Privatisation and federal government ‘big stick’ push electricity prices up: Australia Institute report

Ageing coal-fired plants in Victoria are least reliable in national grid.

Waste in the privatised electricity market is forcing electricity price increases by more than $200 per year for the average consumer.

That’s the verdict of a report by the Australia Institute. ‘The Costs of Market Experiments’ report also claims the Morrison Government’s ‘big stick’ approach to correct bad market practice will make things worse.

That’s because the Australian electricity market has significant structural problems, the report concludes. Blaming electricity companies for electricity prices increase will not fix those problems.

$2 billion annual waste sends electricity prices up

According to the Institute, the annual cost of wasteful activities by electricity retailers is $2 billion per year.

TAI report says privatised electricity forcing electricity prices up.

“Australia’s energy future will not rely on coal”: TAI Executive Director Ben Oquist fronts the cameras. Image: Australia Institute

This is then passed on to consumers, raising electricity prices and leaves households worse off.

Privatising the electricity market has seen “enormous increases in wasteful spending”, the report notes. This includes high-pressure sales tactics, top-heavy management and “dizzying” ad campaigns which confuse and mislead customers.

As a result, the electricity industry is spending more on banking and finance costs than it does on fossil fuels to power its generators.

‘Big stick’ approach failing says report

The Morrison Government has talked up a ‘big stick’ approach to bring electricity companies in line and reduce power prices.

The government has said it will intervene in the market forcing retailers to offer cheaper power. Yet the report says this approach is “phoney”.

“[It is] merely an attempt to manage the political optics of the crisis in the system, not address its true causes.”

The report points out:

  • Real output per electricity sector employees fell 37 per cent between 2000 and 2018.
  • Productivity growth worse than for any other Australian industry.
  • Electricity sector sales staff have quadrupled since mid-1990s. Management grew more than 200 per cent.
  • Electrical tradespeople and back-up workers grew 21 per cent over same period.

Renewable power is the solution, not the problem

The damning report lays blame squarely at the feet of federal and state governments. They “unashamedly” handed power to profiteering electricity companies.

These companies are in “a sort of arms race”, the report says. As a result Australia has “flipped from a cheap electricity country to an expensive electricity country”.

It adds that it is not credible to blame fuel prices or the influx of renewables like solar power for price rises. Solar installations are already cheaper than fossil fuelled power generation and the “inevitable shift” is underway, the report notes.

On the home front, solar panels and battery storage can slash household electricity bills. Consumers are less at the mercy of electricity companies because they generate and store more of their own clean power.