Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax November 2014 Disclaimer The energy offers, tariffs and bill calculations presented in this report should be used as a general guide only and should not be relied upon. The information presented in this report is not provided as financial advice. While we have taken great care to ensure accuracy of the information provided in this report, it is suitable for use only as a research and advocacy tool. We do not accept any legal responsibility for errors or inaccuracies. Alviss Consulting Pty Ltd does not accept liability for any action taken based on the information provided in this report or for any loss, economic or otherwise, suffered as a result of reliance on the information presented. If you would like to obtain information about energy offers available to you as a customer, go to the relevant regulator’s website or contact the energy retailers directly. Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax May Mauseth Johnston, Alviss Consulting Canberra, 17 November 2014 © Alviss Consulting Pty Ltd This work is copyright. Apart from any use permitted under the Copyright Act 1968 (Ctw), no parts may be adapted, reproduced, copied, stored, distributed, published or put to commercial use without prior written permission from the Alviss Consulting. Tax on, Tax off: Electricity prices before and after the repeal of the carbon tax November 2014 Tax on, Tax off: Electricity prices before and after 3 Acknowledgements This project was funded by grant from the Consumer Advocacy Panel (www.advocacypanel.com.au) as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas. The views expressed in this document do not necessarily reflect the views of the Consumer Advocacy Panel or the Australian Energy Market Commission. Several consumer groups and energy advocates have provided assistance through alerting their networks to this project and by forwarding energy bills, as well as other retailer communications, received by consumers. The assistance from the Victorian Council of Social Service, the South Australian Council of Social Service, the Consumer Action Law Centre, the Consumer Utilities Advocacy Centre, Camcare, St Kitts Associates and St Vincent de Paul Society Victoria has been much appreciated. The St Vincent de Paul Society is also an advocacy partner of this project. Gavin Dufty, Manager of Policy and Research, has provided input into this report and is the project’s spokesperson. 4 CONTENT Foreword Executive Summary 9 1. About this project 14 2. Retailers’ obligations, statements and communications 15 3. Methodology and assumptions 21 3.1 Retailers’ estimates based on substantiation statements 21 3.2 Assumptions about consumption levels 24 3.3 Data collection 25 3.4 What bill calculations include/exclude 25 4. Comparison of the impact the repeal has had on bills across the NEM 26 4.1 Standing offers 26 4.2 Market offers 28 5. Jurisdictional analyses 31 5.1 Bill impacts in the ACT 31 5.1.1 Changes to ACT market offers 31 5.2 Bill impacts in NSW 33 5.2.1 Changes to NSW market offers 35 5.3 Bill impacts in South Australia 40 5.3.1 Changes to South Australian market offers 40 5.4 Bill impacts in Tasmania 43 5.5 Bill impacts in Victoria 44 5.5.1 Changes to Victorian market offers 48 Tax on, Tax off: Electricity prices before and after 5 5.6 Bill impacts in Queensland 55 5.6.1 Changes to Queensland market offers 55 6. Issues regarding retailers’ strategies and behaviour 57 6.1 Combining price increases with carbon tax adjustments 57 6.2 Cost savings versus new prices 57 6.3 Reduced discount on market offers 58 6.4 Changes to tariff structures 59 6.5 Changes to supply charges 59 7. Allocation issues and potential windfall gains 61 Conclusion 64 6 FOREWORD St Vincent de Paul Society Victoria (SVdP Society) welcomes this study into the impact of the repeal of the carbon tax on electricity prices across the National Electricity Market (NEM). The SVdP Society has been a long-standing advocate for energy consumers in Victoria and nationally. The SVdP Society Victoria has over 7000 members and volunteers. Across Victoria our members see what poverty looks like in a highly developed nation It is in this context that we are particularly concerned about the access to affordable essential services. In the last year alone, the SVdP Society has assisted over 120,000 households through providing over $10 million in direct assistance. A significant proportion of this assistance goes to pay for utility costs. It is in response to such needs that the SVdP Society decided to obtain a thorough understanding of changes to energy markets and prices, and the impact they have on household bills in order to increase community awareness about these changes and whether there are ways for households to reduce their bills. In partnership with