Australia : January 22, 2008
Residential electricity users in the Australian state of Victoria are facing an average price increase of 17 percent as of 1 January 2008. The price hike is primarily due to the retail electricity market moving towards full deregulation within the next year. Also contributing to the increase is the ongoing drought which has been responsible for price volatility across the country’s entire Eastern seaboard.
Sydney residents have been very fortunate regarding price hikes over the past few years as the New South Wales (NSW) state government has slowed the transition to full deregulation as part of its privatization plans for the electricity industry. A spokesman for the Energy Retailers Association of Australia said the NSW prices are around the lowest in the country due to the fact the Government is still regulating electricity prices for the lower end of the market. However, the spokesman went on to say that this situation cannot last forever.
In South Australia, the privatization of the electricity market resulted in significant price hikes for households which are currently the highest in the country.
Under a national policy promoting full competition in the electricity markets, all state governments will be removing price controls over the next few years. It is expected that Victoria will be the first to commence full deregulation from 2009 with other states to follow soon thereafter.
The current ongoing drought has introduced volatility in power pricing resulting in state government-owned electricity companies being exposed to several billion dollars in hedging risks from electricity supply contracts. The situation will erode some of the profit from the $15 billion the Government hopes to achieve in selling their electricity assets.
The view here is bleak for Australian electricity consumers no matter in which state you happen to reside. It is hoped that the eventual breaking of the drought will being some price relief, but until then, consumers will be exposed to the full force of our deregulated electricity markets.