Plan for Reforming Electricity Distribution System

The Australian Prime Minister, Julia Gillard, outlined a plan to change the way the Australian electricity market runs, Sunday 2 December 2012. While the PM referred to a detailed plan, no such plan has been released, only a transcript of interview, on "Meet The Press". The Australian National University, ANU Energy Change Institute, which I am a member of, will look with interest at developments.

The PM announced that the plan would be put to the Council of Australian Governments meeting at the end of this week. However, the COAG Meeting to  25 July 2012 instructed the COAG inter-jurisdictional Taskforce to report by "late 2012" on additional action to deliver a regulatory framework that promotes a competitive retail electricity market. It would appear that the new plan will therefore not be able to take into account the taskforce's recommendations.

The PM referred to giving consumers more information about their own power usage. This appears to be a reference to the installation of smart meters which give consumers details of current energy consumption and current charging rates. In theory this allows the consumer to delay electricity use to an off-peak time. However, in my view this is not an effective way to reduce energy consumption or costs. Expecting consumers to manually control large energy using appliances is not an effective approach. In my view these devices should be required to have automated energy saving features built in. In particular all new domestic air conditioners should have a mandatory peak energy saving function built in.

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PM: This isn't about the ownership of electricity assets; it's about the way in which our power system works. I will have the Council of Australian Governments meeting at the end of this week, and I will be taking there a plan to make a difference; a plan to make sure that families pay $250 less per year for electricity than they would if we just let the current system run.

And it's about addressing the real drivers of high power prices – the overinvestment, the so-called gold-plating of the network, the fact that consumers don't get enough of a say, empowering the regulator at the centre of this with more resources, and making sure too that we reward big electricity users, big businesses, that moderate their consumption during peak time periods of pressure on the electricity network.

We can make a difference; the Productivity Commission said this all adds up to difference of around $250 a year for a family. I'm determined to make the difference ....

This is not about the ownership of electricity assets, it’s about the market design features that I’ve talked about, and giving consumers more of a go, more of a say, more information about their own power usage.  ...

PM: I think people can understand gold-plating really easily. What it means is there's an overinvestment in the poles and wires, and under the current market design – the rules for electricity – there's actually a perverse incentive for companies to keep investing, keep investing, keep investing – and passing all of those costs on to consumers. Indeed, there's been around about $11 billion of investment for the peak loads on four days a year.

Well we can do better than that. We can do better with a regulator that has more resources available. We can do better with consumers at the centre of the decision-making process. We can do better with consumers getting more information in their own homes about how to manage their electricity consumption. ...

PM: What we are talking about is a detailed plan to change many features of the way the electricity market runs, and it is not an appropriate comparison to saying this is about a website with more information.

This is about changing, going through from the top – at the moment, a perverse incentive to gold-plate, more investment in poles and wires – changing that so these things are set more independently.

Number two: putting consumers at the centre of the decision-making process through a consumer challenge panel, giving mums and dads in their own home more information about their electricity usage so they can make choices, knowing what it's going to cost them.

Number four: actually getting through to the regulator more resources to help them go about their job.

And finally, rewards to big businesses that use a lot of power to lighten the load on peak days. That's the plan that adds up to a $250 difference. That's the plan I'll be fighting for at the Council of Australian Governments meeting....

From: Transcript of Interview with Paul Bongiorno, Rafael Epstein and Patricia Karvelas, Meet The Press, Office of the Prime Minister of Australia, 2 December 2012.