Alviss Consulting, the SVdP Society has systemically monitored residential electricity and gas prices since July 2010. This project, also commonly referred to the Vinnies’ Tariff-Tracking project, has produced numerous reports examining price changes as well as market trends, retail competition and regulatory shortcomings.1 The cost of energy is significant to many Australian households, and especially to those on lower or fixed incomes. We therefore believe it is important to inform households about what is happening in energy markets, when and why prices go up (or down), and how they can minimise their own costs. At the same time, we believe that it is important to represent the interests of residential energy consumers in policy and regulatory debates, in order to influence policy decisions and regulatory arrangements that have an impact on households across the NEM. This study shows that while some households will receive significantly lower electricity bills in 2014/15 due to the repeal, others will experience modest price decreases or none at all. We believe households should be made aware of which category they belong to as well as why. Furthermore, we encourage all consumers that can get a better price reduction from a different retailer to either call their existing retailer and ask for a discount or shop around. For example, we note the report’s findings in relation to Powerdirect and Alinta, which have significantly increased their market offer discounts for new customers in some jurisdictions. We would therefore encourage existing Powerdirect and Alinta customers to request the same level of discounts that they are willing to offer new customers. 1 See www.vinnies.org.au/energy Tax on, Tax off: Electricity prices before and after 7 The SVdP Society will endeavor to share the information provided in this report with our colleagues, as well as look for opportunities to engage with policy makers and regulators on issues we believe are important for our constituencies. Finally, in relation to the issue of potential non-distributed cost savings due to the repeal (section 7 of the report), we call on the Federal Government to conduct an inquiry into how these monies should be accounted for, collected and distributed. We do believe that the amounts in question can be significant and while we acknowledge that it could be impossible, and impractical, to identify the rightful “owners” of the monies, we do not believe that would justify any windfalls to entities within the energy supply chain or a revenue stream for the government. We are grateful to May Mauseth Johnston of Alviss Consulting for undertaking and involving us in this important study. Gavin Dufty Manager, Policy and Research, SVdP 8 Executive Summary Leading up to the carbon tax repeal, households were regularly reminded about how much this tax was adding to their energy bills and that savings of 9%, or $200 per annum for electricity alone, would occur if repealed.1 This report shows that there is no ‘magic number’ and household savings on electricity bills vary significantly. Average reductions For households using 6,000 kWh per annum, the average price reduction to customers on standing offer contracts across the NEM is $160 (or 8%). For customers on market offer contracts, the average price reduction is $110 (or 6%).2 The jurisdictional differences are, however, significant. Table 1 below shows that households in the ACT (on the regulated rate) would receive a reduction of 12% while South Australian households would receive a 4% reduction. Table 1 Annual price reductions for households using 6,000 kWh/annum (single rate) by network area Standing / Standing / regulated offers % regulated offers $ Market offers % Market offers $ ACT - ActewAGL 12% $165 10% $155 NSW - Essential 6% $145 6% $135 NSW - AusGrid 9% $160 5% $100 NSW - Endeavour 9% $160 5% $90 SA - SAPower 4% $110 4% $90 Tas - Aurora 9% $150 8.5% $140 Vic - Citipower 9% $170 6% $100 Vic - Powercor 8% $180 5% $95 Vic - SP Ausnet 8% $175 5% $90 Vic - Jemena 8% $175 5% $90 Vic - United 8% $175 6% $100 Qld - Energex 8% $175 7% $140 1 Australian Government, Department of Environment, Repeal of the carbon tax – Impacts on house- holds and businesses, Fact Sheet which estimated that electricity bills in 2014-15 would on average be $200 less than they would have been with a carbon tax in place at http://www.environment.gov.au/system/files/ pages/59388d77-a9b5-4e4c-87b7-d732baf7c45b/files/factsheet-impacts-households-and-businesses_0. pdf and Prime Minister Abbott’s statement on 15 October 2014: “When this bill is passed, this Government estimates that power prices will go down by 9 per cent” available at http://www.abc.net.au/news/2013-10- 30/tony-abbott-carbon-tax-gas-electricity-bills/5050348 2 See section 4 for more detail about offers and calculations.