Queensland Residential Prices

Transcription

1 Factsheet: Queensland Electricity Pricing 1. Apportionment of electricity prices to cost components Queensland pricing has increased as a result of significant network investment justified in the last regulatory period mainly on peak demand growth from residential air conditioner installations and stringent network fault tolerance requirements set by the Queensland Government. Costs associated with Renewable Energy Targets, Carbon Pricing and Solar Feed-in-Tariffs are small by comparison to network cost growth Queensland Residential Prices c/kwh Wholesale cost Carbon FiT RET Gas Scheme Retail Network Costs Network prices peaked in due to network price freezes in and transitional pricing proposals from the Queensland Competition Authority to shift from energy-related charges to fixed charges. o See Queensland Competition Authority s Price Determination document for : page 84, table 6.1 and Appendix D, page 136, tariff 11 cost-reflexive regulated retail tariffs. Network prices have again been escalated by 3.67c/kWh in as a result of the transitional pricing proposals. o See Queensland Competition Authority s Price Determination for : Appendix E Build-up of carbon-inclusive tariffs on page 93, and Appendix F Build-up of carbon-exclusive prices on page 97, and Table 11 on page 48. Carbon price has been excluded from Queensland residential prices after the repeal of the Carbon Tax regulation. o See Queensland Competition Authority s Price Determination for which provides detail on the difference between the carbon-price inclusive and exclusive prices. Costs associated with Renewable Energy Target have never reached more than 1c/kWh o See Queensland Competition Authority s price determinations to Solar Bonus Scheme costs were underestimated in the Distribution Regulatory Proposals in As a result, the distribution companies apply to the Australian Energy Regulator on an annual basis to increase their revenue for the difference. Compensation for the Solar Bonus Scheme costs to the distribution companies through network charges is currently running 2 years behind when the actual cost is incurred by the distribution companies. The Queensland Competition Authority, in their electricity price determinations, did not adjust electricity prices to reflect the additional costs being incurred by the distribution companies.

2 o o o The total cost for the Solar Bonus Scheme for including the original allowance and the cost pass-through for (which the QCA s Determinations include in network costs for ) is $195 million for Energex (network prices for residential customers are based on Energex cost structures with a subsidy provided to Ergon to be able to provide the same tariffs to more remote locations as per the Uniform Tariff Policy which amounted to $662million in see State Budget Papers). If the $195 million cost of the Solar Bonus Scheme is applied to all energy users in the Energex area then the cost per kwh in would be 0.9c/kWh. However, it appears that the AEMC applies the Solar Bonus Scheme costs to residential customers only, which increase their apportioned costs of the scheme to residential customers to 2.6c/kWh. Some might suggest that it is reasonable to charge only residential customers because it is only residential customers that were eligible for feedin-tariffs. However, the electricity grid has no capacity to allocate electricity generated from rooftop solar panels only to residential customers. Once the energy is absorbed into the grid, it flows through the distribution network to wherever demand is closest: that could be the houses next door, the coffee shop at the end of the road, the 7Eleven two streets away, and/or the supermarket a few streets away. At mid-day during the week, when the suburbs are empty of residents and residential demand is very low, the electricity generated by rooftop solar panels will largely be directed to local commercial enterprises. For this reason the graph above includes the appropriately apportioned cost across all energy users in the Energex network. See Australian Energy Regulator s Determinations on the Solar Bonus Scheme for and the Determinations on Distribution to Table 8.5 on page 151 for detail. 2. Evidence of significant benefits to network companies from pricing policies since 2007 Network prices have led to increased network company profits. Profits earned by Queensland Government from the network companies have grown from $426million in to $1.117billion in The Queensland Government has also benefitted from the increased notional tax payments from the higher revenues Queensland Network Company Profits (after notional tax deduction) Energex Ergon Powerlink Sources for profit calculations are Annual Reports for Energex, Ergon and Powerlink from 2007 to How much does the Solar Bonus Scheme cost the average household in the current tariff As shown previously, the cost included in the regulated tariff for is $195 million. Energex has a revenue base of $2.6 billion. $195 million is a small fraction of Energex s cost and revenue structure.

