Carbon tax fallout will hit power bills

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This was published 12 years ago

Carbon tax fallout will hit power bills

By Brian Robins

HOUSEHOLD electricity prices will become exposed to world oil prices following the introduction of a carbon tax, which will result in more electricity being generated from gas.

In little noticed comments last week, Mr John Pierce, who now chairs the Australian Electricity Market Commission, the body that oversees the national electricity market, warned of the emerging link between the oil price and domestic gas prices.

"We should start to think about what the domestic energy sector … is going to look like in the event that electricity prices become linked with the international oil prices" ...  John Pierce.

"We should start to think about what the domestic energy sector … is going to look like in the event that electricity prices become linked with the international oil prices" ... John Pierce.Credit: James Alcock

''We should start to think about what the domestic energy sector … is going to look like in the event that electricity prices become linked with the international oil prices because of a linkage of gas,'' Mr Pierce, a former head of NSW Treasury, warned at a public forum. ''Those sort of structural shifts … are going to drive an increasing trend … towards energy efficiency.''

Gas prices in the eastern states are rising as a number of export gas projects are being developed in Queensland, which is taking place at a time when electricity generators are planning to build gas-fired power stations as the carbon tax will make it uneconomical to generate electricity from coal.

The carbon tax, to be introduced mid-year at $23 a tonne, will wipe out the profits of the NSW government-owned electricity generators.

''In the short to medium term, it will make profitability harder and we may become unprofitable,'' the Macquarie Generation chief executive, Russell Skelton, said yesterday. ''But it won't change the generation mix over the next three to five years compared with not having a carbon price.''

Government-owned power generators Macquarie, Delta and Eraring will be forced to write down the value of their power stations by hundreds of millions of dollars, due to the carbon tax. Detailed figures are to be released later this month.

Research by AEMC estimates the carbon tax will have a modest impact on household power prices, pushing them up by around 16 per cent over the next few years. The larger impact will result from the increase in spending to upgrade the electricity distribution network.

For NSW, between 2010-11 and 2013-14, household electricity charges will rise 42 per cent, with 38 per cent of the rise due to the anticipated higher wholesale price of electricity and 36 per cent due to the large upgrade of the distribution network with the balance due to other costs such as the solar feed-in tariff, according to AEMC analysis.

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The carbon tax will add 1.94¢ per kilowatt hour to the NSW household electricity price in 2012-13, and another 2.03¢ in 2013-14, with the price forecast to rise to 32.27¢ a kilowatt hour by 2013/14.

Next month, the pricing regulator IPART, the Independent Pricing and Regulatory Tribunal, will review household electricity prices, taking into account the likely impact of the carbon tax and other factors such as renewable energy schemes.

''The carbon tax will be the biggest change'' on the price, IPART deputy chairman Mr Jim Cox said yesterday. This review will add to the price rises of up to 10 per cent approved from July 1.

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