Grattan Institute blames state governments for high power bills

More than $20 billion has been wasted on upgrading Australia’s electricity infrastructure, resulting in higher power bills for consumers, according to a new report.

The Grattan Institute has pointed the finger squarely at state governments for overspending on the electricity network, with households and businesses left paying up to $400 a year more than they should be.

Its report calls on state governments in New South Wales, Queensland and Tasmania to write down the value of their energy assets to reduce electricity bills, or give direct rebates to customers.

Network costs can account for up to 48% of residential electricity bills, with retailer costs often accounting for as little as 20%.

The cost of the National Electricity Market’s power grid rose from $50 billion in 2005 to $90 billion today, the report said. But up to $20 billion of that was not needed to cover growth in population, consumption, or even demand at peak times.

“There have been some improvements in reliability of supply, but not enough to justify the spending,” the Grattan Institute said.

It said the over-investment was “overwhelmingly” in NSW and Queensland.

“In 2005, the NSW and Queensland governments required their network businesses to build excessive back-up infrastructure to protect against even the most unlikely events. At the same time, growth in demand for electricity slowed, as appliances became more energy efficient and more households installed solar panels.

“Unless state governments fix the mistakes of the past, consumers will continue to pay for assets that are neither used nor useful. And prices that are higher than they should be will lead to poor investment decisions in future.

“In Queensland and Tasmania, where the businesses are still state-owned, the Government should write down the value of the assets. This would mean governments foregoing future revenue in favour of lower electricity bills.

“In NSW, intervening to revalue the privatised businesses would create too many problems, so the Government should instead use the proceeds of the privatisations to fund a rebate to consumers.”

To prevent “the mistakes happening again”, governments should move to full privatisation, according to the Grattan Institute’s report. It claims the evidence shows that privatised electricity businesses deliver lower prices for consumers, without compromising reliability or safety.

“And governments should change the way electricity is priced, so all consumers can see when demand is high. Network costs would fall if customers reduced their consumption at critical peak periods.

“Governments should act now to give some of that money back to consumers, and to ensure we have a more sustainable and affordable electricity network.”

How to find a better energy deal

A recent Canstar Blue survey of more than 7,000 bill-paying customers found that just 55% think they are getting a good deal on electricity. However, many could be missing out on potential savings by not regularly shopping around. The difference between the cheapest and the most expensive electricity plans in some areas runs into the thousands, Canstar Blue’s electricity database shows.

In NSW and Queensland, there are around 20 electricity providers marketing at residential customers, but in some areas as many as 87% of households are still supplied by one of the big three retailers – Origin, AGL and EnergyAustralia. This does not mean they are getting a bad deal, but that there is still reluctance on the part of many consumers to actively search out better deals.

The research found that the majority of electricity customers signed up with their current provider over the phone (52%), while one in four joined online (25%) and one in ten (10%) signed up in person. It’s common that the best deals and sign-up incentives are found online.

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