TEC is pushing for changes to the electricity rules to get rid of “perverse incentives” and to lower bills.

27 November 2013 — [UPDATED 28 November 2013] The Total Environment Centre has proposed reforming the National Electricity Rules to give network operators an income stream from investing in demand management and energy efficiency.

The reform, TEC says, would lead to lower bills and reduced carbon emissions.

“We want more incentives for electricity networks to invest in alternatives to building poles and wires, and particularly in peak power, which is only required for short periods of the year,” said TEC energy market advocate Mark Byrne.

“Under the present rules, networks make most of their money by building new lines and substations, from which they can earn a return for up to 40 years.”

The new system proposed would change the “perverse incentive” for network operators to continually invest in more capacity. TEC says networks could avoid building new infrastructure if they were rewarded for investing in means to shift demand away from peak periods, and encouraging energy efficiency and local generation.

“It’s as simple as paying industrial and commercial customers to turn off their freezers; or asking householders to delay their dishwashing and laundry for an hour or two during peaks; subsidising small battery units with rooftop solar systems, so they can produce power later in the day; even subsidising building energy efficiency retrofits. These are the sorts of innovative solutions this scheme will stimulate,” Mr Byrne said.

“Networks would also get to keep some of the financial value of their investments, with the rest being passed on to consumers in the form of lower bills. It’s a win-win-win for networks, consumers and the environment.

TEC in its submission to the Australian Energy Market Commission said that demand management had been neglected, and the need for more network demand management was crucial because:

  • Electricity prices have more than doubled between 2007 and 2013
  • Network charges now make up half of the average Australian electricity bill
  • Networks are investing more than $40 billion in electricity distribution and transmission networks in the current five-year regulatory period
  • An estimated one-third of the current investment in the networks is to cater for growth, and in particular, growth in peak demand
  • The Productivity Commission estimates that peak demand events occur for less than 40 hours a year (or less than one per cent of the time) yet account for approximately 25 per cent of the average residential bill
  • Current demand management is equal to less than two per cent of national electricity market-wide peak demand and only about one per cent of the generation capacity in the NEM
  • It is estimated that $2.2 billion a year of avoidable network costs are being passed on to consumers Australia-wide
  • The economic cost savings of peak demand reduction in the NEM are estimated to be between $4.3 billion to $11.8 billion over the next ten years – a saving of around $500 a customer each year in South Australia and Queensland, $350 in New South Wales and $120 in Victoria

The reform essentially “proposes that networks be able to keep, for five years, up to half of the non-network benefits of network [demand management] achieved above the targets set by the network itself”, the TEC submission stated.

“As we are coming to the end of a period of very high investment in the power grid, and peak and overall consumption are both flat or declining, this reform should be in place for the next round of network revenue setting, to ensure that the future for electricity prices is very different to the recent past,” Mr Byrne said.

TEC has now submitted a rule change request to the AEMC for a change to Clause 6.6.3 of the National Electricity Rules, Demand Management Incentive Scheme.

[UPDATE] Push for fuel mix and energy efficiency disclosure

TEC is also pushing for changes to how retailers disclose information on how much renewable energy is in the mix, and how much has been spent and achieved on energy efficiency.

An Essential Media poll released on Thursday [28 November 2013] found that 87 per cent of the 1000 Australians surveyed wanted their retailers to do more to help customers save energy, and to report on how much they spent and what savings were achieved each year.

“The results were spectacular,” said Mark Byrne.

“Nearly four out of five Australians also want their retailers to supply information once a year about the percentage of their supply that comes from difference fuel sources – that is, coal, gas and renewable energy.

“Large community groups with over a million members have contacted TEC to help their members switch to retailers that don’t invest their money in CSG in particular, or fossil fuels in general. This information is readily available in some other countries such as the UK, but in Australia it is almost impossible to get.”

TEC will be campaigning for changes to the National Energy Retail Rules to mandate fuel mix and energy efficiency information disclosure to consumers. The changes focus on providing information once a year with bills on:

  • How much energy retailers have spent in the past year on energy efficiency and what they have achieved
  • The percentage of electricity retailer’s investments that come from fossil fuel or renewable energy sources, including coal seam gas and native forest logging
  • The percentage of gas supplies coming from particular geographic sources and gas types (conventional/natural and unconventional/coal seam and shale)