The future of energy generation and storage

[SirRumpole]

Distribution network charges are around 38% of residential bills and being a monopoly (see economics 3001 "natural monopoly") the recovery rate is reviewed every 5 years by the AER, so the idea of disassociated frequent laissez faire changes to poles and wire charges seems a bit far fetched.

So that means that electricity users can be ripped off for 5 years before anything can be done about it ?

 

[Value Collector]

FFS, they already do, just like everyone else who is on grid. (for about the forth time).

So what is your point? I thought your were arguing that fixed access charges were bad.

All I am saying is that fixed access charges make sense, and raising them to the point where subsidy from usage is minimal is probably a fairer thing, rather than loading all the grid charges onto those that either can't have or can't afford solar.

 

[Value Collector]

So that means that electricity users can be ripped off for 5 years before anything can be done about it ?

It also means the grid owners can be under paid for 5 years before anything can be done about it.

 

[SirRumpole]

So what is your point? I thought your were arguing that fixed access charges were bad.

I accept fixed access charges as a component of the system. I'm saying that hiking these charges in response to a drop off in demand for power is contrary to the principle of rewarding consumers for more efficient use of energy (as recommended by Finkel), and is a consequence of the privatisation of networks and the desire of companies to maintain profits, when the grid is an essential service that should be managed nationally for the benefit of national interests and not to line the pockets of shareholders, many of whom probably don't even live here.

I hope that makes my position clear.

 

[sptrawler]

I accept fixed access charges as a component of the system. I'm saying that hiking these charges in response to a drop off in demand for power is contrary to the principle of rewarding consumers for more efficient use of energy (as recommended by Finkel), and is a consequence of the privatisation of networks and the desire of companies to maintain profits, when the grid is an essential service that should be managed nationally for the benefit of national interests and not to line the pockets of shareholders, many of whom probably don't even live here.

I hope that makes my position clear.

So what is the answer?

They either charge more for the service cost, which then spreads the cost over all users.

Or raise the unit cost, which applies the cost to those who can't afford solar, or renters who aren't able to access solar.

 

[SirRumpole]

So what is the answer?

The answer, (but it's probably too late) is not to have privatised networks in the first place but run the grid holistically to achieve the lowest prices.

eg hospitals have to be maintained and new ones built but we don't get slugged with these charges every quarter, and nor should we get slugged with Medicare increases because less people get sick and don't use the hospitals as much.

 

[Value Collector]

I accept fixed access charges as a component of the system. I'm saying that hiking these charges in response to a drop off in demand for power is contrary to the principle of rewarding consumers for more efficient use of energy (as recommended by Finkel), and is a consequence of the privatisation of networks and the desire of companies to maintain profits, when the grid is an essential service that should be managed nationally for the benefit of national interests and not to line the pockets of shareholders, many of whom probably don't even live here.

I hope that makes my position clear.

As I explained earlier, the charges aren't being "Hiked", they are just being allocated more fairly, because it would be unfair to have a system where solar users pay only a fraction of the services they are using, while people who can't have solar are expected to make up the difference.

when the grid is an essential service that should be managed nationally for the benefit of national interests and not to line the pockets of shareholders, many of whom probably don't even live here.

Listen to what Buffett says here at the 7.45 min mark, he explain how the Berkshire owned network sells power at a cheaper rate on the other side of the river than the government owned network that supplies his office on his side of the river, and he doesn't expect to have to raise rates on the privately owned infrastructure until 2029, but the government owned network is raising rates next year (and probably every year)

So the government owned network, pays no tax (even its bondholders pay no tax), charges customers more, has less renewables. Private one pays tax, delivers returns to shareholders, delivers cheaper energy to consumers and emits less carbon.

 

[sptrawler]

The answer, (but it's probably too late) is not to have privatised networks in the first place but run the grid holistically to achieve the lowest prices.

eg hospitals have to be maintained and new ones built but we don't get slugged with these charges every quarter, and nor should we get slugged with Medicare increases because less people get sick and don't use the hospitals as much.

Well W.A hasn't privatised the network and the Government has just put up the service cost nearly 100%.
They also say, the same will be done again next year.

But that still doesn't answer the question I posed, how do you increase the cost, to reflect actual supply cost?

1. Increase the unit cost, which means those who can't afford solar and those who rent, disproportionately pay for it.
Or
2. Increase the service cost, so everyone who is connected to the supply, shares the burden.

 

[SirRumpole]

Well W.A hasn't privatised the network and the Government has just put up the service cost nearly 100%.
They also say, the same will be done again next year.

But that still doesn't answer the question I posed, how do you increase the cost, to reflect actual supply cost?

1. Increase the unit cost, which means those who can't afford solar and those who rent, disproportionately pay for it.
Or
2. Increase the service cost, so everyone who is connected to the supply, shares the burden.

