Interested yet appalled observers have watched in total disbelief as Australian Governments, through their cack-handed ‘Climate-Change-and pay-for-weather-to-change’ policies have virtually destroyed; through incompetence, venality, belief in discredited theories about the Climate, and a total lack of political competence; a well-designed, well-managed, cheap and functional electricity distribution system. Replacing it with a set of policies which have doomed the Australian public to decades of brown- and black-outs due to a reliance on electricity generation from solar panels, wind turbines and (believe it or not) super-Carbon-Dioxide-generators powered by diesel engines as main base load generators at what can be categorically stated as the most costly electricity prices on the planet.
For years, Australian power generation policies have rested upon a base load supply generated by coal-fired and gas-turbine powered generating stations, supplemented by hydro power schemes. Result, a power generation system designed and controlled by Engineers, which delivered electricity cheaply over the vast expanses of the external rim of the Australian Continent. For those who perhaps do not understand how big Australia really is, check out the fact that from Perth to Sydney is 2,700 miles. Through the lunatic policies such as the Renewables Energy Target, the Australian Government, after the forced closure of the Hazelwood coal-burning generation station, allowed AGL, the owners of both Bayswater and Liddell coal-fired power stations to increase their prices for electricity. The Liddell plant was repriced from $40 to $60 per megawatt hour, to greater than $5,000 per megawatt hour, making almost $3 billions extra profit for the Generation giant during the recent power surge. This profit was also boosted by much of the power offered by the Bayswater plant almost doubling in price, from about $40 per megawatt hour, to about $80 per megawatt hour.
Who, readers may well, ask, is paying for this absurd rise in a Generator company’s profits? Well, just as ever, it is the poor, silent Aussie taxpayers who foot that bill, as well as every other attempt at making ‘Climate-Change-and pay-for-weather-to-change’ policies actually work. But the real reason why the electricity bills for the average Aussie has quadrupled in four years is through the change in the unreal expectations of the Network Owners. Here’s what consumers are paying for: in 2010, the networks began to spend $45 billion, approved by the Australian Energy Regulator (AER), on building and upgrading the poles and wires. This unprecedented spending allowance was granted on the back of dire warnings from the networks that energy demand was about to skyrocket, and unless the networks were allowed to spend tens of billions, the poles and wires simply wouldn’t cope.
Unfortunately, the networks did not realise that Electricity generation was changing, and this vast upgrade, built to give a system which could withstand upheavals, missed the revolution indicated by solar and battery technology
Here’s what consumers are paying for: in 2010, the networks began to spend $45 billion, approved by the Australian Energy Regulator (AER), on building and upgrading the poles and wires. This unprecedented spending allowance was granted on the back of dire warnings from the networks that energy demand was about to skyrocket, and unless the networks were allowed to spend tens of billions, the poles and wires simply wouldn’t cope.
It just so happened that this demand spike was predicted to be the most dramatic in NSW and Queensland, the only two states where the networks are government-owned. However, things did not go according to plan. As soon as the networks started spending, energy demand didn’t skyrocket – it did the opposite. In 2010, for the first time in Australia’s history, demand went down, and it’s gone down ever since.
Here’s the rub: the networks had a strong incentive to ignore the naysayers, because the more they built, the more they got paid.
Despite year-on-year reductions in demand, the networks carried on building to match their over-inflated projections, installing Rolls Royce infrastructure that consumers hadn’t asked for, and would never need. Eventually, when the evidence was too pressing to ignore, the networks did rein in some of their spending, but not enough to stop electricity bills going through the roof.
Before the networks even had their spending approved, industry observers and experts were warning them – and the regulator – that their demand projections were way too high, and would lead to unnecessary investment.
“There were signs. Many organisations and individuals – and I was one of them – said their demand forecast was simply too high,” says analyst Bruce Mountain, who’s been advising regulators around the world for almost 25 years.
“But I think also one needs to ask the question: have they profited from an expansion of their capacity? Was this something from which they stood to gain? The answer is obviously yes. They stood to gain very sizeably.”
Here’s the rub: the networks had a strong incentive to ignore the naysayers, because the more they built, the more they got paid. Not only could they charge every dollar of that $45 billion back to consumers through their bills; they could also add on another 10 per cent – their “regulated rate of return” – and charge that back to consumers as well.
This incentive was supercharged in 2006 by state governments: they wrote the rules for the regulator to enforce, thanks to a deal with former prime minister John Howard, who gave them rulemaking authority in exchange for their blessing to replace state-based regulators with one new federal body.
The most egregious overspending on the poles and wires occurred in NSW and Queensland, where the networks are government-owned. This also happens to be where network profits have risen the fastest, via the bills of businesses and households across both states.
For the foreseeable future, consumers will continue to pay for investment they didn’t ask for, and will never need, every time they pay their electricity bills.
