4 Regional Queensland

October 2015 © Queensland Productivity Commission 2015 The Queensland Productivity Commission supports and encourages the dissemination and exchange of information. However, copyright protects this document. The Queensland Productivity Commission has no objection to this material being reproduced, made available online or electronically but only if it is recognised as the owner of the copyright and this material remains unaltered. Table of Contents SUBMISSIONS Closing date for submissions: 16 November 2015 Public involvement is an important element of the decision-making processes of the Queensland Productivity Commission (QPC). Submissions are invited from interested parties concerning its Electricity Pricing Inquiry. The QPC will take account of all submissions received by the due date. Submissions, comments or inquiries regarding this paper should be directed to: Queensland Productivity Commission PO Box 12112 George St QLD 4003 Tel (07) 3015 0111 Fax (07) 3015 5199 http://www.qpc.qld.gov.au/inquiries/how-to-make-a-submission/ Confidentiality In the interests of transparency and to promote informed discussion, the QPC would prefer submissions to be made publicly available wherever this is reasonable. However, if a person making a submission does not want that submission to be public, that person should claim confidentiality in respect of the document (or any part of the document). Claims for confidentiality should be clearly noted on the front page of the submission and the relevant sections of the submission should be marked as confidential, so that the remainder of the document can be made publicly available. It would also be appreciated if two copies of each version of these submissions (i.e. the complete version and another excising confidential information) could be provided. Where it is unclear why a submission has been marked 'confidential', the status of the submission will be discussed with the person making the submission. While the QPC will endeavour to identify and protect material claimed as confidential as well as exempt information and information disclosure of which would be contrary to the public interest (within the meaning of the Right to Information Act 2009 (RTI)), it cannot guarantee that submissions will not be made publicly available. Queensland Productivity Commission Electricity Pricing Inquiry iii Table of Contents Table of Contents SUBMISSIONS III Closing date for submissions: 16 November 2015 iii Confidentiality iii THE ROLE OF THE QPC 1 ABOUT THE ELECTRICITY PRICE INQUIRY 2 1 BACKGROUND 3 1.1 Current Queensland Government policy 3 1.2 Overview of the electricity supply chain 3 1.3 Retail competition in Queensland 5 1.4 Increases in electricity prices 6 1.5 Environmental policies 9 1.6 Regulation 11 1.7 Other inquiries and reviews 12 2 PRODUCTIVITY IN THE ELECTRICITY SUPPLY CHAIN 13 2.1 Framework for considering productivity in the electricity supply chain 13 2.2 Productivity in the electricity supply chain 13 2.3 Generation 16 2.4 Networks (Transmission and Distribution) 18 2.5 Retail 24 2.6 Environmental policies 26 2.7 New technologies 28 2.8 Effectiveness of Regulation and Governance 29 3 DEREGULATION IN SOUTH EAST QUEENSLAND 31 3.1 Why is competition important? 31 3.2 Reform in retail price regulation 32 3.3 Competition and retail price regulation in SEQ 32 3.4 Price deregulation in SEQ 36 3.5 Additional support to increase consumer engagement 40 4 REGIONAL QUEENSLAND 41 4.1 Increasing competition in regional Queensland 41 4.2 Farming and irrigation and other rural/regional industries 47 4.3 Role of local government 49 5 CUSTOMER PARTICIPATION AND SUPPORT IN THE ELECTRICITY MARKET 52 5.1 Consumer behaviour and engagement 52 5.2 Consumer access to information, education and support 54 5.3 Customer impacts of network tariff reform 56 5.4 Concessions 61 Queensland Productivity Commission Electricity Pricing Inquiry iv Table of Contents ABBREVIATIONS 65 APPENDIX A : TERMS OF REFERENCE 67 APPENDIX B : SUMMARY OF OTHER REVIEWS OF ELECTRICITY PRICING 71 APPENDIX C : SUMMARY OF JURISDICTIONAL ELECTRICITY SCHEMES 2015-16 75 BIBLIOGRAPHY 81 Queensland Productivity Commission Electricity Pricing Inquiry v The role of the QPC THE ROLE OF THE QPC Our role is to provide independent advice on complex economic and regulatory issues, and propose policy reforms, with the objective of driving economic growth, lifting productivity, and improving living standards across Queensland. Open and transparent public consultation will underpin these functions. The QPC has initially been set up as a government entity under the Public Service Act 2008, and is part of Queensland Treasury. The Government has announced its intention for the QPC to be converted to a separate legal entity as a statutory body under its