Energy groups have backed major changes to the Queensland electricity sector, which could potentially save billions of dollars in network costs and revenues.
The State Government’s proposal, subject to consultation with employees, is to bring Ergon and Energex under a single company with the aim of reducing duplication and improving the efficiency of network businesses.
If accepted, the merger of the two power retailers could lead to savings of more than $580 million across seven years, according to Energex.
Under the plan, the retailers will remain separate entities but will operate under one holding company before eventually having one board and a single management structure.
The Energy Users Association of Australia (EUAA) has welcomed the announcement, saying the proposed reforms to cut network costs by stamping out duplication in the Queensland electricity network sector has long been recommended by users.
While supportive of the reforms’ potential to curb the rise in electricity bills, EUAA chief executive Phil Barresi has urged savings be passed onto users as soon as possible.
“By the government’s own admission, issues identified in power sector reviews have taken a long time to surface. Energy customers should not be made to wait indefinitely for the savings to flow down to them,” Mr Barresi said.
“Many of the benefits from the proposed reforms will not come into effect until the next round of network determinations not due around 2016. There is urgent need to act in advance of these determinations, there is no more time to waste in delivering savings from the proposed reforms to customers.”
The Energy Networks Association has also welcomed the proposed package of measures to lower cost pressures for electricity consumers, with chief executive officer John Bradley saying the Government’s response to the Interdepartmental Committee on Electricity Sector Reform could yield real benefits to customers.
“The energy network sector welcomes key elements such as the move away from prescriptive reliability standards, which will allow networks to better tailor their investments to provide value to customers,” Mr Bradley said.
“The government has made the right call to pursue the deregulation of retail pricing in a careful manner in July 2015, which will promote more innovative service offerings for customers supported by network innovation.”
The ENA has said it looks forward to contributing to the development of a long-term strategy for network pricing reform, which provides benefits for customers who carefully manage their energy use and reduce their impact on the network at key times.
“Given network costs currently represent about 50 per cent of the energy bill, we need to consider options such as time-of-use pricing, capacity and peak demand pricing considered in the review,” Mr Bradley said.
Clean Energy Council (CEC) chief executive officer David Green said the move towards deregulation means electricity retailers would be able to compete to offer Queenslander’s the best possible deal on their power bills.
“This approach has proven effective in other states, but more work is required to ensure that the market will be fully competitive and deliver real choice for consumers,” Mr Green said.
“As we shift towards cleaner sources of electricity we also need to ensure appropriate incentives are in place so we can all use less electricity at peak times without affecting the services we need, value and enjoy.”
Acknowledging there is no “one-size-fits-all” solution for dealing with the cost of power, Mr Green said rising power prices are a complex problem for governments across the country.
“The single biggest cost has been the multi-billion dollar investment in upgrading the poles and wires of our ageing electricity network, which everyone pays for through their bills,” Mr Green said.
“The proposed merger between Energex and Ergon will create hundreds of millions of dollars in savings, which is good news for the electricity bills of Queenslanders.”
While Queensland Energy Minister Mark McArdle cannot guarantee the government’s proposed power sector reforms will mean lower electricity prices, and that there is no quick solution to lowering costs for customers, he did acknowledge tackling network costs is a critical issue that is within the government’s control.
“Doing this will help the government tackle soaring electricity costs by delivering significant savings that can be passed on to customers,” Mr McArdle said.
“Electricity sector reform is not something that can be delivered at the flick of a switch. The establishment of a holding company for Ergon and Energex, plus other efficiency measures identified, should start to make a difference.”
Unions however, have been vocal in their opposition to the plan, warning it could result in substantial job losses, as well as unreliable supply and higher power costs in regional Queensland.
Together the two retailers employ around 9000 people, with Ergon operating primarily in regional areas while Energex predominantly works in Queensland’s south-east corner.
Mr McArdle denied the reform is another step towards privatisation and said the state government would not sell assets without an electoral mandate.
“It is time for a new dawn, it is time for a new era and it’s time for new thinking on how we do things,” he said, as reported by ABC News.