The Guardian December 4, 2002


South Australian households braced
for electricity price increases

by Bob Briton

South Australians should carry a bottle of body oil on them at all times 
because it seems that everyone wants to give us a massage. At the head of 
this queue of "therapists" are the various interests involved in the 
generation, distribution and retailing of electricity to the State.

Elle McPherson has been appearing on TV ads, strolling along the beach 
while explaining some of the changes set to overtake us when the State's 
electricity market becomes subject to "electricity retail competition" on 
January 1, 2003.

A glossy leaflet from the Essential Services Commission of SA (ECOSA)  
listing and responding to some frequently asked questions  reinforces the 
message that it's all under control.

These efforts are directed at concern that electricity prices to 
householders and other smaller consumers will rise significantly with this 
final step to fully deregulated and privatised electricity supply in SA.

A long-term "softening up" process appears to have been used by the 
promoters of deregulation and privatisation.

Initial reports that the price was set to rise by 32 per cent were followed 
up by news last month that the current monopoly retailer AGL would be 
seeking an increase of (only) 25 per cent.

This was topped by ECOSA chairman Lew Owens who ruled recently that the 
increase must be held to 23.7 per cent.

The cost to AGL of this decree was a drop in projected profits of $12 
million.

In fact, the whole issue of SA's electricity supply seems to be awash with 
relatively good news for consumers. Aside from the chance of a shortfall in 
supply when Victoria's Loy Yang power station is withdrawn for maintenance 
this summer, the system appears to be spoilt for sources of supply and 
competition.

The world's longest underground transmission line was opened in September, 
further linking energy rich Victoria, the Snowy Region and NSW with energy 
poor South Australia. The 177km Murraylink interconnector is to operate 
alongside the SNI (or "Riverlink") above ground interconnector between 
Buronga in NSW and Robertson in SA. The go ahead was given by the National 
Electricity Tribunal to the $110 million SNI project despite opposition 
from Murraylink's owners, TransEnergie.

Further good news on the competition front arrived last month when it was 
announced that Texas-based TXU and Origin Energy would join AGL as 
retailers to SA's 270,000 households.

For its part, current monopolist AGL has been telling the community all 
about the leanness of its operations and preparedness in having additional 
sources of supply (like the Hallett "peaking plant") for the high demand 
hotter months ahead.

So, with all that good news, why is there so much concern out there in the 
community?

The fact is that South Australians are already suffering from high energy 
charges. According the SA Council of Social Service and the Council on the 
Ageing, 30 per cent of respondents to a survey said that they are already 
struggling to pay their power bills. The current average bill of $950 per 
annum is set to rise by $225.15 next year.

Small businesses will suffer. Australian Retailers Association SA executive 
director Stirling Griff was reported in The Advertiser warning that jobs in 
the retail industry (the state's largest employer) would be lost. Business 
SA chief executive Peter Vaughan has also expressed his disappointment at 
the destructive potential of the price rises and the failure of the 
national electricity market to deliver reliable and affordable electricity.

Ken Lyons, chief executive of the SA Dairy Farmers Association has said 
that dairy farmers will suffer enormously from the proposed price hike. His 
members already pay between $2000 and $60,000 a year for electricity.

They rely on it for the cooling of milk and irrigation. The Australian 
Hotels Association has also gone on record as saying that the national 
electricity market has failed and that the rises will wipe out many smaller 
pubs.

There is also anger in the community about the way in which the price rises 
are to be dropped on the community. The SA Government will not be softening 
the blow by subsidising prices as happened in Victoria.

There won't be rebates to businesses or any expansion of the concessions to 
pensioners.

There appears to be nothing to prevent less profitable rural customers 
missing out on the minimal benefits of competition between retailers. This 
has already happened in Victoria in similar circumstances.

Finally there is anger that nobody can come up with a consistent and 
plausible explanation as to why the rises are necessary in the first place. 
Energy Minister Pat Conlon appears to be persuaded by the arguments of AGL. 
The energy corporation says that it locked in relatively high wholesale 
contract prices of electricity in order to have a guaranteed supply. It 
also had to install new software to accept data transfer from distributor, 
ETSA Utilities.

Aside from that, everyone should know that generating costs (and hence 
wholesale prices) are higher in SA because of our reliance on gas-fired 
generation.

Spoiling this part of the pitch was information from the Opposition energy 
spokesman Wayne Matthew that the spot price (or fluctuating wholesale 
market price) for electricity in SA was on a par with those in Victoria, 
NSW and Queensland.

"For the life of me, I can not see how price hikes can be justified", Mr 
Matthew told The Advertiser last month  ignoring for the moment the role 
the previous Liberal Government had in inflicting the whole privatised 
electricity disaster on the State.

South Australia is about to take another step down the road already trodden 
by many other dissatisfied communities that gave up control of their public 
electricity utility to transnational interests. If you were to believe what 
these corporations tell you, nobody is making excessive profits and yet 
prices have to keep going up in massive leaps.

Nobody has succeeded yet in pinning down these transnationals as they play 
their pea and walnut shell game with their disappearing profits. As has 
happened in many other countries, including the USA, all that this 
investment in infrastructure and "competition" has produced is higher 
prices and unreliable supplies.

All SA needs to complete the California-style makeover of our electricity 
supply is the entry of a parasitic layer of energy traders (like the failed 
Enron) into the scene. At least we don't have those bloodsuckers...yet!

Back to index page