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Aug072012

The Effect of the Carbon Price on Electricity Prices

In an otherwise good article, Peter Martin today wrote that

[the TD Securities Melbourne Institute price index] reports a jump in electricity prices of 14.9 per cent and a jump in household gas prices of 10.3 per cent, almost all of which would have been due to the carbon tax. [emphasis mine]

This is incorrect, and, unfortunately, he is not the first journalist to make this mistaken claim. Evidence to the contrary be found in, for example, the reports from the relevant authorities in states that regulate their electricity prices:

New South Wales

IPART’s “Final Report – Changes in regulated electricity retail prices from 1 July 2012

Figure 1-1 Drivers of increase in average regulated retail electricity prices on 1 July 2012, across NSW (nominal, %)

Table 1.2 Drivers of the increase in average regulated retail electricity prices on 1 July 2012, by Standard Retailer (nominal, %)

Over all NSW retailers, the carbon price is responsible for slightly less than half of the latest regulated price rise.

 

Queensland

QCA’s “Final Determination: Regulated Retail Electricity Prices 2012-13

Table 3.2: Carbon Cost allowances for 2012-13 Excluding Losses

Table 3.5: Total Energy Cost Allowances for 2012-13 by settlement class/tariffThe regulated allowance for carbon costs was around 2c/kWh, of a 6-8c/kWh rise; 25-36%.

 

Western Australia

IMO – “2012 Energy Price Limits Review” (specifically the SKM MMA Final Report).

The maximum short term energy market price (STEM) rose by $9/MWh from $314/MWh to $323/MWh. In this case, the increase was entirely due to the carbon price:

Table 5-3 Impact of factors on the change in the Maximum STEM Price

However, in the last five years, the maximum STEM price has risen from $159.84/MWh to its current level of $314/MWh, and the WA Department of Finance notes:

Although WA’s electricity prices have increased, the prices are still lower than the cost of supplying electricity. At the moment, the WA Government covers this difference – paying a subsidy of $367 million in the 2011–12 financial year.

As far as the trend of electricity prices rises go, the carbon price is a drop in the bucket.

57 year history of residential electricity prices in NSW and QLD

I haven’t put in the effort to research the effects of the carbon price on electricity prices in states with deregulated industries (e.g. Victoria), but I’m sure they’re similar.

That final image of historical prices in NSW and QLD, by the way, is from a very good fact sheet [web archive version] by the Energy Supply Association of Australia showing where our electricity prices sit in an international comparison. Fingers crossed for an update.

In the meantime, go forth and blame not the carbon price for the sins of the network.

« A Comment on the Political Discussion of Electricity Regulations | Main | Laggard to Leader: a Review »

References (7)

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Reader Comments (2)

Well done. It was TD Securities that told me almost all of the July rise would have been due to the carbon price, but that can't be right.

August 8, 2012 | Unregistered CommenterPeter Martin

We'll be rooned! Rooned I tells you!

August 8, 2012 | Unregistered CommenterHon. Tony Abbott MP

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