Poorer customers facing worse than 25 per cent price hikes without more energy transition help

 In Home News Section, Home Slider Section, Uncategorized

For Australian households weary of tumultuous energy markets and rocketing prices, a bill hike of more than 20 per cent is hardly likely to be welcome news.

But look a little deeper, and the picture is actually even grimmer for an inordinate number of the country’s poorer and disadvantaged consumers.

The Australian Energy Regulator and its counterpart in Victoria, the Essential Service Commission, yesterday confirmed benchmark power prices would rise by a whopping amount from July.

For south-east Queensland, the so-called default market offer would jump by 21.5 per cent, while it would increase about 21 per cent in New South Wales, 24 per cent in South Australia and 25 per cent in Victoria.

To be sure, the default market offer only applies to a relatively small number of customers directly – about a million out of an overall market of more than 10 million.

But it sets an important precedent for the offers that are available in the broader market, acting as a benchmark against which retailers reference all their other prices.

The DMO is the price that people pay when they’re unable or unwilling to look elsewhere for a sharper deal.

Problems beneath the prices

It effectively allows energy providers to recover their costs of production – for generation, poles-and-wires and retail – plus a margin, or profit.

Gavin Dufty, the policy and research manager at St Vincent de Paul, says regulators face a tough task in calibrating the offers every year.

Set them too small, Mr Dufty says, and those customers directly affected might take less of a hit but retailers will also be less inclined to offer discounts to other consumers.

Set them too high, Mr Dufty says, and those same retailers might have an incentive to offer bigger discounts in the broader market but households directly on the hook for the default offer will cop it in the neck.

In the case of these latest price hikes, he says the regulators undoubtedly had to take into account the unprecedented wholesale market turmoil and high prices of the past 12 months.

And to that extent, he says the hikes are not unreasonable.

But the veteran energy researcher is worried the headline numbers mask a much bigger, structural problem.

“The averages tell a little bit of a lie about how this will wash through the community,” Mr Dufty said.

At the heart of those concerns is the divide between households with the money and the wherewithal to shield themselves from rising electricity prices and those who might lack them.

The most obvious example of this gulf is the rise of the solar household.

Solar panels have an upfront cost of several thousand dollars, but that investment is recouped and typically repaid handsomely as customers generate big chunks of their own electricity.

Add in a home battery, which usually costs several thousand dollars more, and electricity bills can be completely eradicated.

Energy divide grows wider

Mr Dufty, himself a solar householder, says the benefits of such technologies are huge.

But he notes that many people don’t yet have a system, while many more such as renters and poor households may never be able to get one.

As such, he said the weight of electricity price rises like those announced by the AER and the ESC are likely to fall disproportionately on disadvantaged consumers.

What’s more, he says it’s a problem that looks set to get worse as more and more households migrate towards solar panels and batteries and those unable to follow suit have to pick up an ever greater share of the tab.

“One of the things we do worry about at Vinnies is the price increase – whatever the number – is for an average,” Mr Dufty said.

“And what we do know is there’s a lot more diversity in households now.

“Those with solar, for example, will have much lower price increases.

“But those large families, all-electric, living in colder areas, are going to have significantly higher price increases.”

Governments and industry are aware of the equity risks in the transition.

A package of relief measures drawn up by the Commonwealth and states to cushion the effects of the energy crisis has been skewed in favour of those less well off.

Can’t leave half behind: Griffith

Earlier this month, the Federal Government used its second Budget to set aside money to help “low-income Australians” get rid of their gas appliances and improve their energy efficiency.

But those efforts on their own will do little.

Saul Griffith, the Australian inventor and flag-bearer for the electrification push, has argued fixing inequalities must go hand-in-hand with the shift.

In his 2021 book, The Big Switch, Griffith spelt out the opportunities, but also the challenges, that lay ahead.

“It should be simple enough to understand the statement that you cannot half-solve climate change,” Dr Griffith wrote.

“You can’t have half the people subscribing to, and affording, the solutions, while leaving the less wealthy half behind.

“[M]any people likely feel that they can’t afford the technological wonders that are at least a good part of the answer to climate change: electric cars, rooftop solar systems, a household battery, heat pumps.

“If we choose to actually address climate change we are de facto choosing to help everyone afford those solutions.”

By energy reporter Daniel Mercer (Original ABC Article)