Canberra Times Date May 7, 2013
High voltage electricity transmission lines. Photo: Craig Abraham
New South Wales households face higher electricity prices from the middle of this year because the state’s pricing regulator decided to allow higher profit margins, a state government MP told a public inquiry earlier today.
Electricity prices are set to rise an average of 3 per cent from July 1, if preliminary recommendations by NSW’s Independent Pricing and Regulatory Tribunal are agreed to.
A key part of the proposal involves allowing power retailers a higher profit margin with the aim of encouraging more competition.
“So-called competitive marketing activity is pushing electricity prices up, not down,” NSW MP Mr Jonathan O’Dea told a forum to consider the IPART’s power price recommendations earlier today.
“Those who stick with current [regulated pricing] contracts subsidise switchers.”
Mr O’Dea, who chairs the Public Accounts Committee at NSW Parliament, described it as ‘manufactured’ market competition which encourages “undue and costly churning, which also leads ultimately to higher prices”.
Victoria has one of the most competitive electricity markets in the world, thanks to it also having among the highest profit margins for retailers. Yet its power prices are little changed from regulated prices in NSW.
In making its decision, IPART took the decline in wholesale power prices and effectively re-allocated it to give electricity retailers higher profit margins.
“But for the [higher] retail component, prices would actually fall this year,” Mr O’Dea said.
“The main purpose is to attract competition … I don’t think you got the balance right.”