own legislation. The Queensland Productivity Commission Bill 2015 was introduced into the Queensland Parliament on 15 September 2015. Our work encompasses three key streams: WE ARE COMMITTED TO economic reform and policy PROVIDING A regulatory advice and guidance to departments TRANSPARENT AND CONSULTATIVE PROCESS economic research into private and public sector productivity TO ALLOW ALL The philosophy and principles under which we operate will be based on independence, rigour, responsiveness, openness, transparency, INTERESTED equity, efficiency and effectiveness. STAKEHOLDERS TO Our operation and reporting is independent, with tasks referred to PARTICIPATE IN INQUIRY the QPC by the Government. PROCESSES. The Government has said that the final report for each inquiry will be publicly released. The QPC’s final reports will first be submitted to Government to allow a government response at the same time as the public release where appropriate. Queensland Productivity Commission Electricity Pricing Inquiry 1 About the electricity price inquiry ABOUT THE ELECTRICITY PRICE INQUIRY Objective Key dates Issues Paper released The objective of the Electricity Price Inquiry is to examine electricity October 2015 pricing in Queensland and provide the Government with options that improve outcomes for consumers, while balancing the Due date for submissions objectives of: 16 November 2015 a competitive electricity market Release of Draft Report productivity growth in the energy industry and among energy 29 January 2015 users Due date for submissions appropriate reliability, safety and security of electricity supply mid March 2016 efficient investment and operation of electricity infrastructure Final Report submitted to environmental outcomes government 31 May 2015 fairness and equity minimising impacts on vulnerable customers; and Contacts responsible and measured management of the State's finances. Enquiries regarding this Scope project should be directed to: The Terms of Reference ask us to provide options to: ATTN: Catherine Cussen promote the long-term interests of electricity consumers Tel. (07) 3015 5105 www.qpc.qld.gov.au/contact place downward pressure on electricity prices; and us ensure a dynamic and responsive pricing framework. The Inquiry is to examine the underlying drivers of electricity prices to develop options which can deliver a net benefit to the economy while protecting vulnerable customers. The complete Terms of Reference for this Inquiry are included as Appendix A. Register your interest – www.qpc.qld.gov.au/contact-us/ If you wish to participate in the QPC’s inquiry process, please register your interest to ensure your receive our email alerts on key developments including release of reports, calls for submissions and details of public inquiries. Queensland Productivity Commission Electricity Pricing Inquiry 2 Background 1 BACKGROUND This chapter provides contextual information on the Queensland electricity market and issues and provides context for questions in later chapters of the Issues Paper. 1.1 Current Queensland Government policy The Queensland Government has a broad remit and responsibilities at both state and national level in relation to electricity supply. These include regulatory and policy responsibilities at both state and national levels, as well as operational interests through its shareholder role. The Queensland Government has prioritised some interests in electricity supply in the state, in particular in regards to electricity pricing and promotion of renewable energy sources. In commissioning this Inquiry, the Queensland Government has asked us to pay particular regard to promoting the long-term interests of electricity consumers, putting downward pressure on electricity prices, and ensuring a dynamic and responsive pricing framework. We are also undertaking a Solar Fair Price Inquiry commissioned by the Queensland Government which will investigate a fair price for solar exports that is based on the public and consumer benefits of solar exported energy, but does not impose unreasonable costs on electricity customers. It will be progressed in parallel with this Inquiry, and they will have regard to each other as relevant. We note also the government's commitments to investigate a target for renewable generation, including a commitment to encourage the uptake of solar PV. 1.2 Overview of the electricity supply chain The Queensland electricity supply sector consists of electricity generators, transmission and distribution network service providers (often referred to as the ‘poles and wires’) and retailers. Small-scale generation provided by solar photovoltaic (PV) rooftop panels is an increasingly important part of the sector. An overview of the key features of

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