Bruce Mountain has conducted detailed analysis of network profits in these two states. According to his calculations, in 2008 – prior to their multi-billion dollar spending spree – the profit they earned on every electricity connection (every house or business connected to the grid) was $180. Today, it’s $500.
“I haven’t seen network charges higher in any other region or country of the world,” says Mountain.
Much of this profit was generated by a neat trick: back in 2010, using a combination of lobbying and legal appeals, the networks secured a 10 per cent interest rate on their cost of borrowing. This was several percentage points higher than they had to pay their lenders, especially in NSW and Queensland, where the networks borrowed at low government interest rates. But no matter what rate the networks actually had to pay, consumers were charged the full 10 per cent.
Calculated on billions of dollars, every percentage point the networks could secure above the actual interest rate they paid equated to hundreds of millions – all of it pure profit, and all of it paid for by consumers through their electricity bills.
This is all perfectly permissible, according to the networks’ peak body, the Energy Networks Association. Every dollar of network spending has been assessed and approved by the Australian Energy Regulator – it’s not the networks’ fault if that decision was too excessive. Besides, if the networks were to be forced to return some of their profits, that would create an unstable – and untenable – investment environment that would end up costing consumers more in the long run.
But even the regulator has conceded the network price increases are “hard to justify”. In its 2011 State of the Energy Market Report, the AER said it was restricted from making “holistic assessments” of how much of the investment was efficient or necessary, and that “this restriction has led to consumers paying more than necessary for a safe and reliable energy supply”
Yes, the networks needed to upgrade their poles, cables, substations and other transmission equipment, but it is the average poor bloody Aussie who cannot afford to buy the solar panels and the storage batteries which can take advantage of Australia’s bountiful sunshine, and who are tied to the networks cables for their electricity.
But readers must turn, reluctantly, from the stark lack of choice imposed upon Australian energy users to the equally stark choices being forced upon us here in Great Britain & Northern ireland (GB&NI). After the grovelling morons (MPs) in Westminster voted in the Climate Change Act, we in GB&NI have watched as the Climate Change clowns have steered us towards an Energy collapse; by starving coal power stations of maintenance funding because they do not comply with EU Regs; by vast amounts of subsidy (your taxpayer cash) flooding into the holy ‘Renewables’ cashbag (wind turbines, solar, and by burning wood (Yes, Wood) at Drax Power station): as well as by not building replacement power stations to replace the old nuclear stations as they approach the end of their safe working lives! We also watch the un-dead hands of the greedy thieving culprits as they use the pretence of pushing ‘Climate Change’, and the billions of £ sterling therein, towards enriching themselves at the public expense. For instance Lord Deben, a.k.a. the former MP John Selwyn Gummer is alleged to have enriched his family company by up to £600,000.00 by facilitating contracts for those companies who have made substantial payments to his family company. In speech after speech, the QUANGO which he chairs has pushed the acceptance of battery-powered cars to the point where his Committee is advising the Government to push for all petrol- and diesel-powered cars to be banned by A.D. 2030 rather than A.D. 2040. He makes no mention of the fact that Johnson Matthey, who paid his company nearly £300,000.00, is planning to build a huge vehicle battery plant somewhere in GB&NI.
But nowhere in this huge pile of lying garbage spun out by this same Climate Change Committee is given the slightest hint of the sheer problems which will be unearthed once the demand for charging all these “Carbon-Neutral’ battery powered cars becomes evident. We will need the present number of power stations which give a coherent, stable base load to be increased by a factor of 200%. The reasons for this huge increase in power availability is not only through the need to power the millions of battery charge points to give battery-powered vehicles the stable source needed; but also to also absorb the huge increase in generation load once the ban comes into force whereby all gas-fired boilers will be removed, BY LAW, and replaced with electricity-powered heating systems. This last statement is not envisaged as yet, but as the same Committee is pushing for all new homes to be fitted with electric boilers, (so as not to add to the “Carbon Dioxide” emissions, so denigrated by the Climate and Greenie-brigades: it will not be far behind, as the dreaded “Carbon-Dioxide fuelled Climate Change” is just around the corner. Also not included is the vast expense of installing suitable electrical connections for the aforementioned electric boilers, and the slightly secondary problem of where all these skilled electricians, necessary for the electrical boiler and electric stoves to be fitted: are going to be found, trained, paid and overseen!
Also unforeseen, but would be self-evident, is the total upgrade of the National Grid, together with all the towers, overhead cabling, switchyards, massive transformers and associated switchgear; as the present system is just managing.
The final item, forgotten by all except those, who like me, think things through to the end: is ‘who is gonna’ pay for all these things? The new electrical boilers, the stoves, the switchgear, the towers, the cabling, the skilled staff to install and run the very upgrades, the new power stations: they don’t come cheap. As ever, its you and I, the bloody taxpayers, who will be forced to foot the bill financing this fools’ paradise!