House debates

Monday, 8 February 2016

Questions without Notice

Petrie Electorate: Energy

3:07 pm

Photo of Josh FrydenbergJosh Frydenberg (Kooyong, Liberal Party, Minister for Resources, Energy and Northern Australia) Share this | Hansard source

I thank the member for Petrie for his question and acknowledge his hard work in this place for his constituents. He, like me, understands that this government has done everything possible to put downward pressure on electricity prices, unlike those opposite, who saw electricity prices increase by 80 per cent over five years. The way we brought electricity prices down in the past was through the good work of the member for Flinders, who abolished the carbon tax. As a result, we saw that energy prices fell by the greatest amount on record.

But electricity prices are a complex equation, with a number of factors influencing them. That is why this government is taking three particular steps to put downward pressure on electricity prices. Firstly, we are trying to empower customers. Secondly, we are putting in place the appropriate regulation for networks. Thirdly, we are trying to boost efficiency and productivity in electricity markets.

The COAG Energy Council, which has representatives from all states and territories, has committed to giving customers greater choice over their particular energy plan by aligning their energy use and consumption patterns with their particular plan of choice. The Australian Energy Market Commission says that this could reduce household electricity bills by more than $100 a year. COAG has also introduced new powers for the Australian Energy Regulator so that it can properly scrutinise network spending patterns so that customers do not pay any more than necessary. This is important because network spending comprises nearly 50 per cent of household electricity bills. Again, this measure could save around $100 a year for households. In December last year I launched the National Energy Productivity Plan, which seeks to improve energy productivity and efficiency by 40 per cent between now and 2030. We are working on improved standards for vehicles, buildings and appliances to boost productivity and efficiency, and that is absolutely critical.

The electricity markets in this country are in transition. We are seeing a greater use of renewables, we are seeing a greater focus on customer choice and we are seeing more appropriate, targeted regulation. For the member for Petrie, this is good news for his constituents. Households in Margate, Griffin and Bracken Ridge and companies that are major local employers in these areas, like Polyworld in Clontarf and Premier Pet in Narangba, are all benefiting from the low electricity prices that this government is driving by good policy.

Comments

Tibor Majlath
Posted on 10 Feb 2016 7:49 am (Report this comment)

MR. FRYDENBERG:

I thank the member for Petrie for his question and acknowledge his hard work in this place for his constituents. He, like me, understands that this government has done everything possible to put downward pressure on electricity prices, unlike those opposite, who saw electricity prices increase by 80 per cent over five years.

REPLY:

From 2008 to 2012 UNDER LABOR; Electricity went from $0.145/KWH to $0.248/KWH, or +71%; Network charge went from $0.47 to $0.88 per day or +87%

From 2012/13 to 2015 UNDER THE LNP; Electricity went from $0.248/KWH to $0.270/KWH, or +10%; Network charge went from $0.88 to $1.23 per day or +40%

It wasn't the carbon tax so much as it is clearly the increases in Network costs which have driven up household electricity bills. The carbon tax applied to the cost of electricity in $/KWH and not to Network Charges. It was in force for a short time.

MR. FRYDENBERG:

The way we brought electricity prices down in the past was through the good work of the member for Flinders, who abolished the carbon tax. As a result, we saw that energy prices fell by the greatest amount on record.

REPLY:

Yes and no.

From 2001-Jun 2012 BEFORE THE CARBON TAX; Electricity went from $0.121/KWH to $0.225/KWH, or +87%; Network charge went from $0.38 to $0.87 per day or +129%; Massive rise in costs even without a carbon tax.

From JUN 2012-JUL 2012, UNDER THE CARBON TAX; Electricity price went from $0.225/KWH in one quarter to $0.2476/KWH or +10%; Network charge increased by 1.1% from $0.88 to $0.89 over this period.

FROM JUN 2014-JUL 2014, WITH THE REPEAL OF THE CARBON TAX; Electricity went from $0.2856/KWH to $0.2735/KWH or -4.24%; Network charge unchanged at $1.05 per day

Didn't really notice the greatest fall in price. If as the LNP says prices for electricity fell by up to 12.4%, most of my savings must have been eaten up by continued price rises in electricity. There was no saving from Network charges as only the electricity cost in $/KWH attracted the GST.

MR. FRYDENBERG:

The COAG Energy Council, which has representatives from all states and territories, has committed to giving customers greater choice over their particular energy plan by aligning their energy use and consumption patterns with their particular plan of choice. The Australian Energy Market Commission says that this could reduce household electricity bills by more than $100 a year.

COAG has also introduced new powers for the Australian Energy Regulator so that it can properly scrutinise network spending patterns so that customers do not pay any more than necessary. This is important because network spending comprises nearly 50 per cent of household electricity bills. Again, this measure could save around $100 a year for households.

REPLY:

The saving of $2/week which we "could" save because of more choice appears more like the "illusion of choice" it is.

On average my electricity bill is made up as 10% GST: 70% electricity: 20% Network charges. The ratios were constant for a long time, however the Network Charge has been increasing from 20% (2011) to 33% (2015). As an example of the cost of the carbon tax on household electricity bills, consider a $2000 houshold electricity bill, with different Network Charges

With 10% GST; 20% Network Charges; 70% electricity and assume the carbon tax was a MAXIMUM of 12.4% (LNP's own figure)

The LNP's GST = $2000/11 = $181.82
Cost of electricity (usage+CT) = $(2000 - 181.82) x 7 / 9 = $1414.13
Network Charges = $(2000 - 181.82) x 2 / 9 = $404.04
Electricity usage = $1414.14 / 1.124 = $1258.13
Labor's Carbon tax = $(1414.14 - 1258.13) = $156.01

The components of the $2000 bill are

LNP's GST = $181.82 or 9.091% of $2000
Labor's carbon tax of 12.4% on electricity used = $156.01 or 7.8% of $2000
Electricity used = $1258.13 or 62.9% of $2000
Network Charges = $404.04 or 20.2% of $2000

With 10% GST; 50% Network Charges; 40% electricity and again assuming the carbon tax was a MAXIMUM of 12.4%

The LNP's GST = $2000/11 = $181.82
Cost of electricity (usage+CT) = $(2000 - 181.82) x 4 / 9 = $808.08
Network Charges = $(2000 - 181.82) x 5 / 9 = $1010.10
Electricity usage = $808.08 / 1.124 = $718.93
Labor's Carbon tax = $(808.08 - 718.93) = $89.15

The components of the $2000 bill are

LNP's GST = $181.82 or 9.091% of $2000
Labor's carbon tax of 12.4% on electricity used = $89.15 or 4.46% of $2000
Electricity used = $718.93 or 35.95% of $2000
Network Charges = $1010.10 or 50.51% of $2000

The carbon tax wasn't the villain it was made out to be. Don't get me wrong tax is bad, even if it is the LNP's GST.

Instead of fiddling around the edges, why not abolish the GST on essential services such as electricity, gas? The GST is even more insidious in that it applies to the whole bill!

That would really help struggling households. It would be much fairer than it is now.

Tibor Majlath
Posted on 10 Feb 2016 11:50 am (Report this comment)

Correction:

Didn't really notice the greatest fall in price. If as the LNP says prices for electricity fell by up to 12.4%, most of my savings must have been eaten up by continued price rises in electricity. There was no saving from Network charges as only the electricity cost in $/KWH attracted the GST.

Should read as follows :

Didn't really notice the greatest fall in price. If as the LNP says prices for electricity fell by up to 12.4%, most of my savings must have been eaten up by continued price rises in electricity. There was no saving from Network charges as only the electricity cost in $/KWH attracted the CARBON TAX.