Over the last few years, Ray Miller has invested a lot of money to make his home on the Gold Coast as efficient as he can. He has installed the most energy efficient appliances, 1.7kW of rooftop solar PV, and a 2kW inverter. He says the house has a 9-star energy rating and is a net positive energy house, which means it produces more than it consumes.
But now he must wonder why he and others like him bother. Two years ago, his service fee from the local network operator Energex was $105 a year, with the rest of the bill dependent on how much electricity he used. His annual service charge has since jumped to $428.81 – a fourfold increase in just two years.
Miller laments the impact on households like his that have chosen to install solar and become energy efficient. As RenewEconomy pointed out when the new charges were unveiled more than a month ago, it means that low energy consumers – including single occupancy homes or pensioners – are being charged at the massive rate of more than 42c/kWh.
But Miller says the rate is even worse for him. With a new metering charge applied to solar homes, his “fixed” and unavoidable network charges are $468 a year. That means an effective rate of 62/kWh for the amount of energy he uses from the grid.
It seems that the less people consume, the more they are charged. The more they consume, the less they are charged.
Welcome to the new reality of network charges. The same story is being repeated across Australia, as network operators, faced with falling demand, are imposing a massive tax on consumers to protect their revenue streams.
In Queensland it is effectively a government tax, because the network operators are government owned. Ditto in NSW, where the government is trying to lease the networks and wants to get the best price. But in Victoria and South Australia, where the networks are privately owned, the same thing is taking place.
And it’s not just householders that are copping the brunt of the increases. Business customers are the new target market for the rooftop solar industry, but the networks are fighting back by changing the tariff structure.
As RenewEconomy reported last week, in our story “Rooftop solar suffers another blow as networks switch tariffs”, business owners are facing massive increases in fixed costs through new tariff structures.
SA Power Networks slashed the electricity usage component of its network charges to just 3.3c/kWh, just one-fifth of its previous peak rate, and imposed hefty “demand charges”. But even these demand charges fall away the more the business consumes.
Now, the situation may get even worse. The Energy Networks Association is proposing new tariffs that would make it compulsory for home-owners and businesses to pay for the grid, even if they were not connected.
It also proposes penalties, or fees, for homes and businesses that choose to quit the grid. It suggests this could be equivalent to the “historic share of network capacity dedicated to that customer.”
It says the compulsory network connection fee would be specifically designed to “avoid the potentially inequitable outcomes” where some users sought to ‘exit’ the grid.
This is known as the “death spiral”, and has prompted warnings that networks may have to write down the value of their assets, particularly in light of the fact that much of the expenditure may have been unnecessary.
The networks, however, are resisting fiercely, and are looking to protect their revenues whichever way they can. Regulators have argued that these tariffs are “cost reflective”, but the solar industry says they are anything but, because they do not reflect peak network demand.
Meanwhile, users such as Miller are feeling penalised, while prolific power users – with air conditioners and massive daily consumption rates – who caused the network expenditure in the first place, are not penalised.
“If you plot the total cost of the energy per usage, the cost per kilowatt-hour increases for the efficient/frugal users (who can be those on pensions) have been disproportionate,” Miller says.
“The more you use the cheaper the rate. The users who are extremely inefficient ( and use more of the network capacity) have not been paying their fair share of the network upgrades. We continually get the ‘cost reflective’ argument, but only from a very narrow ‘energy industry’ perspective.”
Giles Parkinson is founder and editor of One Step Off The Grid, and also edits and founded Renew Economy and The Driven. He has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.
Subscribe via RSS
Forcing people to pay for the grid when not connected would not stand up legally. It would be a brave (and dead) Federal Government to mandate a tax like that.
They do it in some states with water services.
I know this is the case in Tasmania, where (until about 5-7 years ago) water/sewerage services were provided by the council. If you owned land you paid rates on that land, which included water/sewerage fees. After the new water company was established, it was able to continue charging to all rateable properties – I thought due to the historic relationship, but could be any number of reasons.
Water and sewer are health issues, and need to be controlled by the state.
Electricity is not!
It is time we started looking at gross feed in tariffs as a way of getting around the solar problem without being unfair to low power consumers or discouraging energy efficiency moves.
Under a gross feed in system solar owners are paid for all the power they produce and pay for all the power they consume. The last time i looked NSW was still using gross feed in tariffs.
