Come 2013, electricity network companies in Australia will begin the tedious process of determining how much each household and business will pay for their electricity consumption based on the new infrastructure that need be constructed in the next five years. Staggering electricity rates had been everyone's burden and change had been pushed in the legislature.

Thus, an alliance of business, consumer and energy efficiency groups on Friday had welcomed the release of the final report of the Senate Select Committee on Electricity Prices, who deemed it necessary to push for reforms before this tedious electricity pricing process even begins.

"Reform is particularly urgent because the next round of 'network regulatory determinations' kick off in 2013. These determinations lock-in how much infrastructure network companies can build over five years, what returns they get and how much electricity prices will rise.

"We must fix the system before then to deliver the lowest possible prices for business, households and the most vulnerable among us. The Commonwealth and States need to work together to make these reforms happen," the tri-partisan group said in an issued statement.

The recommendations of the Committee share considerable common ground with the Plan for Affordable Energy launched on 29 October by the Australian Industry Group, the Brotherhood of St Laurence, CHOICE and the Energy Efficiency Council.

The Committee has clearly listened to the input provided by our organisations. While we will study the recommendations further, important reforms endorsed by our alliance, the Productivity Commission and the Australian Energy Market Commission have been picked up. These include:

  • Allowing energy users to sell demand reduction into the wholesale electricity market at peak times;
  • A stronger Australian Energy Regulator to ensure greater scrutiny of network businesses;
  • A clearer operating framework for network companies;
  • A keen focus on boosting energy efficiency to help businesses, households and government agencies contribute to demand reduction and save money; and
  • Greater consumer protections and a stronger voice for consumers in the operation of the electricity market.

Our alliance proposes that key Ministers consider a number of key areas to build on this package, to make it stronger and ensure that we deliver affordable electricity for households and businesses. These include:

  • Developing a proposal to set minimum targets for distribution network companies to use demand-side activity to reduce spending on newpeak-driven infrastructure;
  • Providing consumers (households and businesses) with a formal role in regulatory processes;
  • Using Victoria's 'probabilistic' network planning framework as a safe, cost-effective basis for the proposed national reliability standard; and
  • Monitoring retail costs and margins and assessing the effectiveness of deregulation of the retail market in Victoria.

The overall message is clear. Consumers, businesses, economists, regulators and now, following the release yesterday of the Senate Committee report, Senators from the Coalition, Labor and the Greens all agree that electricity reforms are essential. It is time for action.

Ai Group Chief Executive Innes Willox said: "The proposal to pay energy users to reduce demand at peak times is a simple and effective idea that deserves support from all levels of government - it can help businesses and households earn new revenue while reducing pressure on the prices we all face."

"The proposal to set national reliability standards is a good one, but needs detail. We need smarter standards, not lower ones. Victoria's 'probabilistic' standard should be the model, delivering low costs and high reliability," Mr Willox said.

Chair of the Brotherhood of St Laurence's Climate Change and Equity Program, John Thwaites, said: "The Senate report bolsters the case to fix the energy system, which will benefit Australians on low incomes. However, Governments need to ensure that before 'time of use' pricing, which charges more for electricity during peak demand periods, is introduced they evaluate the impact on vulnerable households."

CHOICE Chief Executive Officer, Alan Kirkland, said: "We welcome the Committee's support for the establishment of a national energy consumer advocacy body. Debates about pricing and regulatory issues are dominated by powerful interests and we need to ensure that consumers have an expert, well-funded voice.

"We think the Committee's recommendations could be further enhanced by the adoption of minimum targets to reduce expenditure on network infrastructure driven by peak demand. This is a significant driver of the price increases in recent years and we hope this option will be considered as governments head towards the final COAG meeting of the year."

Energy Efficiency Council Chief Executive Rob Murray-Leach said: "The Senate Committee strongly endorsed energy efficiency programs to make energy affordable, and also recognised the need to reform the way that generators are charged for using the network. We have a national consensus - it's time for action."