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Electricity Price Review: Householders must not subsidise

Press release, Molly Melhuish, 3 October 2019

Electricity Price Review: Householders must not subsidise expansion of bulk electricity supply.

I welcome Government’s recognition that electricity is an essential service, so prices must be fair.

Government appears to accept industry’s position: that the Low Fixed Charge regulations make large households in energy hardship subsidise rich householders who invested in energy efficiency and solar energy.

The “subsidy” ogre is wrongly invoked. Bulk electricity suppliers are desperate for a return to growth in electricity demand, which has flat-lined since 2007. High fixed charges would allow them to reduce per-kilowatt-hour charges, adding years to payback periods of the investments consumers made to reduce their power bills.

High fixed charges are anti-competitive against energy efficiency and solar. Householders would be subsidising the expansion of power stations and lines, at twice the cost of their energy efficiency investments.

Instead, regulation should give every household consumer access to a price option that rewards their efforts to save electricity and reduce their carbon emissions. Those who have already invested in energy efficiency or solar must not be punished with higher power bills.

I welcome Government’s provision for backstop regulation in case today’s industry self-regulation leads to pricing that overly protects industry asset values.

Suppliers of bulk electricity must change their business plans to cooperate with, instead of competing against, local energy options. Today their pricing is anti-competitive, and their recent proposals are profoundly more extreme.

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