Momentum builds for network tariff reform

Electricity customers could be better off if the building momentum for network tariff reform leads to fundamental changes in the way electricity is charged for and used, according to the Energy Networks Association.

The Association’s chief executive officer John Bradley said while network cost pressures on electricity prices are declining, tariffs for small energy users remain unsustainable and unfair.

Commenting on the Grattan Institute’s report, Fair pricing for power, released on July 7, Mr Bradley welcomed the contribution of another voice supporting network tariff reform.

“The Grattan Institute correctly identifies the barriers to reform as access to smart meters, retail price regulation and the need to support vulnerable customers”, he said.

“That is why the ENA has encouraged the COAG Energy Council to develop a national agreement on the introduction of flexible pricing and smart meters as part of an integrated package.

“ENA’s Road Map to Fairer Prices released in April is an integrated package that would remove the barriers to networks rolling out advanced meters, complete overdue retail price deregulation, inform consumers about better price options and improve customer hardship programs.”

Mr Bradley said it is important to avoid prescriptive or standardised solutions.

“Both tariff structures mentioned in the Grattan report (a capacity tariff or critical peak price) are options that may improve fairness and help avoid future network expenditure but they should not be the only options available,” he said.

“Networks and their customers are very different across Australia and it’s important that the regulatory framework permits flexibility in tariff design by networks engaging with their customers.

“In this way, networks and their customers can achieve tariffs that provide the right incentives while balancing a range of factors such as fairness, efficiency, simplicity and mitigating volatility or bill shock.”

In addition, Mr Bradley acknowledged introducing and trialling new tariff structures to benefit customers, network businesses are already seeking to reduce costs. In particular, he noted demand had been falling and distribution networks had responded, reducing capital expenditure by approximately $3 billion in total for the three years from 2009/10 to 2011/12.

“Network companies are continuing to hunt cost savings, with New South Wales distribution companies projecting savings of $4.3 billion over the five years from 2011, resulting in falls in network charges for consumers,” the ENA said in a statement.

“Recent decisions of NSW and Queensland governments to remove prescriptive reliability planning standards are also expected to save more than
$2 billion in networks capital expenditure in the next five years.”