Move to emissions trading scheme could wipe $185 off annual power bills, but…

… regulators must play a role

As delegates converged on Brisbane for the annual regulators conference, Consumer Action Law Centre has urged national and state energy regulators to ensure any move to an emission trading scheme results in lower power bills for Australians. Consumer Action said a household’s annual energy bill could drop by around $185 if regulators remain vigilant and ensure energy retailers pass on savings to their customers.

The Federal Government expects a move from a fixed carbon price to an emissions trading scheme with a floating price will reduce the cost to polluters by over 75 per cent, from around $25 per tonne to $6 per tonne. For Australian households this could mean drop of two cents per kWh from what they would otherwise have been paying, an average annual saving of $185.

But Gerard Brody, CEO of Consumer Action, said the lack of competition in energy markets around Australia meant retailers can’t be relied on to pass on the savings. ‘In an effective, competitive market we could expect competition to put downward pressure on prices—but I’m not aware of a truly effective energy market anywhere in Australia.’

‘Victoria is widely considered to have the most competitive electricity marketplace, but it’s far from perfect. Recent research from Victoria’s energy regulator found that energy retailers’ gross margins have increased by between 20 and 60 per cent in just five years,[1] suggesting we should be sceptical about retailers’ willingness to pass savings onto their customers.

‘The ACCC was tasked with ensuring companies didn’t misrepresent prices when the carbon tax was introduced. Now the regulators’ role should be to ensure business savings made by moving to an ETS sooner than expected are passed on to households,’ said Mr Brody.

Mr Brody said he was pleased the Prime Minister had put energy prices in the spotlight and suggested that the ACCC / AER Regulatory Conference was the perfect forum for stakeholders to discuss how fair and effective markets and active regulators can work together to restrain energy prices across the country.

‘This conference comes at a very opportune time. The Government wants to lower energy prices and moving to an ETS means this is attainable. Those attending this week’s conference in Brisbane have an excellent opportunity to ensure consumers get the benefit.’

Notes

The 2013 ACCC/AER Regulatory Conference was held in Brisbane on 25 and 26 July.

This graph shows the estimated drop in a household’s annual electricity bill that resulting from a move to an emissions trading scheme. More details on the calculations used are available here.

ETS vs carbon tax