The idea of government regulated utilities isn't for the government to subsidise electricity costs. The idea is to restrict the return investors in these assets can make. The returns allowed under the regulated models are pretty dismal too, which is one reason why you get limited expenditure on new energy infrastructure (because there is a dismal reward/incentive for utilities to do so).

In metro WA, electricity bills will mostly reflect the price of natural gas (majority of SWIS grid is supplied by natural gas generation). The price of natural gas has risen substantially in the last 10 years, from around $3 per GJ to approx $10-12 per GJ now. Private utilities can't absorb price increases like that and remain in business. If there is no business then there is no electricity (which you would probably complain about more than the current price rises).

If you wan't government ownership of utilities and zero price increase in energy then you essentially pay for the same costs through increased taxes (the money has to come from somewhere). Government run businesses have also tended to be run less efficiently than private sector, so that cost will be more.

As a caveat, I work on the commercial side in the energy sector.

How much do you pay per kilowatt hour over there Mark? It's about 22 cents in Sydney and a service charge of around 50 cents a day. In regional and rural NSW the prices are higher.


I agree with what you say Mark. If it's an essential service then why does the government need to generate a profit from it? One reason I can think of is that one day the government plans to sell it off.

I once saw a documentary about electricity generation and retailing in Australia. Originally private companies provided electricity. When more people were using electricity it became an essential service. The private companies were not seen to have the capital to continue to supply what had become to be seen as an essential service.

So government stepped in. Where did government capital come from? From the tax payer. So in effect the tax payer payed for the electrical supply and now the tax payer is increasingly being expected to pay for profits to either privatised or corporatised government service providers. So one way or another we have to pay for it. Fair enough in a way. However it's unfair to profiteer from what is an essential service.

I think the only way to escape is to have your own electricity supply. Get yourself off the grid. It's impossible for me to do this now because I have a unit. Later on when I'll move back to the farm I'll aim to do this.

Mark _australia said...

They reckon it needs to go up again to reflect the cost of supply. Hang on, wasn't that what they did 2yrs ago and now the number of people needing time to pay on the bill has risen 1000% or something? My bill has doubled in about 4 yrs.

2 years ago, ever heard of CPI?

I believe it mostly comes down the the way money is spent on new infrastructure ie. nothing for 20-30 years then "oh **** the electricity network is f***ed we need to spend big dollars to bring it back up to scratch"(who knows this may be the cheapest way of maintaining a power system). And residential power prices reflect this with prices remaining stable for years before substantial increases.

Australia having a low population with a large country, power distribution is very expensive with power users in city's effectively paying more than their fair share to subsidize the costs for rural power users.

Mark _australia said...
I thought the idea of a public utility was that as it supplies essentials it is subsidised by the Govt (ie: taxes) and not to make a profit?

I also thought when they split Western Power into 3 entities (supply/generation, billing and some other crap) that is was going to be more efficient and cheaper? Blind freddy could see that would not be cheaper.

Hard to say it seems to me most large company's run inefficiently (public or private) possibly by separating them out it could reduce red tape etc.

Mark _australia said...

Much like selling off everything else the Govt seems to want to do [}:)][}:)]

Completely agree why sell something that is making money and reducing taxes, for a short term gain.



The reality is if power prices did increase by 4 times tomorrow we would all keep paying it because it would still be cheaper than a generator. I would be a lot more careful though and would bin the plasma tv and get an LED.

Remember the Fremantle Gas and Coke company?

I new a bloke back then who worked for the company, they were producing gas for Fremantle the expensive way- buying coal and extracting the gas and supplying Freo.

They were bought out by SEC/ Western Power or whoever it was at the time.

Then the operation was shut down so the locals in Freo had no choice but to buy SEC supplied natural gas- and it certainly wasnt cheaper!

Stephen

Mark _australia said...

They reckon it needs to go up again to reflect the cost of supply. Hang on, wasn't that what they did 2yrs ago and now the number of people needing time to pay on the bill has risen 1000% or something? My bill has doubled in about 4 yrs.