Your question is irrelevant because you are treating electricity as another commodity that has to pay for itself when it's an essential service like health or education that we pay for with taxation.

 

[sptrawler]

Your question is irrelevant because you are treating electricity as another commodity that has to pay for itself when it's an essential service like health or education that we pay for with taxation.

Well that's nice, but the Governments, both Federal and State, don't agree.

The die was cast years ago, when the Governments desegregated generation and distribution. From that point on the cross subsidy from cheap generation, to loss making distribution, wasn't possible.
This in effect brought about the loss of Government control, as someone has to pay for the distribution.
So in reality you have answered the question, you say that it should be paid for with taxation, which means by everyone. As everyone uses electricity, it follows,the service cost should carry the brunt.
Solar should only mitigate the usage cost, not the distribution cost, as those with solar are still availing themselves of the distribution service.

 

[SirRumpole]

This in effect brought about the loss of Government control, as someone has to pay for the distribution.

Totally agree, which is why we are in the situation we are now and why Finkel recommends "stronger governance"; ie more regulation. Governments thought that once they could sell off their assets they were no longer responsible, but the voters will let them know otherwise.

 

[Value Collector]

you are treating electricity as another commodity that has to pay for itself

Offcourse it should pay for itself, it makes complete sense to me that the costs of the infrastructure should be covered by those that use it.

I can see the same thing eventually happening with the roads, the roads are largely funded by the fuel tax, however as electric cars take over, it would be silly to assume the fuel tax can just keep going up on user that have combustion engines without expecting an increasing number of electric car users to pay some sort of contribution to the maintain and build roads.

 

[SirRumpole]

As I explained earlier, the charges aren't being "Hiked", they are just being allocated more fairly,

I'm afraid that statement is b.s. because if we go back to the orginal story :

https://thewest.com.au/news/wa/power-surge-to-hit-solar-homes-ng-b88515496z

everyone is being charged the new fixed rate not just solar users, so I can't see how you can describe this as "fair".

 

[sptrawler]

Totally agree, which is why we are in the situation we are now and why Finkel recommends "stronger governance"; ie more regulation. Governments thought that once they could sell off their assets they were no longer responsible, but the voters will let them know otherwise.

Well the W.A Labor Government, still owns the distribution network and the majority of generation.
They have just put up the service cost nearly 100%, and are going to do the same again next year.

 

[SirRumpole]

Offcourse it should pay for itself, it makes complete sense to me that the costs of the infrastructure should be covered by those that use it.

We all use it, we all pay tax.

 

[sptrawler]

Well the W.A Labor Government, still owns the distribution network and the majority of generation.
They have just put up the service cost nearly 100%, and are going to do the same again next year.

Those with solar are still better off, as they are still mitigating their unit usage.

 

[Value Collector]

I'm afraid that statement is b.s. because if we go back to the orginal story :

https://thewest.com.au/news/wa/power-surge-to-hit-solar-homes-ng-b88515496z

everyone is being charged the new fixed rate not just solar users, so I can't see how you can describe this as "fair".

Just charging solar users would be "Unfair".

"Fair" is charging everyone who connects to the grid a service charge that covers the cost of the grid existing, and then a usage charge to cover the cost of the generation capacity they consume or a usage credit for the generation capacity they supply back.

We all use it, we all pay tax.

so what, we all use water, but we still pay a connection fee and a usage fee.

 

[SirRumpole]

Just charging solar users would be "Unfair".

"Fair" is charging everyone who connects to the grid a service charge that covers the cost of the grid existing, and then a usage charge to cover the cost of the generation capacity they consume or a usage credit for the generation capacity they supply back.

The WA government has just almost doubled the "cost of the grid existing" by doubling the service charge.

Lets see them justify how the cost of the grid could double overnight.

 

[Tisme]

So Western Australia has an inefficient publicly owned system. Perhaps privatisation would be key to reducing costs?

 

[Value Collector]

The WA government has just almost doubled the "cost of the grid existing" by doubling the service charge.

Lets see them justify how the cost of the grid could double overnight.

It's not that the cost of the grid has doubled, its that the artificially low grid service charge was being subsidised before hand by a usage charge that was higher than it had to be.

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Imagine you had a helicopter business, and your revenue came by charging customers $10 / litre of fuel used, the fuel only really cost you $1.5 / litre, So the excess fuel charges actually funded your maintenance and replacement of your helicopters.

However a portion of your customers started using their own fuel, they still used your helicopters every day, but a growing number were not buying the same amount of fuel, so you could no longer maintain and replace helicopters as well.

Now your customers still rely on your services, even though they get most of their own fuel they still rely on your helicopters, so ofcourse you need to change your pricing.

The fairest system is a system that allows the customer to benefit from the fuel they are providing, while still contributing to the system that keeps the helicopter fleet in top condition.