Energy cost shock for consumers

Origin Energy chief executive Grant King has predicted the price of electricity will increase threefold by 2020 as a result of the cost of implementing Labor’s renewable energy targets. “The reality is that the price of electricity is going to go up substantially,” Mr King told a Sydney conference yesterday. “We think it is possible that by 2020 the price of energy to consumers will be up to three times what they pay today.”

In March it emerged that electricity prices in NSW were set to rise by up to 64 per cent over the  next three years, fanning criticism of the Rudd Government’s climate change policies. The independent Pricing and Regulatory Tribunal said the price increase was designed to cover the costs of the carbon pollution reduction scheme and electricity network upgrades.

Mr King said the government’s target of increasing the proportion of renewable in the overall energy mix to 20 per cent by 2020 would dramatically increase costs. “When we look broadly at the whole range of renewable, they are nowhere near cost competitive with the existing traditional fossil fuel technologies” he said. “In broad terms you could say that they are twice the price of those current technologies. “I would contend that they are much more than twice the price because we have not yet learnt (from the government) how to cost them”

Companies’ transmission and distribution charges, which have traditionally been about half of the cost of energy for consumers, would rise as a proportion of producers’ costs in the next decade, leading to an increase in the overall energy bill. “Depending on the policy choices we make, we believe that will go up more than 60 or 70 per cent,” he said.

Origin contends a lack of clarity from government over its policies also means Australia is unlikely to meet its target of reducing carbon emissions by 5 per cent by 2020. “ We will fall well short of that target.” Mr King warned that the government had been irresponsible in delaying talks on carbon pricing. “We have gone from late last year having a bipartisan electoral commitment to price carbon to one where there is no political agreement about pricing. We need to know what the government wants us to build in the next two or three years.”