4 Apr 2018
The recently released Grattan Institute Report into the cost of the Australian electricity networks again highlighted a broken energy system.
The independent think-tank’s report provides some useful analysis of one of the systemic problems with why the cost of electricity in this state is too high – the Regulated Asset Base (RAB). The RAB is important because its size largely determines network costs for consumers, and its growth has far outstripped both potential use (capacity) and actual use.
Poor government decisions have driven excessive investment in the networks. In Queensland, the Grattan Institute estimates that over the past decade, network assets per customer grew from under $8,000 to almost $14,000 (in real terms) – the highest in the nation.
The Queensland networks’ excessive RABs continue to drive the networks’ prices and profits, and our networks are already extraordinarily profitable – 23, 15.5 and 10.5 times greater than Lend Lease, Telstra and BHP respectively. Further, the Queensland Audit Office report for 2016-17 highlights that their profitability increased by 45% to $1.9 billion even with an increase in expenses of 17% to $8.2 billion.
The Institute’s Report recommends the Queensland Government write down the RABs of the distribution networks by up to $7.19 billion, or about 25%. While encouraging, QFF contends that this figure is too low – numerous reviews have identified that reducing the RABs to efficient levels would require write-downs of at least 50%.
The weight of independent reports cast doubt over the credibility of Queensland’s current move towards ‘cost-reflective’ tariffs. With excessive network costs and extraordinary profits, these reports demonstrate that the cost on which the tariffs are based is significantly higher than an efficient delivery cost.
QFF welcomes the Grattan Institute’s findings and invites the government to consider the recommendations in its response to the recent QCA draft determination on retail prices, which has not provided any price relief to Queensland farmers.
The post Weight of evidence on sustainable electricity networks grows appeared first on Queensland Farmers' Federation.