By Ross McInnes, QDO Vice-President
If a dairy farmer wanted to increase their return on investment, considering that their income cannot increase due the fixed nature of supply contracts, one creative way would be to devalue the farm assets to make the imaginary returns look better.
If the electricity industry wanted to make more money, but the regulator set the rate of return, the creative way to achieve this would be to inflate your asset value so in turn higher rates can be charged for maintenance. This is the kind of creativity Queensland’s electricity sector has been thriving on for some time now.
This has resulted in unmanageable increases in electricity charges for rural industries year after year that appear not to have any no end.
Consecutive Queensland Governments squeezed unsustainable performance dividends from the electricity industry. This resulted in a substantial long term underinvestment in the electricity network requiring a surge in network charges to compensate for the overdue catch-up maintenance.
Because network charges began to form a larger proportion of the total cost, the Queensland Competition Authority (QCA) formed the view that off peak charges were suddenly being overly subsidised. For irrigators trying to minimise costs and increase water use efficiency, this resulted in the unsustainable increases seen over the past decade.
In December 2008 the off peak charge was 7.1 cents per KWh. The current charge is 23 cents per KWh– an increase of 324%. This level of increase regardless of the industry is totally unacceptable. A farmer operating one 30KW irrigation pump, 10 hours a night 5 nights a week on off peak power is paying $238 per week more than 2008 on that component of the bill alone. Minister Bailey needs to explain where we are heading with prices for the next decade.
More than a decade ago, then Premier Peter Beattie promised cheaper electricity by bringing in more competition. However, when prices spiked, the Premier’s excuse, reminiscent of a line from Animal Farm, was simply, “prices are cheaper than if we had done nothing”. Sadly, this same dismissive attitude still dominates the Government’s response to this crisis.