is so resistant to change, it is a big deal.
Some of the reforms proposed by the Australian Government would ensure greater scrutiny of the infrastructure spending that has been a major driver of price rises.
The proposal to reward large energy users for reducing demand at peak times should lower prices for everyone. And providing funding for consumer advocates to take on the might of the energy industry in the regulatory process, should help to stop us getting in the same situation again.
Smart meters may also have a useful role to play - but only if we learn from the lessons of the poorly handled roll-out across Victoria and ensure that they are supported by a robust consumer protection framework.
The ultimate test of what comes out of COAG will be whether both levels of government can put aside their partisan interests and deliver reforms that ensure we won’t see our bills go up another 50 per cent in the next five years.
Anything less than that will be a cop out.
Alan Kirkland is the CEO of consumer group CHOICE.
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