Strategy to pull plug on rising power bills

POSTED September 7, 2012

AUSTRALIA'S electricity market is set for a radical overhaul designed to stop power bills rising, under a new strategy outlined by the Australian Energy Markets Commission.

The commission's report represents a sea change in thinking for the nation's power grid operators, which have resorted to building more poles and wires to cope with short bursts of peak energy demand.

The key recommendations include changing electricity tariffs to encourage less energy use at peak times, and letting businesses that are heavy power users directly enter the wholesale electricity market.

 ''We're trying to better align the value of electricity to households with the cost of providing it, so the consumer can better manage the expense,'' the chairman of the commission, John Pierce, told the Herald. ''And, longer term, investment in the infrastructure is reduced.'' Advertisement

With the push to offer households more choice in the way they use electricity, and the way it is priced, ''it is up to the consumer to decide what works for them'', he said.

 ''Even if you don't want it, to the extent large [electricity] users shift their demand, you will still be better off. Seventy to 75 per cent of electricity is not used by the householder, so the response of the commercial and industrial user [to the proposed changes] is good for everyone else.''

The report suggested that companies be paid to reduce their energy demand at peak times - tackling the ''demand'' side of the electricity market, rather than the supply aide. Reducing the overall thirst for peak power at peak times across the energy grid would have the long-term effect of driving down average power prices for everyone. The approach has been applied with some success in Western Australia and in the US.