Flexible power pricing on the cards

Report urges suppliers to make peak-demand power more expensive. Photo: Louise KennerleyThe Abbott government has floated changing how homes and businesses are charged for electricity  to make power bills better reflect how energy is used.

In a draft blueprint for Australian energy policy, released by Energy Minister Ian Macfarlane on Tuesday, the government flagged support for reform of electricity tariffs in the wake of soaring power prices, saying it would work with state governments to drive changes.

Under the current system, households usually pay network prices based on set fees and the amount of power used, regardless of the time of day. The changes would see higher energy costs imposed on households that have greater demand on the network during peak times.

“Such pricing can lower electricity use during times of peak demand by imposing higher prices when electricity is most costly to deliver,” the report said. “Spreading use more evenly in this way lowers the cost of supply.”

The government’s energy green paper also touched on the additional cost households that do not have airconditioners pay for the extra power infrastructure needed to support those who do. The  benefit for homes with airconditioners is estimated to be $350 a year.

Tony Wood, energy director of the Grattan Institute, said tariff reform would ease network congestion at peak times and give consumers more clarity about electricity pricing, which has increased by about 50 per cent nationally in the past four years.

“If we had prices that more accurately reflected the cost we impose on the system, we could find ways of reducing our electricity consumption at certain times of the day,” he said. “It would make tariffs fairer and cheaper if we got it right.”

Mr Wood said the most aggressive changes could allow for critical peak pricing, giving some consumers offers of higher rates during busy periods in return for generous discounts at other times. He compared the pricing model to that of other businesses, such as airlines, that charge premiums at different times of the year.

“Pricing things based upon when we use [something] is not foreign,” he said, “we’ve just never done it for electricity and gas before”.

The Australian Energy Market Commission estimates the majority of consumers would have lower charges under a pricing model that is more reflective of the cost of delivering electricity at different demand times.

But Gavin Dufty, St Vincent de Paul’s manager of policy and research, said he was concerned some consumers, such as low income families, could be worse off under any changes.

“If you change the basic way that households charge for energy, which is essential, state and the federal governments needs to ensure that concessions and supports that are out there realign to compliment the price changes,” he said.

The next step in the government energy blueprint – a white paper – is expected to be released later this year.

This story Administrator ready to work first appeared on Nanjing Night Net.