Energy Matters Calls For Real Electricity Pricing Reform

National solar provider Energy Matters supports the Energy Supply Association of Australia (ESAA) in calling for reform in how consumers pay for electricity networks; but points out solar is not part of the current problems as the ESAA suggests – it is very much part of the solution.

The ESAA has released a discussion paper (PDF) describing how consumers pay for the cost of providing electricity networks.

The discussion paper concludes that the way consumers are charged for using electricity networks needs to reflect the way we generate and use electricity.

However, Energy Matters believes that the ESAA missed the mark with its recommendations – it did not propose genuine reform that would be fair for all consumers.

Energy Matters sees genuine reform being consistent with the following principles:

  • Charges that are consistent for all consumers, including residential and commercial
  • Charges that reflect the fixed cost of providing a network capable of supplying peak demand
  • Charges that incentivise consumers to reduce peak demand

The company says genuine reform would involve the following actions:

  • Unbundling bills to separate network charges from other charges
  • Eliminating consumption charges to pay for electricity networks
  • Introducing capacity charges to pay for electricity networks
  • Applying the same capacity charge (c/kVA/day) to all consumers (residential and commercial)
  • Allowing all consumers (residential and commercial) to select their required capacity (e.g. 4, 6, 8, 10 kVA) in 2 kVA steps
  • Allowing distributors to charge a penalty fee when consumers exceed their capacity
  • An independent regulator to determine the capacity charge (c/kVA/day) and penalty fees for each network in Australia

Implementation of the above would mean a fair deal for all consumers says Energy Matters.

For example, a non-solar household with several air conditioners and other energy hungry appliances may require a peak capacity of 24 kVA. An energy conscious household with solar PV may only require a peak capacity of 6 kVA – roughly ¼ that of the non-solar household with multiple air conditioners. The reforms would mean that the energy efficient household would only pay ¼ the electricity network charges of the energy intensive household.

As with any reform there will be winners and losers – but in both aspects will be fairness and opportunity for losers to become winners.

The winners from the outset will be the energy efficient households who do not contribute significantly to peak demand.

The losers will be those consumers who will be forced to pay for the privilege for their choice to consume large amounts of electricity.

The reforms described above would require smart meters to be rolled out to all consumers. The default option would be for consumers to avoid any penalty fees by paying the capacity charge that matches the main breaker in their household. This capacity charge will be different for each consumer – whether residential or commercial.

For a typical household with a single phase supply this could be a breaker with capacity of ~ 20 kVA. The distributor would then apply the regulated charge (c/kVA/day) and pass this charge onto the consumer via their retailer.

Consumers who wish to reduce their electricity network charges would have the option to change to a lower capacity if they agree to regulated fees.

Over time, consumers would adjust their demand profiles – for example, by insulating their homes, switching to more efficient appliances, changing the time of day they use appliances or by installing solar power systems – and move to a lower capacity charge.

Particularly disadvantaged groups would receive assistance in achieving this goal through existing or new schemes.

The solar industry has already stepped up to the plate in helping more consumers reduce mains electricity demand with companies such as Energy Matters offering zero deposit payment plans whereby the electricity bill savings can be more than the repayments.

Through the implementation of real electricity reform as described above, network operators would then be able to reduce their expenditure on networks – they would only be required to build and maintain the network to meet the self-determined peak demand of all the consumers in their network. Over time, this would reduce the network charges for all consumers.

Energy Matters invites the ESAA to declare their support for the above principles and actions; and to join with Energy Matters in campaigning for genuine reform in the interests of all consumers.