3 The Australian Energy Market Commission bases its household calculations on average household usage of 4533kWh per year. Applying a cost of 0.9c/kWh to 4533kWh per year provides an annual cost to the average household of $42. At the very worst, if the costs of the Solar Bonus Scheme are incorrectly applied only to residential customers, the annual cost to the average household is $118. It should not be forgotten that rooftop solar in the Energex network has significantly increased generation during peak demand in summer when households with air conditioners (with a potential load of around 3400MW on maximum demand of 4373MW (77%) (see Energex DAPR 2014/15, page 57)) draw power from the grid for only a few hours a year. It has been estimated that households without air conditioners subsidise those with air conditioners to the value of $330 per year. (Productivity Commission report in 2012 which is no longer available from their website). The investment in rooftop solar has reduced the requirement for additional generation required only for a few hours a year. There is as yet no reliable costing of that saving to the average electricity user as a result of rooftop solar panel investment, but it should be a priority for research. 4. Future Solar Bonus Scheme costs Because of the lag in charging for the Solar Bonus Scheme through the cost pass-through process, the costs of the Solar Bonus Scheme will increase in The costs for the Solar Bonus Scheme for Energex in which still need to be included in residential tariffs are $254 million. The costs for the Solar Bonus Scheme for Energex in which still need to be included in residential tariffs are estimated to be an additional $222 million The projected cost for the Solar Bonus Scheme for Energex for the period to be costed in the tariff is $197 million. The total would amount to $674 million could be applied to tariffs in However applying 2 years of prior year costs into a single year is poor business and accounting practice. Energex is applying to the Australian Energy Regulator to smooth the recovery of revenues over the five year regulator period such that lower annual regulatory revenue is offset by higher Solar Bonus Scheme recoveries in and From onwards the lower Solar Bonus Scheme recoveries will be offset by higher annual regulatory revenue. See Energex s Regulatory Proposal Page Other related facts The Queensland Newman Government has proposed to use proceeds from asset sales to pay for the Solar Bonus Scheme. o This would reduce the cost impact of the Solar Bonus Scheme on electricity tariffs. o The average yearly cost per kwh for the Solar Bonus Scheme for the next 2 years will be around 2c/kWh to catch-up with costs and thereafter should run under 1c/kWh. o If the network companies were sold, then the Queensland Government would lose more than $1 billion in annual revenue from electricity sales. An alternative consideration in dealing with the $474 million outstanding liability for the Solar Bonus Scheme would be to reduce for one year the profitability of the network companies which would reduce pressure on prices. The Newman Government has committed to deregulating prices in July The effect of this is that the Queensland Government will no longer be accountable for electricity prices. Media: For more information, contact

4 Cerian Stanfield, Acting Manager, Marketing and International Relations: Phone: (07) Professor John Foster, EEMG Director, Lynette Molyneaux,

5 Appendix: Details of Solar Bonus Scheme cost calculation Queensland electricity prices Calculating cost of Solar Bonus Scheme to Energex customers $ million Energex - Included in 2009 Distribution Determination Cost pass-through approved (see AER Determinations) costs costs costs costs Forecast costs (See Energex Regulatory Proposal ) costs TOTAL COST OF SBS SCHEME ($m) Residential GWh (AER Benchmarking RIN) 8,245 7,910 7,610 7,361 7,400 7,400 7,400 7,400 7,400 7,400 Total Energy Distributed in GWh (Annual Report) 22,565 22,144 22,105 21,719 21,000 20,569 20,504 20,547 20,681 21,121 Cost of SBS to customers (c/kwh) - All energy users Residential customers only (incorrect apportionment) Average annual residential use in kwh (AEMC) 6,000 6,000 6,000 5,370 4,533 4,533 4,533 4,533 4,533 4,533 Annual cost of Solar for average residential user $1 $2 $6 $22 $42 $100 $91 $40 $38 $36 Regulated Tariff (c/kwh) Unregulated