WA electricity prices lowest in the nation

Monday 15 Dec 2014

People in favour of privatising Western Australia’s electricity system argue that Western Australians pay more for electricity than other Australians.

This argument is simply not supported by the facts.

Western Australians are currently charged 24.6 cents per kilowatt-hour to consume electricity.  This charge is the same, no matter where you live, because it includes the tariff equalisation charge, which is used to subsidise the higher cost of producing and distributing electricity in regional areas.

An examination of the 2013 Residential Electricity Price Trends final report, which was commissioned by the Australian Energy Market Commission, shows that the price of electricity in WA is the lowest of all Australian States.

The report also indicates that there is a relationship between privatisation and electricity prices, but that the relationship is one where the price of electricity is higher, the greater the level of private ownership within the system.

For example, in the partially privatised systems of Queensland and New South Wales, the average charge is 25.8 cents and 25.7 cents per kilowatt-hour, respectively.  In the almost fully privatised systems of Victoria and South Australia, the average charge is 27.1 cents and 29.6 cents per kilowatt-hour respectively.

The Barnett Government argues that the current charge for electricity in Western Australia is 30 per cent lower than the level it would need to be, if it was reflective of the cost of producing electricity.  The State Government has historically subsidised the cost of producing electricity in Western Australia because of the higher costs associated with Western Australia’s large landmass, and the fact that Western Australia cannot access the benefits of being connected to the National Electricity Market (NEM).

Those that argue that the privatisation of Western Australia’s electricity system will drive down prices for consumers ignore a number of facts.

First, privatisation will not change the fact the Western Australia is a big place and has unique cost pressures when it comes to producing and distributing electricity.  Second, privatisation will not result in WA becoming connected to the National Electricity Market.

What we can be certain of is that no private investor would invest in a system where the amount they can charge for electricity is 30 per cent lower than the cost of producing it.  In fact, they are only likely to invest in a system where they can make a profit.  This means, as our electricity system is progressively privatised, price increases of between 30 per cent and 50 per cent can be expected.

The average WA household currently pays about $1,460 per year for power.  After you apply the privatisation price premium, this bill could rise to $2,190 per year.

In other parts of Australia, the evidence suggests that privatisation leads to higher electricity prices for consumers.  Western Australian households currently pay less for electricity than households in every other Australian state.  If the Barnett Government privatises our electricity system, we would likely end up paying the most.