Comment by Rod Boyte*, Director, Smart Power
Since the Finkel review was released late last week, there have been headlines stating that electricity prices would fall if the recommendations of the review were adopted.
Here’s a warning: These headlines are misleading.
While I am not in disagreement with the review or the recommendations put forward, what I take issue with is how they are falsely being framed and fed into mainstream media.
Based on my extensive knowledge of the electricity industry, a more accurate headline should be:
“Despite Finkel’s recommendations, prices will still rise for most”.
The review actually states that relative to ‘Business as Usual’ (the ongoing and unchanging state of the energy market operating within the present policy vacuum), wholesale electricity prices can somewhat improve from a forecasted ‘worst case scenario’, provided Finkel’s recommendations are adopted.
But here’s the catch: prices for most will not be lower than what we’ve seen to date. Because despite Finkel’s recommended solutions, we’re continuing to operate within the existing policy vacuum, which is pushing prices up.
Additionally, many businesses and residential users have not yet felt the full impact of the increases we have had over the last 12-18 months in the wholesale market. These increases will filter through over the next year or so as larger businesses re-contract and as retailers adjust their pricing for their other customers.
Some of this we are already starting to see with retailers announcing significant increases in pricing for residential users and small businesses from 1 July 2017. Ouch.
In short, for most us, prices are likely to go up before we experience any relief produced from Dr Finkel’s recommendations.
* Rod Boyte is the founder and a director of Smart Power Ltd. Rod is an independent energy management solutions specialist who has helped hundreds of organisations across Australia and New Zealand rethink the way they purchase and manage energy to achieve greater levels of sustainability and operational excellence.
Rod has been a member of the Energy Management Association of New Zealand (EMANZ) since 1995 and served on the EMANZ board from 1998 to 2002 (Vice Chairman in 2002). Over the past six years Rod has represented consumers at all levels by sitting on various groups including the Frequency Standard Working Group, Policy Procurement Working Group and the Metering and Reconciliation Working Group.
Rod is a frequent guest speaker at key industry conferences and events providing insights and predictions into current and future issues. His most recent engagement was in May at Vic Water’s 2017 Future State of Electricity conference.
With 25 years in the energy management field, Rod Boyte is deemed to be one of the most experienced energy management executives in Australia. www.smartpowerenergy.com.au
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