Energy industry under scrutiny

The electricity industry has been under much discussion and scrutiny of late, with a number of changes happening across Australia in the sector.

Andrew Reeves, chairman of the Australian Energy Regulator (AER), recently spoke at a conference of the Committee for Economic Development of Australia (CEDA) on the importance of recent energy market reforms and how these can improve outcomes for energy consumers.

Mr Reeves spoke about issues of regulation, infrastructure and electricity prices, areas which have been of particular focus for AER in recent times.

It was acknowledged that rising energy prices have been putting a strain on households. This can be illustrated with the many recent examples of households, especially in NSW, getting their electricity disconnected as they have been unable to afford their energy bills.

Mr Reeves spoke in detail about the energy reform package which has sparked reviews of regulation in the energy market, including a review of the rules that set out how network prices are chosen as well as how they've been applied, reliability standards, the efficiency of public and private NSPs and how the long term interests of consumers can be better integrated into the regulatory process.

"There have been a range of reasons for recent price increases, but the rising costs of the electricity poles and wires that transport energy to customers have been the main contributor to price increases in all states," said Mr Reeves.

"The factors driving these increased network costs include the need to replace ageing equipment and meet peak demand and, at the time the determinations were made, higher cost of finance in the post-GFC environment."

Peak demand has been an issue in the electricity sector but Mr Reeves argues that consumers may have been bearing the brunt of unnecessary and unfair charges for this, as well as the costs for maintaining and upgrading ageing infrastructure.

Under the new framework, a number of problems within the system are being addressed.

"Changes both to the rules framework and to the AER's processes are a part of making the energy market work better for consumers. In essence, the initiatives underway are intended to promote an interactive process in which consumers, the AER and network businesses are all involved in ensuring the services that are valued by consumers are the ones that are provided," said Mr Reeves.

Mr Reeves suggested that the new regulatory framework, better regulation and better investment decisions, along with better consumer engagement, will result in a more efficient energy sector.

Posted by Charlie Moore