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Friday, July 13, 2012

Why the Carbon Price Does Not Matter

Tony Abbott transfixed by small issues
Tony Abbott transfixed by small issues
Australian electricity pricing rules set by State Governments require their pricing regulators to provide a return of 10 per cent on investment in the electricity grid.

When that investment reaches an average of $30,000 per customer, the annual cost of electricity plus annual connection fees will be $3,000 per customer.

Western Australia State Government Minister for Energy Peter Collier said: "What the Economic Regulation Authority, the ERA report confirms is that, despite the necessary and significant increases in tariffs over the past four years, we are still a considerable way from West Australian consumers paying the true cost of electricity, which means the Colin Barnett Liberal-National Government continues to subsidise household bills to the tune of hundreds of millions of dollars each and every year."

The WA Government already has increased electricity prices by about 60 per cent since 2009 in its bid to reach cost reflectivity.

WA households are facing electricity price hikes of more than 19 per cent, plus inflation, if the State Government pursues cost reflectivity without accepting two key recommendations by the Economic Regulation Authority.

In its final report on the efficiency of the state's electricity retailer, Synergy, released yesterday, the ERA found power prices would need to immediately increase 12 per cent - or about $200 - to reach the State Government's goal of cost reflectivity and relieve the State Government of its $400 million annual burden.

Source: Courtney Trenwith Deputy Editor WAtoday 5 July 2012
Read more at WA Today,  Government won't support reform that would push down electricity prices

Trying to save money by reducing energy use in response to an increase in the price per kiloWatt-hour will make no difference to the average annual cost.

For instance, if average energy use is cut by 50 per cent, the price per unit will be doubled so that the average annual cost of $3,000 per customer is maintained.

See the related posts Tony Abbott Just Does Not Get It and The Great Carbon Tax Distraction