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Issue #1794      September 13, 2017

Towards a renewable future

Running around like a headless chook, the Prime Minister has spent the last few weeks in damage control over his government’s failure to address a looming energy crisis. PM Malcolm Turnbull’s claims energy prices would come down, after his meeting with the power company barons last week were met with ridicule.

The government does not have a national energy plan. After all, the government is as good as owned by the mining corporations who are major donors to the Coalition parties.

It is still backing coal-fired powered stations as the way forward while the rest of the world is fast turning to renewables.

The National Party, at its federal conference over the past weekend (9/9/2017), voted to remove all subsidies for renewable energy providers over a five-year period, with a freeze at current levels in the coming year.

The National Party has actually embarked on a campaign against renewables, it is so beholden to the interests of the coal mining, gas and coal seam gas sectors.

While trying to give the impression that it is doing something, the government continually postpones any action. As part of its short term political opportunism to put off the inevitable move to renewables, the government commissioned a report from the Australian Energy Market Operator (AEMO) for a Clean Energy Target policy to begin in the 2020s!

Energy prices continue to rise. Electricity is an essential service. It is a basic right in a modern society. No one should be left to freeze in winter or suffer from the heat in summer because they cannot afford electricity.

Yet charities are assisting tens of thousands of pensioners, unemployed and low income families to meet their bills.

Hot air

Turnbull’s meeting with the power barons, telling them to do more to help people with their bills, insults the intelligence of the Australian people.

Small businesses are also affected by the hefty hikes in prices. They do not get the massive discounts of the big users.

Turnbull says he told the power barons to “ensure no family pays a cent more for electricity than it needs to.”

“Australia is blessed with abundant energy so it is simply not good enough that some families and businesses cannot always afford to turn on their lights, heating and equipment,” Turnbull said.

So why does a country so “blessed” have some of the highest electricity prices in the world?

Privatisation

The answer is simple: privatisation, deregulation and “competition”.

The production and distribution of electricity is in private hands, the market is all but deregulated, in particular in the wholesale sector, and despite all claims to the contrary competition has driven prices up.

Privatisation and “competition” mean there is no overall planning of supply. The opening and closing of power plants is in self-interested private hands whose sole motivation is the making and maximising of profits.

Privatisation creates a conflict of interest as higher consumption results in higher profits.

Private ownership has held back and is still holding back the transition from coal to renewables.

Privatisation and the breaking up of generation, distribution, metre reading, etc, has resulted in a multitude of layers of profit sucked up by multiple private providers.

A report by David Richardson for the Australia Institute on electricity costs (June 2017) estimates that privatisation, corporatisation and marketisation and charges based on a return on an inflated valuation of assets is costing an additional $404 to $502 per household per annum.

For example, prior to privatisation and the entry of multiple companies into the distribution, there was no need to market electricity. Households were automatically connected to the public company.

With privatisation sales staff were needed to sell electricity. This is reflected in the increase in sales workers (broadly defined) from 607 in November 1996 to 3,008 in 2016! That is an increase of almost five times.

There was an increase from 2,669 to 8,473 managers over the same period.

The report also notes there has been a fall in productivity – output per worker.

Richardson draws the conclusion from his research that “privatisation, commercialisation and marketisation cost at least a billion dollars in the new functions electricity organisations had to take on, as well as the duplication of management structures and corporate functions and having to operate in a market involving buying and selling skills.”

These additional costs are passed on to consumers. This is why power bills have skyrocketed.

Price rises will continue unless governments step in and set fixed rates for all consumers and nationalises the system, removing the layers of duplication and profit-gauging.

Pricing minefield

There are thousands of electricity plans to choose from. They are not designed to be understood. Quite the opposite.

For example, there are usage charges which vary according to how much you use in a specified time. These might be peak or off-peak usage charges. Then there are supply charges. Add to that mix the GST which may or may not be included at the point where the charges are broken down or just at the end of the bill.

There can be a Paper Bill Fee if you do not opt to receive your bill by email, a Payment Processing Fee, and a Pay On Time Discount. Contracts may include a percentage reduction in the official charges approved by the regulator.

It is a minefield and impossible to compare different companies. It is the most disadvantaged who tend to end up paying at a higher rate, unaware of the need to annually search for another contract or even unable to understand the process involved.

On the question of renewable energy, we need action now. The solution does not lie in extending the life of AGL’s 46-year-old Liddell coal-fired power station beyond its planned closure in 2022.

Nor should AGL or other private energy companies, in effect, be determining the direction of energy production and pricing in Australia.

The government must step in with a national plan for the transition to renewable energy which includes the provision of training and jobs for those currently working in the fossil fuel industries.

There is much the federal, state and local governments should do, such as capping and regulating energy prices,

Instead of providing the mining sector with billions of dollars in subsidies and the opening of new coal mines, the government should redirect that money to research and development of renewables and to subsidising domestic and business consumers who wish to install solar panels.

Next article – Editorial – Military-industrial complex demands infinite warfare

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