8 June 2016
Electricity prices are set to climb again from 1 July 2016 by between 11.2% and 15.8%, with irrigators on transitional tariffs facing increases of the order of 12.3%. The Queensland Competition Authority (QCA) has just delivered this determination which applies for small businesses, farmers and irrigators.
The Queensland Energy Minister told us last year that electricity cost pressures were now under control and we could expect any future price increases to be minimal. The QCA determination confirms that this is not the case.
Queensland irrigators and farmers cannot continue to sustain significant yearly electricity price increases. Tariffs for irrigators have risen by 120% since 1 July 2007 representing almost a decade of double-digit price increases.
The Queensland Farmers’ Federation (QFF) appreciates reforming electricity tariffs is a complex issue, but this is unacceptable. The intensive agricultural industries rely on electricity to pump water and to process and store product on farm. In addition, the increased costs of pumping water will also be passed onto the customers of irrigation schemes.
Further uncertainty remains as tariffs are restructured over at least the next five years to introduce higher charges for use of electricity at times of peak demand, such as during the day and during summer months. Demand based charges will directly impact farm business operations. Irrigators that have to water crops each day during the hot summer months and dairy farmers that have no option but to milk in the mid to late afternoon are likely to be the hardest hit.
Irrigators have little option now but to take action to address the significant risk of much higher electricity prices as they are forced to shift from transitional tariffs to new demand based tariffs. The cost of depending too heavily on grid supply will be the focus of their attention. The response will vary across the different industries. Cane farmers in the Bundaberg and Mackay areas are already reducing irrigation use hoping that there will be adequate rainfall to maintain crops. There are increasing examples in the cotton and fruit and vegetable industries of a shift from grid supply electricity to diesel and renewable energy power on farm.
The affordability of electricity is a major concern for our membership and it is having a real impact on the future of Queensland’s irrigation sector. QFF has continued to raise these concerns with governments. They must explain what they are trying to achieve with these reforms and take action to deal with the spiraling costs of electricity. If there are benefits to be gained in the longer term, action must be taken now to help the irrigation and wider business sector implement the changes.
All levels of government have recognized the potential for agriculture to become a pillar of the economy and provide sustainable jobs for people in regional and rural areas. The current approach is and will continue to impact on the productivity and profitability of the agricultural sector, undermining rural economies and job prospects well into the future. QFF will continue to work with governments to address these unsustainable electricity price increases and engage in reform that will bring prices back under control to ensure Queensland agriculture’s potential can be realised.
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