The great energy spend that is costing us billions

Australian electricity bills will continue to skyrocket thanks to a massive over-investment in the network that we didn’t ask for and will never need.

Here’s what consumers are paying for: in 2010, the networks began to spend $45 billion, approved by the Australian Energy Regulator (AER), on building and upgrading the poles and wires. This unprecedented spending allowance was granted on the back of dire warnings from the networks that energy demand was about to skyrocket, and unless the networks were allowed to spend tens of billions, the poles and wires simply wouldn’t cope.

However, things did not go according to plan. As soon as the networks started spending, energy demand didn’t skyrocket – it did the opposite. In 2010, for the first time in Australia’s history, demand went down, and it’s gone down ever since.

Despite year-on-year reductions in demand, the networks carried on building to match their over-inflated projections, installing Rolls Royce infrastructure that consumers hadn’t asked for, and would never need. Eventually, when the evidence was too pressing to ignore, the networks did rein in some of their spending, but not enough to stop electricity bills going through the roof.

Here’s the rub: the networks had a strong incentive to ignore the naysayers, because the more they built, the more they got paid. Not only could they charge every dollar of that $45 billion back to consumers through their bills; they could also add on another 10 per cent – their “regulated rate of return” – and charge that back to consumers as well.

… The regulator has just approved a further $50 billion for the networks to spend over the next five years. For networks in NSW, the fight is on to secure an even higher allowance – they’ve appealed the regulator’s decision in the Australian Competition Tribunal, and are fighting to impose even higher electricity prices on the people of NSW.

…. Battery brands like Tesla are excited about Australia for three major reasons: at 1.4 million households, we have the highest penetration of solar rooftops in the world; we have excellent solar resources to feed them; and, crucially, we have some of the world’s highest electricity prices.

This wasn’t always the case: less than a decade ago, Australia paid some of the world’s cheapest electricity bills. In the past few years, however, household power bills have doubled, and now we’re duking it out with Germany and Denmark for the title of world’s most expensive.

ABC: Opinion: By Jess Hill: 10 Nov 2015

Key Words: Climate Change, Infrastructure
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