Cotton Australia has filed a submission to the Queensland Competition Authority (QCA) in a bid to stop a proposed 17.5% increase in electricity tariffs for Queensland growers.
The QCA’s draft determination on electricity prices for 2013-14 proposes an increase of 17.5% for popular farm and irrigation tariffs.
Cotton Australia’s primary concerns are:
The cumulative increases in irrigation tariffs between 2000 and 2013 of around 260% are not sustainable, and will only be further exacerbated by a 2014 increase of 17.5%.The QCA’s modelling of the impact of the recommended price increases has been totally inadequate.There is no incentive in the non-obsolete tariffs to encourage off-peak, despite the fact that many irrigators have designed and installed their systems to maximise the use of off-peak power.
While the recognition of a seven-year transitional period at least demonstrates that the QCA has some appreciation of the potential impact of tariff reform, seven years is entirely inadequate given the effective service life of equipment that has been invested in to best much the tariff structures that were available at the time of installation.
Regardless of the transition period, any move to force “large” irrigation customers onto demand charges will simply force those users “off the grid” and have them adopt alternative energy sources, leading to “stranded” electricity supply assets.The inclusion of a “headroom” allowance in Ergon’s area defies rational explanation, undermines the intent of the Universal Tariff Policy and should be scrapped. It is an unjustifiable 5% impost.
A more effective way to foster completion would be to direct the current government subsidy from Ergon retail to Ergon network, which would give other retailers the opportunity to compete.The inclusion of an “escalation” component of 25%, to encourage transition from obsolete tariffs is unjustified, and in fact will only lead to unsustainable electricity prices and the “stranding” of electricity supply assets. If adopted, “site-specific” charges for very large customers will make regional cotton gins completely uneconomic, putting the industry’s $1 billion contribution to the Queensland economy at risk.
Cotton Australia’s recommendations are:
That the QCA recommend to the State Government that it should call for a thorough, joint Federal/State Review of the electricity pricing framework.QCA undertake a robust analysis of the impact on price increases on the business profitability of business electricity users, with the analysis including the effect of all state-controlled price increases.
That the Queensland Government instructs the QCA to fully investigate the true cost differential between peak and off-peak electricity supply, and establish tariffs which reflect these true differentials. That QCA adopt the use of a 12-year transition period based on the ATO’s determination of the estimated life of irrigation infrastructure.
That the QCA, electricity suppliers and irrigators develop tariffs attractive to “large” users, whose primary use of electricity is to pump available riverflows when they occur, acknowledging that these flows are both intermittent and unpredictable in nature.
That the QCA removes the “headroom” allowance from its pricing recommendations, as it is a flawed and dishonest pathway towards improved competition.That the QCA recommend that the Queensland Government redirect its current subsidy payment from Ergon Retail to Ergon Network, as a cost neutral way of encouraging competition within the Ergon area at a retail level.
QCA removes the escalation charge for 2013-14, and prior to the next electricity price setting thoroughly models the impact of increase prices on business profitability, and user behaviour when faced with increased charges, and take into account those finding when next considering the implementation of “escalation”.
That the QCA recommends to the Queensland Government that existing business deemed either as “Very Large” customers, or those that may one day be categorised as ‘Very-Large” customers continue to be able to access “Non-Site Specific” Network charges, this would not limit the option of offering “Site Specific” network charges.
