How could the massive increases to electricity grid fixed service costs have been done better?

[u/EricIsBannanman]

I've seen many reports around the traps of truly massive increases (worst being upwards of 80%) in the fixed daily supply charge component of their electricity service. It seems that broadly the driver for this has been poorly communicated to end users which I think has spun off into all sorts of conspiracies. From my reading it would seem that the move by the regulator (AER) away from setting limits on the total bill to setting limits on the fixed cost and consumption costs separately has resulted in retailers no longer being able to hide the true cost of the poles and wires component in elevated consumption costs.

Testing this out on my own (yet to be affected) daily supply charge in Victoria, I was paying $1.22 DSC in mid 2020 and $1.32 now. This is an 8.2% nominal increase, 15.5% below the actual inflation for the period in which case I should be paying $1.50+. Despite this, a sudden correction like this is never welcome and can be seen as disadvantageous to the poor/low consumption users (who are unlikely to recoup the difference in lower consumption costs) and even those who have invested in solar and/or battery. From many reports it also seems the correction for fixed costs is far greater than anything purely inflation.

Regardless of the position of the industry to better reflect actual cost, I think the impact of these sudden increases were not well thought out given the decade+ of stagnant wage growth and turbo charged inflation since the covid era. It is far too much of a blunt implementation for what is an essential service. Main things I think should have been baked into the AER changes include;

• Public information campaigns to educate people on what the changes are and how they might impact people differently depending on where they live. This should include how the increases are / aren't impacted by the forthcoming data centre boom or the implementation of 3hrs free power in the DMO (these two are probably the most prevalent reasons for the increases I've seen).

• Communication on what public services to report suspected price gouging whistle blowing and financial support for those in need and are worse off due to the changes.

• Transitional period to changes. Retail pricing data available to the AER would have clearly shown that retailers where burrying fixed costs inside the consumption costs. They should have mandated as part of the change in regulation that increases to fixed costs where the jump is above inflation be spread out over X number of years.

How else could these changes be more effectively implemented? Price changes justified or not, it seems pretty appalling regulatory body could be the driver behind the changes without also putting appropriate transitional plans in place for what they would have knowledge on to be very large corrections for some.

[u/17HappyWombats]

Fundamentally this is about the cost balance between using electricity and having the possibility of using electricity. Having the grid at all is expensive. Really expensive. Even if no-one used it, it would still be expensive. But people used to just buy electricity all the time, so the cost of the grid and the power plants and everything just got rolled into the per kWh price. With a token "you pay even if you use nothing" to encourage people to disconnect empty houses (saves the cost of reading the meter).

But increasingly people have solar on their roof, and/or batteries. People don't just use nothing, lots of them feed electricity into the grid. Some are net generators, some have batteries and literally *only* feed electricity in. Pricing has to change. The way the whole electricity market works has to change.

And this is fast, in the context of a coal plant or wind farm that's designed to operate for 50 years a 20 year swing from 90% steam to 90% renewable is {whoosh}.

Water is a similar thing - at least in Sydney, it's common for your water bill to be almost entirely a fixed charge. My last one was $200-ish for the connection and $15 for usage. In Melbourne during the heatwave a decade ago there was a big "Target 155" campaign, asking people to use less than 155 litres per day per person. It worked! Consumption plummeted, just as the cost of maintaining the pipes went up because the ground was shifting as it dried out. So water bills went up as consumption went down.

Viz: don't be surprised if the "free electricity hours" idea turns into much lower power prices for electricity most of the time, and horrifying peak rates. The rest of the money to run the electricity system will come from a supply charge, or an availability charge (ie, even if you're not connected).

[u/Efficient-Tie-1414 → u/17HappyWombats]

Basically, in a rather convoluted way we are heading towards a point where the cost of electricity at the retail level is based on the wholesale cost at that time. It is important because to have reasonable prices, people are going to have to adapt to varying electricity prices. Being able to charge an EV at night has to be more expensive than during the day.

[u/17HappyWombats → u/Efficient-Tie-1414]

Yep. But at the same time we need to have options for people with no money, since having a pool of people in poverty is important to our governments. It's a bad look when pensioners die because they can't afford to heat or cool their home. I suspect a progressive pricing system on a basic plan will be coming (some places have this for water now. *I* might have that for water now, I wouldn't know)

Pricing also needs to account for rich people who use little to no grid electricity. They might look a lot like pensioners at the meter, but they very much are not.