Electricity companies rip-off Australians

Oops...sorry for typos and other errors in the Oct 3 post. The wrong version got out. Greater effort will be applied to avoid repeats in the future. Having said this, perhaps this shortcoming will be forgiven by readers. In the interests of accuracy, the correct version  has been published below.

Rising electricity prices over recent years, especially, but not only in Victoria, have been a disgrace. There has been absolutely no justification for this rip-off of Australian citizens. Sadly, governments are allowing this to happen.

Electricity companies have been doing nicely. A number of foreign based companies operating behind the scenes have been doing better still. For example, SP Ausnet has sent its parent Singapore Power $90 million in assorted fees and related party payments this year alone. Spark Infrastructure has handed over its own parent company, Hong Kong Based CKI, $54.5 million in the dame period, in the form of management fees.

Consider this in the context where, according to the record 40 percent of the reason for electricity price rises has been investment in transmission and distribution. The problem here is that this investment is occurring in conditions where governments have guaranteed a certain return on investment. That is, the companies take their cut regardless of the quality of their performance, by imposing this on consumers. Thus rising charges are not connected with costs so much as they are with guaranteed return. Coalition and Labor governments have both been responsible for setting up this system.

This is the essence of revelations of a recent Age Business survey.

Incentive has been given to the electricity companies to take advantage of the system by using some clever accounting, imposing a series of questionable management fees (essentially charging themselves and passing this off as costs). It is especially telling when there is good evidence to suggest that the system remains short of being at the standard that it should be, and arguably, has been a contributing factor to fairly recent and devastating bushfires.

Disclosed documents reveal that Singapore Power has been given the right to 1 percent of its subsidiary’s earnings before interest, tax, depreciation and amortisation, plus a further fee of 1 percent of the total capital expenditure. Singapore Power is owned by the government of Singapore.

The most important impact has been that rising electricity prices have been a major contributor to the falling standard of living being experienced by too many Australians. According to a range of indicators, more people are finding that they are having great difficulty in paying their bills. If we pride ourselves on being a just society, surely we would insist that this is wrong and that something should be done about it.

The extent of rising electricity prices is one of those factors that are not good for Australia’s economic prospects. Electricity is a key business resource. Unreasonable price hikes impose a substantial added cost to running a business and in an already difficult environment to operate; this can be the last straw.  Depressed sales do not help either. When many Australians have to choose to do without, in order to pay an exorbitant electricity bill, it does not help at all.

It is high time for some action to put an end to this.

And this is a timely warning for the people of New South Wales, who fade the prospect of the privatisation of their electricity supply. Experience in other parts of the country has shown that this is not a good idea.

It would be great to share some thoughts and ideas on what can be done.