I thought the idea of a public utility was that as it supplies essentials it is subsidised by the Govt (ie: taxes) and not to make a profit?

I also thought when they split Western Power into 3 entities (supply/generation, billing and some other crap) that is was going to be more efficient and cheaper? Blind freddy could see that would not be cheaper.

Much like selling off everything else the Govt seems to want to do [}:)][}:)]

7,444 posts on Seabreeze and you complain about electricity prices ?

I do agree with what you say though.

Whilst I believe that governments should govern and not run private enterprises, I also say the government should provide a safety net of essential services, such that they are available for all. I would include water and electricity in my list of essential services.

I find it hard to believe that lots of different providers trying to make a return to shareholders can provide electricity cheaper than a single body with a monopoly market whose only return it to its customers. Just doesn't seem logical.

Wait til 'they' bring in peak power billing!

I remember staying with people in Denver, Colorado in early 80's where electricity was/is supplied by nuclear power & they had peak billing - so whatever your highest usage in ANY 15 min period IN THE MONTH was, then your whole bill was calculated at that rate

At the time our 3 monthly bill was $100-125, their single monthly was over $900 equivalent.

You use - you pay.

And of course, over the decades, our various state & fed gov'ts have always maintained OUR assets in peak condition so they wouldn't have to sell them off

Mark _australia said...

Dude, that reeks of Govt spin-speak.

I did say i worked in the energy sector!

Seems to be consensus that governement should provide essential goods and services. Yet there is little complaint about essentials like food and housing being supplied via the market. I would argue that food is more 'essential' than electricity. Companies make unrestricted profits from the retail of these products. Maybe it is because these market are more competitive?

History would also show that government run enterprises are less efficient than a market based system. Failure of communism would be circumstancial proof of this. Humans seem to need to be incentivised to achieve maximum efficiency. If a market based system is more efficient, then in the long run it should be more benficial for the community as a whole (tax structure should take care of this).

The WA electricity industry was split into three different enterprises in order to achieve a similar industry structure to the Eastern States NEM, in order to foster competition amongst electricity generators (and eventually retailers). Arguably it has not had the best result. But it potentially provides for greater competition in the future, and a more efficient market.

I don't see how if a war, etc causes private companies to pack up and leave the utilities industry that this would be a bad result. Most foreign companies are more anxious about expropriation of assets than the other way around. They are taking all the monetary risk for construction of infrastructure, etc and would receive zero reward if assets were expropriated by government.

People complain about selling natural gas cheap to China, yet the Western Australia natural gas resources industry wouldn't exist as we know it without the demand supplied by foreign markets (highly captilized business requires economies of scale).

Price of thermal coal has also risen from something like $24 a tonne to around $130 a tonne over the last ten years (500% price rise). I think the main problem regarding electicty prices is increase in price of primary energy (Coal, Oil and Gas) as opposed to the structure of secondary energy market.

Anyways, didn't mean this to sound like marketing for the energy industry (although it probably does). And also didn't mean to make such a long reply.. had a few drinks, sorry...

adolf said...

Does anyone really think that banging on and complaining about the cost of living on a water sport forum will make any difference?

If we can convince Mark to get one of his high powered firearms and pay a visit to 1 of the utilities... and it gets on TV... well yes.

So Mark wot you say m8... got the cojones?

You can leave the Winchester, take a semi or full.

I can see the headline now... "High Power bills makes man go berserk with high powered firearms"

... ends it with a finger through his face.

adolf said...

Does anyone really think that banging on and complaining about the cost of living on a water sport forum will make any difference?

I didn't think the objective was to make a difference.. I wouldn't have thought any of the posts on the majority of forums set out to change the world.. The purpose was for conversation and exchange of point of views..

The vast majority of our electricity comes from the burning of coal,which i don't think has risen that much.

Therefor the cost of producing this electricity should not be going through the roof.

According to Webster's dictionary,one of the three definitions of tyranny......a rigorous condition imposed by some outside agency or force.

So unless you want to get your electricity off the grid,you are stuck with the condition/price they charge.