Bushman's Bakery director Peter Grant said his electricity bill has doubled over 10 years.
Bushman's Bakery director Peter Grant said his electricity bill has doubled over 10 years. Jacob Miley

Mackay bakery crippled by energy costs

A MONTHLY electricity bill for Mackay business owner Peter Grant 10 years ago was $5000.

Now, that expense has doubled, putting his business under pressure.

Mr Grant, a director of Bushman's Bakery on Evans Avenue in North Mackay, said the high cost of electricity was concerning for a business that relied on power to operate its electric ovens and refrigerators.

It was one of the factors that made staying in business difficult, he said. The bakery was forced to absorb the higher electricity costs as it was unable to raise its prices due to market pressure from the major chain stores.

Mr Grant, said the problem wasn't confined to their business.

"It's not just us, it flows back to our customers. If our customers aren't doing well, we can't sell product to them. We are all relying on each other."

Mr Grant said the price rise was not critical to business yet, but if it were to increase and double again, "that would be just about enough" he said. "It would be devastating for the 25 staff members and the six contractors that work for us."

Here's our user-friendly guide to understanding the electricity conundrum:

POWER prices have almost doubled in a decade, with warnings the bill shock will cost jobs.

"It's taken 10 years to arise and it will take a long time to unwind," Australian Competition and Consumer Commission chairman Rod Sims told a Brisbane forum this week.

A staggering third of consumers are unable to even identify their power plan and find it harder to shop for energy than bank, insurance or mobile phone deals.

Here's our user-friendly guide to understanding the electricity conundrum:

 

Power bill pricing begins with the state's electricity generators.

Most electricity that reaches your home is created by state-owned, coal fired power stations.

This wholesale energy cost - the price of buying electricity from the power stations and other suppliers - is passed on by energy retailers and makes up at least a quarter of your bill.

The energy is traded like goods on the stockmarket.

Retailers compete in the National Electricity Market - an energy exchange spanning five states.

Hundreds of traders working for the retailers sit glued to computer screens on "trading floors" around the country crunching data at all hours to get a good deal.

They even consult weather forecasters - a distant heatwave can send prices soaring.

Traders for the generators are on the selling end, battling to get top dollar.

The generators bid in the highly volatile "spot market", offering their energy to retailers.

Retailers shield themselves from price surges by locking-in deals, but the rapidly fluctuating "spot price" inevitably trickles through to consumers.

The closure of several ageing coal-fired power stations this year sent market jitters that shot generation prices up by 20 per cent.

There was also the giant leap in gas generation prices (they've tripled in as many years).

But critics blame skyrocketing prices in Queensland on a lack of competition rather than a supply scarcity.

Market concentration was increased under the former Bligh administration in 2011 when three state-owned power generators were merged into two.

Generators Stanwell and CS Energy now control about two-thirds of the Queensland market.

Claims the generators were "gaming" the system surfaced as Queensland wholesale prices overtook all other states in the first five months of the year.

This was despite the state having an oversupply of electricity generation last year.

Critics seized on Government forecasts of a $1.5 billion windfall from the generators this financial year - 110 per cent more than in 2015-16 - as evidence of profiteering.

The under-fire Palaszczuk Government reacted by directing Stanwell to change its bidding practices. Prices fell by a quarter, but it only fuelled criticisms the State was wielding too much market power.

 

While generation costs are a political hot potato, the biggest price driver is network charges.

Making up half of power bills, the fees cover the cost of getting power to your door via the state's network of poles and wires.

The charges are recouped by state-owned distributors Ergon, Energex and transmission company Powerlink from Queenslanders via power bills.

A revenue cap is set by a Regulator every five years dictating how much money the monopoly networks can spend on network building and maintenance.

Homeowners pick up the tab, even if it turns out the spending wasn't necessary.

It's like a diner being billed for a $100 wagyu steak even if they didn't eat it, because the restaurateur had to have it on the menu.

While the networks were busy building, Queenslanders were installing rooftop solar.

Demand fell, but high network fees were already locked in.

Rod Sims says the network "gold plating" was an "over-reaction" to power outages 14 years ago.

The problem was compounded by network pricing rule relaxations "largely to maintain or boost government revenues with no or little concern as to affordability," he said.

Consumer activists question how distribution profits of $1.15 billion that flowed to the State in 2015-16 are justified, even factoring in power subsidies in the bush.

 

The third chapter in the power pricing story is retail prices.

That's the part of your bill where you pay for the electricity you actually use.

It's the only area you have any control over, but is still a relative minnow.

Deregulation of south-east retail prices in 2016 boosted competition, but higher wholesale prices threaten to wipe out any savings.

There's still a "considerable concentration in the retailing of electricity", says the ACCC, with the three big players - AGL, Origin and Energy Australia - holding the lion's share of the market.



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