The scary prospect of some electricity prices leaping 20 per cent this winter is bad enough, but the farm sector fears the real power price pain has only just begun.
Having already copped significant 100pc-plus price hikes in less than a decade, many farmers are struggling to see how they will cope with new pricing regimes which effectively penalise them for living in regional areas.
Electricity consumers Australia-wide are scurrying to find better deals from energy retailers, but industry analysts say there is no silver bullet to solve the problem of our record high developed-world power costs.
“I think everyone is very nervous – energy is a large component of what makes any agricultural business tick,” said northern NSW sheep and wool producer, David Mailler.
“No matter what reassuring 10-second soundbite comments we hear from politicians, it’s pretty obvious we won’t see significant change within 12 months, and there’ll probably be no real answers to reduce our power bills for five years.”
“The best time act was 10 years ago.”
PM wants answers
Prime Minister, Malcolm Turnbull, called the nation's biggest electricity retailers to Canberra this week demanding some serious commitment from them to help put the brakes on galloping electricity bills.
New prices since July 1 are tipped to be pushing up average annual households bills by $600 in some states, with both retail and distribution charges blamed to various degrees in different states.
Residential consumers connected through EnergyAustralia are set for a 19.6pc hike in NSW, while Origin Energy prices rise about 16pc.
The Prime Minister said cost pressures from skyrocketing energy prices meant families were turning off heating and businesses were scaling back on power use options at the expense of productivity.
He pointed to significant variations and opaque pricing formulas in retail power bills, as identified by St Vincent de Paul research which found a $830 a year difference in the best and worst “standing offer” paid by typical households.
The problem is more obvious in the bush and getting worse say NSW Farmers members, including Mr Mailler, the Uralla branch president.
There’s a requirement for cost reflective pricing which will make it very difficult to keep many farm users connected
“Our research suggests typical rural consumers can achieve a 32pc cut on power bills if they play the field for a better price, but a metropolitan customer will save 51pc,” said farmers’ association research and innovation general manager, David Eyre.
“In absolute terms, the best domestic average rate for a typical regional NSW household costs $2083 a year, but only $1527/year if you’re in a metro area.”
He predicted price hikes in the order of 200pc for some farms in coming years if the electricity industry implemented full cost-reflective pricing for regional services where distribution charges rise as the population becomes more dispersed.
“We don’t know how it will be implemented, but there’s a requirement for cost reflective pricing which will make it very difficult to keep many farm users connected,” Mr Eyre said.
NSW Farmers has negotiated discounts of up to 20pc for its members who sign up to buy power through Origin.
Mr Eyre said the savings varied with several factors, including how far the farm may be built up areas.
“We believe some basic market reform needs to start with a standard way for everyone to know what the costs are and what prices are available to other consumers,” he said.
“Smaller consumers and those in regional areas have far less access to the informal supply of pricing information provided by the electricity industry.
“It’s confusing and far from transparent.”
Most farm electricity consumers are not getting the best deal
Cotton Australia policy officer, Felicity Muller, said while group buying offers helped, individuals could possibly achieve discounts similar to NSW Farmers simply by arguing hard with an energy retailer.
“Most farm electricity consumers are not getting the best deal,” Ms Muller said.
“Those who have (achieved a good deal) probably employed somebody to spend a lot of time working it out for them.”
However, under current pricing regimes, significant discounts were still unlikely, unless farmers were big-scale irrigators or had intensive farming operations drawing more than 100 megawatt hours of power a year.
“Your bill is structured differently once you use more thanr 100mW – you can see what the network supply costs really are,” she said.
Brisbane-based Energy market analyst, Hugh Grant, said “a couple of hundred different retail tariffs around Australia” kept consumers guessing about what was a fair deal.
He estimated Australian prices were between 1.5 and two times more expensive than prices expected in a “well functioning electricity market”.
Irrigators, in particular, were likely to feel increased pain because they were being singled out for not apparently paying a fair share of the real supply cost in the past.
“If the average farmer’s power costs rose 5pc last financial year, an irrigator’s costs may have risen 10pc,” he said.
Reporting its own difficulties in the electricity market this week, Hong Kong-listed generator and retailer, EnergyAustralia, announced an operating profit drop of 18pc to $129m.
Future power generation
Managing director, Cath Tanna, said she did not have an answer to rising prices, arguing state and federal policy makers should be providing a better environment to encourage the industry to invest in new power plants.
However, NSW Farmers’ is convinced the future for reliable, sustainably-priced electricity supplies will depend on power from smaller scale solar, or other, generation facilities in local areas complementing the large network power plants.
The association is campaigning for electricity companies and technology providers to collaborate with the farm sector and other industries to promote local micro-generators, and to better anticipate and supply regional power needs at a much cheaper cost.