Power Cost Inequities
Monday, 16 June 2008
A blow-out in electricity cost differences between city and country areas threatens to stifle regional development across Australia, a new study shows.
The study shows that nationally, country network electricity prices are already up to 40 per cent higher than in metropolitan areas.
In Victoria, country network prices are 19 to 30 per cent higher than in Melbourne.
And that difference is expected to widen in some areas as subsidies, created to phase in lower network cost differentials following privatisation, taper off.
The national electricity equity (NEE) business study, by consultancy firm KPMG, was released today.
Commissioned by the City of Greater Bendigo and the Bendigo Manufacturing Group, it compared electricity bills from metropolitan and regional business locations in Victoria, NSW, Queensland and South Australia.
The study found that:
- A small manufacturing company in regional Victoria using 1.4 gigawatt hours a year, typically already paid about $10,000 or 19 per cent more for network charges alone than its city equivalent. The disparity was worse in NSW, with a $16,000 or 28 per cent difference while Queensland showed a $22,000 or 43 per cent difference;
- For a larger manufacturer typically using 9 gigawatt hours, network charges were more than double in rural NSW than in Sydney;
- In Victoria a Transmission Equalisation Adjustment, set to end by 2020 will stretch the city-country network cost divide by up to a further 9 per cent;
- Cost differences between city and country areas in Queensland could increase if cross-subsidies are removed.
“What we’ve found is a clear difference between the cost of running a business in rural Australia versus the same business type in cities, based on power prices, ” Mayor Cr David Jones said.
“If these differences are not addressed we could find business drifting to lower cost locations. And that’s a worry not just for regional areas but for governments that have invested heavily to attract or expand business in regional and rural areas.”
“There are considerable advantages in establishing or expanding business in regional Australia, however, this report highlights the inequities in network electricity costs as being a problem and we need to find a way to address them.”
The report makes a number of recommendations. One of these is the establishment of a Regional Network Fund (RNF) comprising two components:
- One-off contributions to network expenditure that improves regional customer outcomes; and
- Tariff support payments to offset the differential in rural / regional and metropolitan network supply costs.
“A ‘Regional Network Fund’ type approach, we believe does present a realistic option for rural and regional areas,” Brian Gould – Manager Business Development, City of Greater Bendigo said. There are other options which may also present economic, social and environmental benefits. These benefits could be realised by substituting the use of other forms of energy and developing significant embedded generation at strategic locations.”
Back to the Latest News