Our Plan to Bring Down Power Prices
SA-BEST has a vision for a renewable energy future that provides for affordable, reliable, quality and secure power, that is good for jobs, business, residents and the environment.
With proper and careful planning, the SA-BEST energy policy will drive economic development and jobs by reducing prices and maximising opportunities for local manufacturers, along with lower power prices through greater competition through a community-based retailer.
South Australian electricity prices are amongst the highest in the world . They have skyrocketed. The Australian Energy Market Commission reports that bills have increased by 17% in the past year alone .
This has had a huge impact on domestic consumers, particularly those who are vulnerable, on low and fixed incomes; and small businesses in South Australia. Energy intensive businesses have also been hit particularly hard with negative impacts on employment.
South Australian consumers must be protected. Power prices must be reduced, and reduced substantially. Power supplies must be reliable.
SA-BEST intends to use a balance of power position in the Parliament to make sure that whoever forms the next South Australian Government ensures that South Australian consumers and industry and business pay less and enjoy reliable supply.
If the Government fails to deliver on this key issue, SA-BEST will withdraw its support.
If the Government can’t get prices down, or can’t keep the lights on, then the lights will go out in the Premier’s office.
Independent reports commissioned by the Department of Premier and Cabinet in 2009  and disclosed in the course of a Federal Senate Select Committee Inquiry into the 28 September 2016 state wide black out, emphasised the need for proper planning to transition to renewables, including issues of grid stability and security, particularly due to variable renewable energy generation (in the absence of battery backup or other means to make it dispatchable).
SA-BEST strongly supports renewable energy, in conjunction with storage, energy management and dispatchability. We also support the targets under the Paris Agreement to reduce greenhouse gases in Australia by 26-28% based on 2005 emission levels. Out of necessity this involves an orderly transition to renewables to meet, and exceed, those targets.
Key to this, SA-BEST supports a full simulation model of the national electricity market (NEM) for South Australia. This will assess pricing, grid robustness, distributed generation, demand management and storage under different scenarios to underpin proper, long-term planning.
Bad planning at a State Government level does not absolve the policy uncertainty and poor planning at a Federal level. The political bickering federally has led to enormous policy uncertainty, and with it, a lack of investment confidence to build more capacity to secure a reliable supply of power. Increased generation supply will make markets more economically efficient and lower prices.
In 2009, Nick Xenophon - as an Independent Senator in the Australian Parliament - worked with then Leader of the Opposition Malcolm Turnbull MP and leading energy economists to propose an alternative to the Rudd Government’s Carbon Pollution Reduction Scheme (CPRS). That report - jointly commissioned by Mr Xenophon and Mr Turnbull - and underpinned by extensive modelling, proposed an Emissions Intensity Scheme as a simpler and cleaner way to meet greenhouse reduction targets, and indeed, to exceed them.
Unfortunately, at the time the Coalition did not endorse the scheme, and Mr Turnbull was soon replaced as Opposition Leader by Mr Abbott. The Labor Party referred to the Scheme as a “mongrel” at the time, but six years later, in the lead up to the 2016 election, effectively endorsed it , with a policy that mirrored the original proposal.
SA-BEST is also concerned that the national energy market (NEM), with its centralised Commonwealth control, may not be serving the best interests of SA electricity consumers. We support an urgent review of the NEM, with a view to bring back control to the states, with more accountable mechanisms for the benefit of electricity consumers large and small.
We also believe there needs to be greater transparency, accountability and efficiency across the various energy regulating and advisory authorities, including the Australian Energy Market Operator (AEMO), the Australian Energy Market Commission (AEMC) and the Australian Energy Market Energy Security Board (ESB).
The Immediate Problem
One of the most urgent problems is that domestic electricity consumers on lower incomes, particularly those on fixed incomes and receiving welfare benefits, are particularly hard pressed by the rise in electricity prices. There are some 20-30% of electricity consumers who are in living in quite challenging economic conditions. In turn, those consumers, through no fault of their own, haven’t been able to take advantage of the opportunities in the market to maximise the benefit of negotiating a better deal.
SA-BEST is concerned over the influence in this state of ‘Gentailers’ - businesses which both generate and retail electricity - who exercise enormous market power, particularly since the closure of power plants in Victoria. The average 12 month wholesale price was $50/MWh in December 2015, $70 in December 2016 and $110 in December 2017.
SA-BEST proposes the following plan to alleviate prices, particularly for vulnerable domestic consumer (not covered by the Government’s recently announced Virtual Power Plant (VPP) deal for Housing Trust customers), and for small to medium businesses:
Establish a new electricity retailer based on a cooperative model, under a legislated governance framework. The new co-op retailer could be called Community Electricity Trust of SA (cETSA).
cETSA will enter into a tender process for a power purchase agreement for the development of a new 150MW dispatchable renewable energy power station in South Australia, to compete in the highly concentrated generation market.
The SA Government will act as guarantor for the power purchase agreement to give investment certainty for the construction of the new capacity within South Australia.
The new capacity would need to be independent of existing major players in the SA generator/ retail market (ie Origin, AGL and ENGIE.)
cETSA would operate as a ‘consumer trust retailer’ (as has been implemented overseas, including Germany). It will be a member-based organisation facilitated by a governance structure passed through the South Australian Parliament.
Membership will be open to two broad categories of members who between them will share equally the new generation capacity of approximately 500,000 megawatt hours.
Domestic consumer membership will be open to those households with an income of less than $75,000 per year (or other such threshold based on appropriate modelling to reflect vulnerable and low-income households). This would allow a membership base of approximately 50,000 consumers. The ‘small business’ membership base will be open to approximately 5,000 small businesses with electricity bills of up to a prescribed threshold (in the order of $20,000 a year), based on modelling to maximise benefits to small businesses. The state government will conduct the auction, design the contract and supervise the contract management.
