Energy Minister Chris Bowen has opposed the electricity market regulator’s controversial plan to raise the cost of connecting to the electricity network, fuelling a clash over the charges to be levied on home owners who have installed batteries.
The Australian Energy Market Commission proposal would change how electricity companies recoup costs of maintaining and building the poles and wires network. After its draft report in April, a final version was released on Thursday which argued the current system of variable network charges benefits households with rooftop solar panels and batteries at the expense of those who could not afford to invest in clean energy.
However, clean energy advocates argue that the commission’s final proposal to switch from the current system of variable to fixed network charges would slug battery owners thousands of dollars and reduce the benefit of investing in household clean energy technology.
Bowen said that “premature changes” would create unintended consequences for the 430,000 households who have installed batteries and that any reforms must cut costs for all customers.
“Any changes need to be in the interests of all consumers, including those investing in their own solar and batteries, delivering lower bills and a better deal for households. We will only back changes that meet these criteria,” Bowen said.
“We’ve been clear to the industry and regulators – any reforms must deliver cheaper bills.”
Network costs can account for up to 50 per cent of a typical household electricity bill. The charges are levied to repay private operators of the poles and wires network and fluctuate depending on how much power is used. That means homes with batteries and solar panels that use less electricity from the grid pay fewer network charges.
Under the commission’s new plan, to kick in from 2030, network charges would be fixed, a move it said would ensure all customers pay a fair share for network upkeep, regardless of whether they have reduced their grid usage via solar and battery systems.
Commission chair Anna Collyer said the current regime was designed for a market in which a few large coal plants supplied energy users with most of their power. But renewables had fundamentally changed the system and the current regime was unfair to those who could not cover the thousands of dollars in costs to install batteries.
“Inaction is not a neutral option. The longer we wait, the more costly and more complex this system becomes, and the heaviest burden falls on those least able to carry it,” Collyer said.
For its proposed power bill changes to take effect, the commission must complete a formal review, which could take months. While Bowen cannot veto the plans, the commission must consider his opinion as well as that of industry, other regulators and state and federal energy ministers.
Green Energy Markets advisory director Tristan Edis said fixed network charges would increase the electricity costs for a household with rooftop solar and a 20-kilowatt-hour battery, over its 15-year lifetime, by about $6000 in Melbourne and about $8500 in Sydney.
Edis said the final report recommended that the network companies should influence how charges were levied.
“Why on earth would you give foreign-owned monopoly networks the power to set pricing structures? Of course, they’ll aim to hobble the one genuine competitor threatening their monopoly, which is batteries and solar. You’d have to be an imbecile to think they’d do anything else.”
Tony Wood, senior fellow at the Grattan Institute, said the proposed reform was an attempt to address a growing problem: that households with the means to afford solar and batteries were no longer paying an equitable share of the cost of a network built for everyone.
“The AEMC is not resiling from its position that the people with solar and batteries are avoiding paying for the network and that’s got to be fixed,” he said. “Just because the financial attractiveness of rooftop solar and batteries may be less, that doesn’t mean we shouldn’t do it.”
Smart Energy Council chief executive David McElrea said the proposed changes in the final report would still impose greater costs on battery owners.
The commission proposed a “grandfathering” provision to carve out households that have bought a battery before the fixed charges kick in and emphasised changes would be implemented over a decade, starting in 2030.
“When our household solar and battery revolution is bringing down power bills, stabilising the network and reversing climate pollution, we would be mad to do anything that undermined that.“
Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
