Based on the Australian Energy Regulator (AER)’s recently published 2021–22 electricity network pricing proposal for Evoenergy, electricity charges in the ACT are set to increase substantially.
The increase is predominantly driven by a 133 per cent rise in the jurisdictional charge resulting from the ACT Government’s 100 per cent renewable energy target.
Under the ACT Government’s 100 per cent renewable energy target, large-scale wind and solar generators are paid for the energy they generate under contracts entered into with the ACT Government.
Electricity network charges are a component of the retail bill (in 2020–21 they made up approximately 40 per cent) and consist of transmission charges, the costs to operate and maintain Evoenergy’s electricity distribution network and jurisdictional charges.
Under ACT legislation, Evoenergy is required to recover jurisdictional charges from the ACT community by passing the costs through to all ACT energy retailers.
This follows approval on 26 February 2021 by the ACT Minister for Energy, Water and Emissions Reduction, Shane Rattenbury, of the forecast amount Evoenergy is able to recover for costs associated with the administration of the ACT Government’s large-scale feed-in tariff scheme for the next financial year (part of the ACT Government’s 100 per cent renewable energy target).
Under the scheme, payments are made on a contract-for-difference arrangement, where the payment is calculated as the difference between the fixed feed-in tariff price agreed to in the contract and the wholesale electricity price.
Evoenergy’s Chief Executive Officer, John Knox, said in this instance the sustained decrease in wholesale electricity prices for around the past 12 months has been the driving factor behind the increase.
“What we’ve seen over the past year is a significant drop in wholesale electricity prices which has increased the payments Evoenergy has had to make under the scheme,” Mr Knox said.
“This has resulted in a tripling of the funds Evoenergy requires to make large-scale feed-in tariff payments to generators, from around $42 million in the current financial year to $127 million in 2021–22.
“We understand passing through any increase is difficult for the ACT community, let alone one of this size.
“The significant jurisdictional charge increase, combined with smaller transmission and distribution charge increases, is expected to result in an average network increase of around 41 per cent higher than 2020–21.
“Under current ACT legislation, Evoenergy’s role is to administer the ACT Government’s large-scale feed-in tariff scheme.
“The ACT Government is responsible for the framework of the scheme and the long-term contracts with renewable energy generators.
“We will continue to work with the ACT Government as part of our administrative responsibility and have raised our concern about the impact of this increase on the ACT community.”
Industry body warns of uptrending prices
Energy Networks Australia (ENA) General Manager Corporate Affairs, Tamatha Smith, said the looming bill hikes should serve as a cautionary tale for other states going it alone on energy policy.
“Renewables have a critical role to play as we decarbonise our electricity system, but governments have a responsibility to ensure their policies and the contracts they sign to support this do not harm customers,” Ms Smith said.
“The cost increases looming in the ACT are without a doubt going to have a major impact on households and businesses.
“A change in approach is needed that supports the energy transition without undue costs being borne by customers.”
Ms Smith warned that the ACT’s proposed moratorium on new gas connections could also cause major bill pain for local customers.
“The ACT is heavily reliant on gas for heating in winter. If all this winter gas demand is forced to shift to electricity, the grid will require major, expensive upgrades and these will also be paid for in customer bills,” Ms Smith said.
The AER will now assess Evoenergy’s network electricity pricing proposal with a final decision expected in May 2021.
For more information on the ACT Government’s energy policy and ENA’s comments, click here.