Regulator could have halved 18% rise with more power

HOUSEHOLD electricity prices could be cut as much as 10 per cent if the state government gave the pricing regulator IPART a freer hand in setting prices.

The Independent Pricing and Regulatory Tribunal this week approved electricity price rises averaging 18 per cent, but with many households to face rises of up to 21 per cent, as a result of the carbon tax and higher spending on the power network.

But in its report, explaining the price rises, IPART says it could have halved the rise forced on households from July 1 if it was not hamstrung by regulations prescribing the way it calculates rises.

It now wants greater flexibility in the way it would review future price rise applications from power companies, which could drive prices significantly lower.

”If the NSW government decides to extend retail price regulation beyond 2013, we consider we should be given a suitable degree of discretion in making the determination to allow us to provide a balanced, flexible regulatory package that facilitates a stable and efficient electricity market,” an IPART spokesman said yesterday.

”For example, we would like discretion in setting the energy costs … Currently regulated customer bills are 7 to 9 per cent higher than they would be if [prices were] set in line with market-based prices.”

Surging power prices over the past two years have led many households to cut their power usage which has cut overall demand and pushed down electricity prices in the wholesale market. As a result, retailers have been able to to boost their profits from those households that are still on regulated electricity tariffs, which is around half of the total across the state.

In this week’s electricity pricing determination, IPART criticised the way the new industry regulator is not able to push back against the spending plans of the electricity distributors. This means they are encouraged to boost their spending on new equipment, which is pushing prices higher than they would be otherwise.

”This lack of discipline on expenditure is exacerbated by inadequate governance arrangements in NSW,” IPART warned, which has resulted in ”diminished emphasis on improving efficiency and productivity” at the government-owned electricity distributors Ausgrid, Endeavour Energy and Essential Energy.

The NSW government said it will consider the call made by IPART, although it has no power to reject the price rise, a spokesman for the Energy Minister, Chris Hartcher, said.

”IPART’s terms of reference for the determination were locked in by the former Labor government [and] were written in the context of the sale of the retailers and ensuring price certainty for bidders.

”The government is committed to placing downward pressure on electricity prices, while providing investment certainty and an appropriate regulatory framework.”

The higher electricity prices will attract new competitors to the market, so households could be better off shopping around, said Cameron O’Reilly, of the Energy Retailers Association.

”The federal government is providing compensation for part of the price rise, through tax cuts and some payments to households. But the household won’t necessarily tie the two together, and will have spent the extra money by the time their bill comes in.”

Mr O’Reilly said it may make sense for some households to shop around and compare offers that are available from newer competitors.

Consumers could access the IPART website, he said, which enables a comparison of market offers available.

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