Australian home-owners will be met with a nasty surprise when their power bills are inflated by electricity network expansions worth just under $2 billion that were discontinued.
As a result of this, the state government owned energy company Energex have saved in excess of $1.8 billion in the past half-decade in project costs. Experts are stating that utility customers will end up picking up the bill, which is made possible by national guidelines which allow power companies to keep unspent revenue.
The Australian Energy Regulator received a bid from Energex which showed that only $4.42 billion was spent from the $6.24 billion for the 2010 – 2015 period.
Households will ultimately have the surplus of the unspent portion passed along as savings in future years.
However, these same households paid for the discontinued power network upgrades during a period where there was an increasing percentage of customers unable to pay their energy bills, resulting in power disconnections.
Declining energy demand in Australia
The Australian Energy Regulator fixed power companies’ revenues in 2010, but declining demand on the energy grid and a promise by the Queensland government to end “gold-plating” by energy retailers to drive up price, has resulted in the discontinuation of a number of network expansion projects.
Energex paid the Queensland government over 80% of its profits in 2013 – 2014 from a total of $500 million. But high ranking industry expert, John Bradley, has said that these guidelines were put in place to stop government incentives from being employed in unnecessary projects in Brisbane and throughout greater Queensland.
Increases in valuation of network resources
Economist, Bruce Mountain, has highlighted the large increases in valuation of network resources, like poles and wires, since 2002. With the decreasing need for these assets, these unnecessary purchases will continue to affect household energy bills in the future. Mr Mountain estimated the cost of the network per household has increased from roughly $3400 in 2002 to $9400 last year.
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The increase in the cost of the network per household was a result of the introduction of policies encouraging state government legislators to increase spending in energy assets.
Mark McArdle, Queensland minister for energy and water supply, said that the Australian Energy Regulator is the appropriate body to handle the asset base.
The electric power distribution company, Energex, has said that it has recommended below-inflation price increases for the next half-decade.