High price to pay for energy demand

IPART decision means households foot the bill for wasted opportunities

Consumers are funding the expansion of energy networks while opportunities to cut demand and slash bills are being passed up, says consumer watchdog CHOICE.

Today’s IPART decision to confirm NSW energy price rises of 17.3% from 1 July is the latest increase around Australia driven largely by costly energy infrastructure upgrades.

“Households are copping a massive bill for Australia’s expanding energy networks, while opportunities to lower these costs through regulatory reform are overlooked,” said CHOICE’s Head of Campaigns, Matt Levey.

“There has never been a stronger case for action to reduce energy demand rather than building more and more expensive poles and wires,” Mr Levey said.

While current increases include a spike from the national Renewable Energy Target, CHOICE believes the more concerning underlying trend is growing network costs.

For example, by 2013, the network component of NSW household power bills alone is likely to exceed the entire retail charge for electricity as recently as 2009-10.

Yet just last week, new evidence showed that spending by Australia’s electricity networks on efforts to reduce energy demand is equal to just 0.4% of their capital expenditure of $9 billion per annum. ¬The same research also found that each dollar spent by electricity networks aimed at reducing demand saved more than two dollars which would have gone to network infrastructure costs.

“At the moment, our energy networks have much greater incentives to keep expanding and pass on the costs to consumers rather than reduce demand,” Mr Levey said.

“Yet there is clear evidence that action to cut demand, including through energy efficiency, can avoid network expansion and reduce costs for households. For every dollar spent on cutting demand, this could save more than two dollars being spent unnecessarily on network infrastructure costs”

CHOICE is calling on Australia’s governments and energy regulators to get serious about reducing energy demand as part of our campaign for a consumer-friendly energy sector.

This includes calls for a National Energy Savings Initiative to lower household bills which could help households of all incomes and an independent review of the energy market.

CHOICE has also joined with advocacy group DoSomething! to launch the 10% Challenge, a campaign to help Australian households reduce their energy and fuel use by 10%. For more information go to EnergyCHOICE.  

Media Contacts:
• Matt Levey, Head of Campaigns, CHOICE: 0488 214 066
• Ingrid Just, Head of Media, CHOICE: 0430 172 669

Notes to editors:

The costs of Australia’s expanding energy networks are projected at approximately $40 billion within the current five-year regulatory period, and these costs are increasing. For example: “Network investment over the current five year cycle is forecast at over $7 billion for transmission networks and $32 billion for distribution networks. Investment is set to rise by around 84 per cent in transmission and 54 per cent in distribution (in real terms).” Australian Energy Regulator, ‘State of the Energy Market 2010’, p. 54

See the Australian Alliance to Save Energy, ‘Report of the 2010 Survey of Electricity Demand Management in Australia’: http://www.a2se.org.au/activities/research

For example, it has been estimated that energy efficiency gains from buildings alone could cut more than $16 billion from Australia’s energy infrastructure costs by 2020, producing net economic savings of $1 billion per year. See ‘Building Our Savings’: http://www.climatechange.gov.au/what-you-need-to-know//~/media/publications/buildings/building_our_savings-pdf.pdf

The National Energy Savings Initiative is proposed in the report of the Prime Minister’s Task Group on Energy Efficiency, currently awaiting a response from the Federal Government. According to illustrative modeling, a scheme of this type could save households up to $296 in 2020 through a combination of lower bills for all households along with specific energy saving measures. See http://www.climatechange.gov.au/en/publications/energy-efficiency/report-prime-ministers-taskforce-energy-efficiency.aspx

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