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Feb 24, 2013

Electricity prices; Queensland LNP learns the art of spin

Curiously in the wake of a recommendation by the Queensland Competition Authority for a 21% hike in electricity prices, the Premier is claiming that the government has delivered on a promise to lower the cost of living in the state.  Such a promise was always a rash one, given the extent to which factors influencing that cost are out of state government hands.
The determination of the federal government to increase energy costs with its carbon tax, and the growing costs of regulation across the economy is always going to be born by the consumer.  The previous government amalgamated many of the local authorities in the name of efficiency, which has caused massive hikes in rate bills owing to bigger councils getting bigger ideas for bigger projects along with bigger edifices in their own images.
The increase this year is exacerbated by the government’s action last year in freezing the power price until now.  Mandated sourcing of expensive ‘alternative’ energy from wind farms and solar panel subsidies are not helping.  Now Newman is talking up the old subsidies chestnut: 
Although Mr Newman acknowledged his price freeze was a "component'' of what the QCA was putting forward, he described the increases as "unacceptable''.  "What I do say today, is that the government will act to make sure people aren't hit with a double-digit increase,'' said the Premier. 
"The government might have to subsidise it, in fact probably will have to subsidise it, but we're determined to find a way to ensure people don't get hit with a double-digit increase."  He said it was too early to talk about the cost of subsidising power bills, or who might benefit. 
"Another day, another time when we've done the work we'll be able to talk about our plan here,'' Mr Newman said.  "But...we are determined that people are not hit with an unacceptable double digit power increase." 
Under the QCA determination, households currently paying about $1426 a year for power, will see that rise to $1715 in the year from July.  Earlier it was revealed households could soon be paying almost $1 per day for electricity before flicking on a single switch.Phased in over three years, the cost of just having a power connection would rise from 28 cents to almost $1 per day by 2015/16. … 
Continuing investment in the power network, coupled with subsidies to solar households and lifting of the Government's price cap accounted for more than 70 per cent of the increase under the new pricing model. … 
Mr Nicholls conceded the Government would introduce whatever price rise the QCA recommended rather than override the independent authority. However, the Government will consider making State-owned power generators and distributors absorb some of the increase. …
Subsidies are not effective in that unless they are financed by substantial expenditure cuts elsewhere; they end up costing consumers somewhere along the line.  They have to be paid for unless the LNP continues to do the old Labor trick of borrowing and living on the never never.  Even this, raises borrowing costs and we all end up worse off.
It is doubtful how much of the rise can be absorbed by power generators given the need for expanded infrastructure.  Companies have been accused of ‘gold plating’ the grid, meaning that they spend a great deal more than they could get away with in order to ensure a reliable supply 24/7.  Were they to desist from doing this there would be a massive scream at the first hints of brownouts or blackouts. 
It is not that many years ago that generators were accused of irresponsibly failing to upgrade the grid, making it unreliable.

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