State Govt announces cost-cutting for electricity sector

MAJOR changes to Queensland's electricity sector that could save billions in network costs and revenues are the centrepiece of reforms announced today by the State Government.

Queensland Energy Minister Mark McArdle said the proposal, subject to consultation with employees, was to bring Ergon and Energex under a single company would reduce duplication and improve the efficiency of network businesses. 

This proposal if accepted could lead to savings of over $580 million over seven years, a statement from the government claimed.

"Doing this will help the government tackle soaring electricity costs by delivering significant savings that can be passed on to customers," Mr McArdle said.

"Electricity sector reform is not something that can be delivered at the flick of a switch. The establishment of a holding company for Ergon and Energex, plus other efficiency measures identified, should start to make a difference.

"The issues identified in reviews of the sector have taken a long time to bring together.

"There is no overnight solution to getting benefits back to customers as soon as possible, but tackling network costs is seen as the most critical issue within the government's control."

In response to rising electricity costs, Mr McArdle said the Newman Government established an Interdepartmental Committee on Electricity Sector Reform (IDC) on 30 May 2012 to examine cost pressures on electricity prices.

The IDC was asked to make recommendations to ensure:

  • Electricity in Queensland is delivered in a cost-effective manner for consumers
  • Queensland has a viable, sustainable and competitive electricity industry
  • Electricity is delivered in a financially sustainable manner from the Queensland Government's perspective

"The IDC recommendations being released today provide a blueprint for reform that addresses the unsustainable nature of network costs, maximises the potential benefits of a competitive market, and protects vulnerable consumers as the reforms are delivered," Mr McArdle said.

"In developing the recommendations, the IDC looked at best practice from other states and developed strategies that allow the government to maximise the benefits of reform.

"However, customers are at the centre of the government's response, with reforms aimed at tackling costs, improving competition and providing the building blocks for a more sustainable electricity sector for customers, industry and government."

Mr McArdle said the IDC found two main cost drivers:

  1. Network costs and revenue. These grew by more than 100 per cent between 2007-08 and 2012-13
  2. Climate change policies. The costs of these policies are expected to add around 11 per cent to standard residential bills in 2013-14, or around 15 per cent if solar costs are included

"These reform strategies address cost pressures, build a more competitive market and reduce risks to customers, industry and government in participating in the sector."

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