What’s behind the Victorian electricity price rises?

In the last week, the major energy companies have announced that they are increasing electricity prices for Victorians by between 6% and 9%, with TRU Energy and AGL showing the largest increases. But where is this coming from? Depending on which paper you read, you will see the price rises attributed to a number of things; the carbon tax, smart meters, more “poles and wires”, a lack of competition and the need to privatise…the list goes on.

So, lets start to cut through this. Many personal beefs with the Government and the energy industry are aired whenever an opportunity like this arises. The favourite media circus beat-up is on the carbon price, which everyone loves to hate. It will be responsible for an estimated 12% increase in electricity prices that will come into play in July next year, but this is not what is causing the price rises this year, nor the price rises in the last three consecutive years. To put it in perspective, over a three year period, household electricity will rise by around 37%, around one third of this is a result of the price on carbon.

So what is causing the remaining two thirds of the price hikes? We are. Our energy infrastructure across our towns and our cities is under strain, mostly because of the the way that we are consuming energy. We are increasingly coming home of an evening, turning on the air conditioner, putting on the washing, watching television on our oversized plasmas, charging our phones and computers (and soon our cars). So while the average household energy consumption has remained constant, or even declined over the past three years, our peak usage has increased from 10-20%. This is causing the distribution companies (the “poles and wires”) to build new infrastructure to cope with this. This is costing upwards of $40 billion dollars over a five year period. This is what is really behind the price hikes.

But there is some good news on the horizon. The effects of the carbon price on the market are beginning to show, as companies with the biggest carbon exposures are putting up their prices, and conversely, companies backed by renewable energy are becoming more price competitive. That’s a great sign of more good things to come.

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