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Time for action on the price of electricity

By Damian Sullivan - posted Friday, 7 December 2012


Jenny, and other householders like her, will likely benefit from such changes. But the moves to deregulate retail energy prices, introduce more cost reflectivity into pricing, and use smarter meters are likely to generate the most interest - and possibly anxiety - for consumers.

More cost reflectivity in energy pricing - which basically means the consumer pays more when overall demand for energy is higher - has potential to address one of the main reasons for the growth in peak demand.

Currently, there is no price signal to electricity users about the real cost of using electricity at peak times. Cost reflective pricing has the potential to significantly reduce peak demand because people would have an incentive to cut their usage at peak times.

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For households similar to Jenny's one where people don't have an air-conditioner, there are likely to be benefits from more cost reflective pricing. Currently, they effectively subsidise the cost of households who run air-conditioning all the time.

A new air-conditioning system may cost $2000 to install, according to the Energy White Paper, but costs over $6000 in costs for the electricity system - which all electricity users must pay for.

There are also risks, however, with this aspect of the proposed reform. Before such a measure is introduced, we need to make sure vulnerable households are not disadvantaged. Currently, we don't have enough information about how time of use pricing would affect low-income households or other vulnerable customers. This needs urgent investigation.

But the need for more research shouldn't stop COAG agreeing to an initial package of reforms this Friday. While there are some notable gaps in the PM's approach, there is urgent need for action now to secure more affordable energy for people like Jenny.

For information on the Plan for Affordable Energy go to www.bsl.org.au

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About the Author

Damian Sullivan is the Senior Manager, equity in response to climate change program in the Research and Policy Centre of the national welfare body, the Brotherhood of St Laurence.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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