Flawed logic continues power price pain

NSW households may soon be asked to pay an extra $52 to $84 per year on their electricity bills, to give retailers an extra allowance to acquire and retain new customers.

In its draft determination for regulated electricity prices from 1 July 2013, the Independent Pricing and Regulatory Tribunal (IPART) has proposed the increased charge to attract new retailers into the market. IPART argues that this will promote extra competition – and that extra competition will, ultimately, push prices back down.

The Public Interest Advocacy Centre questions the logic of hiking prices up solely to encourage the possibility of driving them back down at some time in the future.

‘This approach artificially inflates electricity prices in the hope that this will deliver competition and lower prices in the end. But there’s no certainty that lower prices will be the end result. And how much extra will struggling households pay in the meantime?’ asked Oliver Derum, Policy Officer in PIAC’s Energy and Water Consumers’ Advocacy Program.

‘Without these costs, consumers could have been celebrating a price drop. But instead we have the odd situation that consumers are being asked to fork out millions of dollars to fund the “discounts” that power companies might offer back to consumers.’

‘Further increasing prices above the actual cost of delivering this essential service is not a good way to encourage innovation,’ said Mr Derum.

NSW saw over 23,000 residential disconnections last year due to an inability to pay. While IPART’s proposed price increases for 2013/14 are modest compared to previous years, the 3% average increase will do nothing to ease the pain for people struggling to pay their bills.

‘Without this increase, we could actually have seen prices go down.

‘That might have started to offer a little relief. But instead consumers are once again being asked to dig deeper into their pockets to pay for this essential service’, said Mr Derum.

PIAC will outline its arguments against the increased allowance to IPART at the public hearing for the current price determination process. The hearing will be held on Tuesday, 7 May, at IPART in Sydney, commencing at 10 am.

Contact: Oliver Derum, Policy Officer, 0422 946 901.

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