From the CEO
In recent months, we’ve been talking a lot about the need for reform in the retail energy market. In our view, there are longstanding inequities that clearly disadvantage consumers, especially people who are already struggling. To their great credit, federal and state governments have now listened and responded with a package of reforms.
We’re hopeful that once implemented (which may be some months away), these reforms will stop consumers being blindsided by unnecessarily high bills caused by unexpected fees and charges, and prices changing soon after they sign contracts.
It’s particularly pleasing to see that consumers in hardship programs will benefit from the lowest price offered by their retailer and that, at the end of a contract, customers will be moved to the regulated price, if that’s lower than the price they’re paying.
The package isn’t everything we wanted, but it’s a fine start. There has also been very important and welcome work done to improve product standards, which will help consumers make better decisions and avoid dodgy deals. I’ll have more to say on all of this soon.
The thing to remember is, retail is only one part of our energy bills. In fact, the physical network makes up 45% (or $675 of a typical annual household bill). And, worryingly, the cost is growing. It’s sobering to note that ~$26B will be spent over the next decade in new transmission projects in the national market – more than the value of the existing asset base.
Even more striking is that the distribution system (which carries power from the transmission system to your home or business), has a value 3.5 times bigger than that – and distribution costs are growing at a worrying rate. In recent expenditure reviews, we’ve seen distributors receive approved increases of 24%, 27%, 28% and 41%; not as much as they’d asked for, but a lot nonetheless.
What are the implications of all this?
Well, there’s no doubt that costs have gone up for distributors (interest rates, climate resilience, etc). For consumers, though, there’s a pretty stark realisation that if these costs continue to rise in proportion to the projected growth in demand, the hoped-for reductions in bills from cheaper renewable energy could be swallowed up.
Consumers are alive to this problem. Our June survey showed 62% of Australians believe distribution and storage costs will drive up their bills. This, in turn, diminishes confidence in the energy transition itself.
There are ways to address this, though, and below are some actions ECA is taking:
1) We are working with other market bodies to propose changes to the way distribution planning and expenditure reviews are conducted. There’s considerable opportunity to improve the regularity and scope of these so that we get a true ‘whole of system’ plan (i.e. a better view from transmission to consumer), including the contribution from consumers through their own energy assets – all supported by new smart meter data. Such a plan would also more easily identify communities at risk of long-duration outages, as well as constraints in parts of the network that might be addressed by lower cost solutions (such as community batteries), rather than expensive network upgrades.
2) At ECA we have a mantra on network costs: “no more than needed, no sooner than required.” We strongly believe that the current network must be optimised first before paying to extend it. To this end, for the last several months we have been working with the University of Technology in Sydney, through our Grants Program, to develop better metrics to test how effectively the current network is being utilised, especially in the context of changed peak demand and new 2-way flows in the grid. This is very promising work which should prove highly useful for our pricing regulators.
3) We’ve also been working with the Centre for New Energy Technologies (C4NET), again through our Grants Program, to build a modelling framework that can improve how network planning considers changed consumption patterns in light of electric vehicle integration and increased electrification of homes and businesses.
4) We know it’s really tough for consumer advocates to participate fully in distributor expenditure review processes, not least because the technicalities of this industry can be daunting. To enable more and better participation, we have funded the University of Melbourne’s Professor Pierluigi Mancarella (Chair, Electrical Power Systems) and his team to develop and present a comprehensive course on the ‘Foundations of the Energy System’. Conducted over several months, the course has had great reviews from the 160 advocates and allies who have enrolled. If we can, we’d like to run this again at a future date to accommodate those who missed out, so make sure to let us know if you want to put your name on the list.
We will continue working with industry, policy makers, and regulators on every way we can think of to keep costs down. Let us know if you have ideas.
Until next month,
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Brendan French
Chief Executive Officer
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From the Grants Team
New grants projects approved
Congratulations to our latest grant recipients! We’re excited to be funding six new projects through our Grants Program. From improving household energy performance for renters, to achieving equity for First Nations communities with prepayment meters, these grants promise better energy outcomes for Australians. We can’t wait to see their impact.
Apply for grant funding
Do you have an advocacy or research project that will benefit Australian energy consumers? We want to hear from you! The next round of our Influence and Collaboration Grants applications is now open.
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Submissions
The number of Australians who need access to payment difficulty protections might surprise you. Our latest energy survey showed that more than half of all Australian households earning under $150,000 say they are either under financial pressure, or managing to afford household bills, but struggling to afford anything extra. That’s why it’s vital that payment difficulty protections in the National Energy Consumer Framework are fit for purpose. In our latest submission to the AER, we made several recommendations to improve this.
We have also made submissions to DCCEEW on IPART’s final report on the future of embedded networks in NSW and to the Victorian Government on proposed regulations for minimum energy efficiency standard for rental properties.
Come Work With Us!
We’re searching for a talented Policy Officer to join our team. You’ll be working on important issues such as consumer protections, energy efficiency, electrification, and retail pricing. This role suits early career professionals who want the opportunity to learn, have access to some of the leading stakeholders in the industry, and positively impact the energy outcomes for Australians.