The increase in capacity and competition will give immediate benefits to those who are part of cETSA. SA-BEST expect that it will reduce generation prices that the AEMC says averages $178/MWh for residential customers to around $100/MWh .
This would drive down average prices paid by residential and small business cETSA customers by $78/MWh or about 20% (Prices falls from an average of $377/MWh to $299/MWh).
In addition, the extra competition from the new, independent, competitive cESTA dispatchable generator is expected to reduce prices for all customers, irrespective of whether they participate or not. Previous analysis by the government of the similarly sized Solar Reserve Aurora project shows that prices across the state would fall by an additional 3% . On top of the competitive effects of the 250 MW VPP and 150 MW Aurora initiative, consumers not eligible to participate in the cESTA project are expected to experience a reduction in bills of about 10%, due to additional competition.
In addition to cETSA, other community power options currently being proposed by Local Councils must also be supported. A much stronger focus on incentives to encourage energy efficiency and installation of household generation and storage for Renters/Landlords is also an imperative.
We must also consider the merit of moving from a flat rate energy concession to one that is based on a percentage of the bill. This would ensure that the energy concession is better targeted and gives most relief to eligible households with the largest bills.
Gas Reservation Policy
SA-BEST is open to a 15% gas reservation policy if, within two years, power prices have not come down in South Australia by at least 20%.
SA-BEST is well aware of concerns that ‘gentailers’ in SA have an enormous amount of market power. We believe the next South Australian Government should play a strong, proactive role to ensure competition laws are being enforced. In the absence of Australian Competition and Consumer Commission (ACCC) action (noting constraints as to the number of actions it can launch), SA-BEST believes the South Australian Government should obtain independent legal advice to take action against anti-competitive behaviour. It should maintain a ‘watching brief’ over the conduct of gentailers, have additional regulatory powers, monitor their conduct and obtain all documentation necessary to determine if laws have been breached.
As a first step, all retailers should be required to provide consumers with a simple and clear power purchase plan and power bills that follow a standard format. Retailer power plans and bills are too complicated, riddled with multiple discounts that disappear after specified periods and are difficult to compare.
With standardised power offerings, consumers can more easily compare retailer offerings, enhancing competition. With simplified bills, consumers can more easily confirm that they are paying as per agreed terms.
Maximising Local Industry Participation
The benefits of the boom in renewable energy investment must be maximised in South Australia to ensure the greatest extent of local industry participation, including building our research and development capacity.
Procurement rules should reflect this, in order to maximise the economic and employment potential of this sector to South Australia and encourage strong flow-on benefits through local manufacturing.
Any energy policy should include a comprehensive plan to maximise uptake of electric vehicles. SA Government vehicles housed in government car parks should be used to further stimulate the uptake of electric vehicles.
SA-BEST believes this needs to include provision to facilitate necessary infrastructure, integration into the grid and energy capacity planning.
Appropriate incentives for the manufacturing and purchase of electric vehicles in South Australia should also be considered, along with a trial vehicle-to-grid storage mechanism.
Energy Efficiency Measures
Energy efficiency can deliver cheaper energy bills, more viable businesses, more liveable buildings and a cleaner environment. Smarter energy use will also foster growth opportunities in new and expanded markets for energy efficient products and services.
SA-BEST supports a strengthening and revamping of energy efficiency schemes for households and businesses. This should include assessing the efficacy of various measures in relation to building design and construction, heating and cooling systems, insulation and glazing, appliance efficiency, lighting systems and energy star-rating systems.
South Australia has the potential to play a leading role in energy efficiency measures, to drive integration and coordination across the states.
SA-BEST would also support incentives for landlords to invest in energy efficient rental properties, including a $1 million pilot programme over 12 months to evaluate the benefits for wider implementation.
The current South Australian Energy Advisory Service provides free, independent information for residents on a range of energy topics, including saving energy, understanding energy bills and energy efficiency. SA-BEST supports expanding this service to also include advice to small business regarding energy consumption and demand reduction initiatives.
The Sting in the Tail
SA-BEST wants cheaper and more reliable energy to be a key priority of the next Government of South Australia.
Both the Liberals and Labor have made big promises in relation to energy. But can they be relied on to deliver?
All too often the major parties promise much before an election and then offer excuses afterwards.
SA-BEST will ensure that they do get prices down, and if they don’t, they will pay a heavy political price.
If power prices are not reduced by at least 20% on December 2017 retail price by December 2019, and remain on a downward trajectory each year thereafter, SA-BEST will reserve the right to withdraw from any agreement of support should it be in a balance of power position.
We believe that would focus the mind of whomever is in Government to ensure there is cheaper and more reliable power in South Australia.
If this involves the need for greater regulation and control of our electricity assets, then that ought to be considered as well – it would put the private operators on notice.
If SA-BEST holds the balance of power in the Parliament, no excuses or back-tracking from Government will be allowed.
Either they will deliver cheaper and reliable power, or they will cease to be the Government.
Energy needs to be an absolute focus and priority for the next Government of South Australia.
SA-BEST will guarantee that.
Bruce Mountain, CME, 2017
McLennan Magasank Associates; 11 May 2009; Potential for Renewable Energy in South Australia - Report to the South Australian Department of the Premier and Cabinet and; National Institute of Economic and Industry Research; 14 May 2009; The Future Prospects for Renewable Energy in South Australia – A Report for the Sustainability and Climate Change Division of Dept Premier and Cabinet
AEMC Retail Price Trends) p134, https://www.aemc.gov.au/sites/default/files/content/bf56a5d5-e2b2-4c21-90ed-79dda97eb8a4/2017-Residential-Electricity-Price-Trends.pdf