October 5, 2011
Claims that improved financial regulation of energy distribution companies will lead to blackouts in Australian homes are false and misleading, the Alternative Technology Association says.
The ATA has welcomed a move by the Australian Energy Regulator to seek changes to the national electricity rules for an improved, independent assessment of the costs claimed by monopoly distribution companies. The industry has claimed in the media the proposed changes would lead to power outages.
Craig Memery, the ATA’s energy policy advocate, said the claims by industry group the Energy Networks Association were a cynical attempt at maintaining unjustifiable profits passed on to consumers.
“Energy distributors will always be able to pass on the costs required to maintain reliability and minimise blackouts,” Mr Memery said.
“The Regulator needs to be able to make accurate, independent assessment of company spending on poles and wires, and hopefully compel them to look at better alternatives to expensive network upgrades,” he said.
“Consumers end up paying for every cent invested by the distribution companies through electricity bills, with a high rate of interest, and we pay for their hefty profit margins as well. The Regulator must have the tools and the power to protect consumers from paying more than is necessary for electricity.”
Mr Memery said the Regulator’s decision was a step in the right direction to help control the massive increases in household energy bills.
The Regulator’s rule changes attempt to address a number of other weaknesses in the regulatory process that distribution businesses have been exploiting, at consumers’ expense. The changes would:
- Make the distribution companies’ costs more transparent. Currently, all the distributors have to do is mark a document “commercial in confidence” and public access is blocked;
- Prevent distribution businesses from keeping important information to themselves till the price determination processes;
- Compel distribution businesses into making more cost-effective decisions about networks. Consumers want reliable power, not gold-plated networks;
- Result in a more reasonable cost of capital for distributors.
“While the companies should have some room to deal with unforeseen events during the five-year regulatory price period, they should have one chance to get their pricing proposal right, and be subject to full scrutiny by the Regulator and all stakeholders,” Mr Memery said.
The ATA believes the Australian Energy Regulator’s proposed changes deserve public support, and urges consumers not to be misled by scare tactics. “The distribution businesses are not trying to protect consumers, they’re trying to protect their unjustifiable profits.”
ATA energy policy advocate Craig Memery on 0412 223 203/energy projects and policy manager Damien Moyse on 0439 900 692