Canberra households may see a welcome fall in electricity prices of as much as 6.75 per cent from July 01, primarily the result of falling wholesale electricity costs driven by investments in renewable energy projects.
The forecast comes via a draft determination of electricity prices by the ACT’s Independent Competition and Regulatory Commission (ICRC), which regulates the territory’s electricity prices, that would come into effect in the middle of the year.
The ACT ICRC found that falling Large-scale Generation Certificate (LGC) prices and falling wholesale electricity prices were the overwhelming contributors to the fall in electricity prices.
Falling LGC prices, which have dropped from a high of around $85 per LGC in 2018, to their current trading levels in the mid $40s, contributed around two-thirds of the fall in electricity costs.
“The expected retail price decrease largely reflects falling prices in the wholesale electricity market. A key driver of these lower wholesale prices is the growth in renewable energy generation,” the commission said in a statement.
“This led to a reduction in national green scheme costs (contributing 4.1 percentage points of the estimated total retail price decrease of 6.75 per cent) and wholesale energy purchase costs (contributing 2.2 percentage points of the decrease).”
Wholesale electricity costs remain the largest component of ACT electricity prices, followed closely by network costs. The two components represent more than two-thirds of Canberran electricity bills.
The cost of ACT government schemes, which include contributions to renewable energy projects contracted to supply the ACT and contributions to energy efficiency schemes add 11.75 per cent to electricity costs.
“For the average residential household consuming about 6,500 kWh per year, the expected price decrease would translate to a reduction of $113 in their annual bill”, senior commissioner Joe Dimasi added.
The result establishes the ACT as one of the cheapest jurisdictions for electricity prices, while also having successfully achieved its goal of sourcing 100 per cent of its electricity from wind and solar projects.
ACT currently has contracts in place with wind and solar projects located within the ACT, as well as NSW, Victoria and South Australia, which supply ACT consumers with emissions-free power at a fixed price.
As reported by RenewEconomy, the ACT’s fixed-priced contracts with renewable energy projects has worked to cap the ACT’s exposure to wholesale electricity price increases, returning a dividend of $4.3 million via electricity cost savings in the first three months of 2019.
The ACT and Tasmania remain the two jurisdictions in Australia that enjoy the lowest prices for electricity, with both jurisdictions having regulated electricity prices and electricity supplies sourced overwhelmingly from renewable energy sources.
The potential need for regulated electricity prices was underpinned by the views of Canberra households collected during the price determination process, where many households indicated that it was difficult to compare offers from different companies.
As part of the process of determining electricity prices, the ACT’s Independent Competition and Regulatory Commission surveyed more than 1,000 Canberra households on attitudes towards electricity prices and the process of finding the best deal on their electricity.
Two-thirds of survey respondents (67 per cent) said that they found it difficult to compare electricity plans from electricity retailers, with just 17 per cent of respondents saying they found the process easy.
A vast majority (72 per cent) of respondents said that there were” too many different terms and conditions on plans” and that it “is too hard to work out the discounts are calculated”.
More than half of respondents (54 per cent) said they did not understand the differences between electricity tariff structures.
The Commission is set to make a series of recommendations to the ACT government to help improve consumers understanding of their electricity bills, including making it mandatory for retailers to recommending customers switch to a new tariff if it will lower their electricity costs, and ensuring electricity tariffs are compared only to regulated prices.
The final determination of the ACT’s electricity prices for the 2020/21 financial year will be handed down in May, following a period of consultation on the draft determination.