Thanks Giles,
Easily my pet hate in the delivery of gas, electricity, phone charges etc. While recognising that the infrastructure to deliver those services is expensive and must be paid for, the actual service or good they are providing is what we are paying for. That infrastructure is a cost of doing business and should be incorporated into the rates of use.
If that was the case, the highest users would pay the highest costs. FAIR! Your article highlights what I have thought about for a long time, in particular the ‘perverse outcomes’ effect which this creates. (As an analyst, perverse outcomes is favourite area of interest)
Your article shows the perverse outcomes and the perverse thinking of the power, gas, telephone companies, which leads them to their outrageous submission of recent times that stated that solar rooftop and holiday home owners were sponging off the rest of the community.
This business model is about transferring all risk to the consumer. Whether you use their service or not, you still pay. What other businesses are allowed to get away with that?
And the most perverse outcome of all, at a time when reducing carbon output is a paramount social good, is that the system encourages you, and rewards you, for being profligate.
Great idea
Usually taxing people gives them incentive to spend less on the thing being taxed. Wouldn’t this make people want to use grid electricity less? As the utiity charges more and more it becomes more advantageous to go completely off grid, which then hurts the utility because they lose access to the power that these owners are producing. So the utility is taxing their way to oblivion.
Interesting!! It is like asking every person passing through Sydney CBD to pay for the cross-city tunnel whether they used it or not…
Shareholder value of these utilities has to be written off eventually–disruption, transformation whatever we call..it is happeing.
It appears networks are increasing fixed charges to catch solar households in their net, yet this approach is also penalising all energy efficient households and all small households. Networks are attempting to recover their costs for shareholders, at the expense of some of the most disadvantaged households in our community.
What I’d like to see more of on this website, are interviews with people acting as Regulators, to hear how they are implementing a fair and equitable electricity service. Democracy doesn’t work without open and honest decision making processes. It is a right of Australian’s to be able to make informed decisions about how the resources of their country are administered and to be able to hold to account those administering their public monies. Even if these public resources are transitioning into private hands, government is then meant to be doing the “steering” while the private sector are doing the “rowing”. Whether there is private or public ownership of electricity resources, this accountability process needs to be able to be publicly examined.
Networks are intelligent the way they amalgamate their interests in an organised and targeted way to pay dividends to their shareholders. I’d like to see this website begin a solar citizens membership, much like a motoring organisation like the NRMA and so on. This solar citizens membership needs to comprise all residents, both owners and renters of residential dwellings, and owners, renters and workers in industrial and commercial settings and others. The group needs to amalgamate their concerns and form strategies for the implementation of a renewable economy, including modifying rental laws for a basic provision of design and implementation of solar and renewable energy within all buildings and property settings.
As a renter I would love that. It is extremely hard to rent a house using solar. I limit my electricity use and it costs so much to do the right thing. I recently noticed the service charge has risen about 30 cents a day! That is ridiculas!
Why should people who want to go off grid be penalised. They are not using the system so should not have to pay.
That is like saying you have to pay for a weekly bus pass even though you walk instead or drive a car.
People are not cash cows
I nominate Giles Parkinson as caretaker for a Community Based Organisation, called solar citizens or some suitable yet to be determined name, with a grassroots decision making structure – a Membership electing a Board of Representatives, for the purpose of generating solar and RE policy and contributing towards political and regulatory processes on behalf of the Membership. A Community Based Organisation, with an inclusive Membership is necessary, to form a basis for legitimate and genuine representation. If this is not done, Australians are divided and conquered by large companies with inbuilt inertia, merely amassing wealth for their private shareholders. A solar citizens organisation needs to create a pathway forward for all people, who care for the environment, to be unobstructed in their efforts to implement renewable resources in all contexts of our lives.
Instead of being like a workers union and not rock up to work, we can switch the grid feed of our inverters off. Seek fair pay for our kWhrs.
Moving from a “Readership” to a “Membership”, gives Renew Economy and One Step Off the Grid the same power as the Energy Networks Association and more. The Energy Networks Association has power to influence decision making processes because it is representative of the shareholders funding energy networks. The Energy Networks Association does not merely report back to each network and their shareholders. They have an active role in shaping policy, due to their political status as an amalgamated voice of people. By Renew Economy and One Step Off the Grid having a Membership, the organisation would have a role in society in any domain where RE is central.
There already appears to be a solar citizens group. Already being done. Good stuff. Should have known people would form a group to gather momentum.