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Nov 6, 2012

Queensland electricity charges; be grateful Newman doesn’t provide your baked beans

Governments should stay out of any activity that could be carried out by the free enterprise system, especially business ventures.  They simply have no talent for it, and little understanding of how it works.  The Newman government is a shining example of this with its review of electricity charges across the state.
In the name of reform, the government is about to divide the total cost of electricity infrastructure spending by the number of households in the state and charge that as a fixed cost with each bill.  This is a similar system to that used by many local authorities for water, whereby landholders are charged a water rate for any bock they own in the reticulation area even if it is not actually connected: 
After promising cost-of-living relief, the Newman Government will reform electricity tariffs to ensure prices fully reflect production costs.  In a radical departure from the current system, households face a massive spike in fixed electricity costs - before even turning on a switch. 
It comes in exchange for a lower variable cents-per-kilowatt rate on the common household tariff.  Under the current capped price, households pay 23 cents per kilowatt with fixed charges of about $95 annually. 
Modelling based on current power costs shows the c/kWh would fall to 20 cents but the fixed charge will increase to $287 annually. 
A family using 10,000 kWh would save about $100 a year. However, a small household using 2000 kWh would pay in excess of $130 more without using any extra electricity.The fixed component of future bills will represent the average price of distributing electricity to every household, the so-called "poles and wires' businesses which make up about half of total electricity costs. 
Bigger households, who are effectively subsidising other users under the current system, would get some relief from the reform.  However, smaller households with lower levels of consumption will feel the effect.
Under a free enterprise model, a business manufacturing or providing a product to market prices each unit of product to cover the cost of building the factory, acquiring the raw materials, manufacturing, and distributing it into the market, plus some profit.  Under this system you pay the infrastructure cost in proportion to the quantity of product purchased, - user pays.
Were Campbell Newman and his crowd to take over the baked bean market in the state, purchasers would pay a price for the production of each can which would be considerably lower than the present cost.  On the other hand each household in the state would receive a bill for their share of the ongoing cost of building and expanding the enterprise, even if they only eat spaghetti.
The idea that bigger users of electricity are effectively subsidizing smaller users is as silly as it would be to suggest that someone using ten cans of baked beans is subsidising those who only use two.  Where did they find someone like Energy Minister Mark McArdle who comes up with such imbecilic collectivist claptrap?
There was a joke around about a guy who stayed overnight at a government hotel.  On checking out in the morning he finds a surcharge of $500.00 on his bill for prostitution.  When he complains that he didn’t use any prostitute he is told, “Yes but she was available had you wished to.”  We should all be grateful Newman is not in the hotel business as well.

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