Time to fix the broken power pricing system

Time to fix the broken power pricing system
February 5 2016

Time to fix the broken power pricing system

More evidence pointing to the need for an urgent overhaul of the electricity pricing system has been laid before power companies and the Queensland Government.

“The Queensland Productivity Commission (QPC) draft report on electricity pricing points squarely to the need for more efficient electricity tariff structures - ones which reflect the true cost of providing power to consumers,” CANEGROWERS CEO Dan Galligan said.

The QPC agrees with CANEGROWERS assessment that escalating network costs are the main driver of skyrocketing electricity prices – accounting for 82% of the 87% price increases across the all customer categories.

“Farmers using irrigation to grow food and fibre for Australians and export markets have seen their costs go up by 96% compounded over the past decade,” Mr Galligan said. “Farmers are either choosing not to water crops to avoid the unsustainable charges and having reduced production or they are borrowing money to pay power bills.

“Quite simply, the current system is failing the Queensland economy, threatening the viability and international competitiveness of irrigated agriculture, putting jobs in regional communities at risk.

“The current electricity pricing framework is broken because tariff charges are neither cost-reflective nor efficient.”

The QPC found the current pricing model with fixed and variable charging is, “not equitable and does not support least cost provision of network services”.

“For rural Queensland an important step will be to introduce tariffs that reflect the different demands that irrigators and other users place on the network,” Mr Galligan said. “Irrigators don’t have to use power at critical peak times, when everyone is under the air-conditioning in a heatwave, so they don’t contribute to that drain on the power system.

“The right price structures would provide an incentive to farmers to run their irrigation when there is spare capacity in the network, such as overnight when water evaporation losses are less.”

CANEGROWERS believes an efficient and equitable pricing regime would see a significant reduction in prices for irrigated agriculture, which would in turn drive up usage across an under utilised network.

“Under utilisation on an over capitalised network is driving prices higher, exacerbating the problem.  Turning this around through more specific and flexible tariffs would result in greater productivity and profitability,” Mr Galligan said.

“This Queensland Productivity Commission draft report is another pointer to what needs to be done. CANEGROWERS will be providing more advice to the QPC prior to the finalisation of its report at the end of May.

“The reality is, irrigators need action on power prices!”

Media comment:            Dan Galligan  |  CANEGROWERS CEO  |  0429 707 809
More information:         Neroli Roocke  |  CANEGROWERS Communications  |  0418 871 881