TSBC charged up over electricity cross subsidies

//TSBC charged up over electricity cross subsidies

TSBC charged up over electricity cross subsidies

Upon the release today of the latest report into the Tasmanian energy market highlighting that Tasmanian small businesses subsidise all other Tasmanian energy users by up to $10 million dollars, CEO Robert Mallett today declared that ‘enough was enough’.

The Tasmanian Small Business Council (TSBC) has been concerned for some time that Tasmanian small business is bearing the brunt of cross-subsidies in Tasmanian electricity tariffs.

[1]

To shed more light on this, the TSBC commissioned Goanna Energy to undertake an analysis of Tasmanian electricity tariffs and today released their report, Cross-subsidies in Tasmanian Electricity Tariffs – impacts on Small Business.

The report highlights that Tasmanian small business is treated differently than residential consumers.

Aurora Energy’s small business retail tariffs contain a cost disadvantage for a small business at the average electricity consumption level of around $400 per annum.[2] For small businesses at higher electricity consumption levels, the annual cost disadvantage increases to about $700 each.

For all small businesses on regulated retail tariffs – which is the great bulk of Tasmanian small businesses – this largely hidden impost could be over $10 million annually.

Recent submissions to regulators and other documents produced by both Aurora Energy and TasNetworks confirm that, small businesses are treated differently than residential customers to the disadvantage of small business customers.

“These cross-subsidies are imposing significant costs on small business consumers, added costs that they can ill-afford,” Mr. Robert Mallett, Executive Officer of the TSBC said. “Small businesses often operate on thin margins and in highly competitive environments. Cost control is critical to survival but these electricity cross-subsidies are damaging to costs and the viability of small businesses. They stymie small businesses’ ability to contribute to the Tasmanian economy by adding to economic activity, employing Tasmanians and investing in Tasmania.”

“To this end, we are calling on the Tasmanian Government, regulators, Aurora Energy and TasNetworks to put an end to these small business cross-subsidies as a matter of priority.”

Mr. Mallett noted that the Goanna report also found that the cross-subsidies lack transparency, as they are hidden within individual electricity tariffs. It further found that the over-recovery of costs in small business electricity tariffs is mostly directed at offsetting the under-recovery of costs in heating tariffs.

“There may be a legitimate purpose in supporting Tasmanians to heat their houses in cold weather, but these electricity tariff cross-subsidies are poorly suited to this. If the Tasmanian government wants to support low income Tasmanians there are a range of other mechanisms open to them to do this, not impose an unfair burden on small business people”.

“The current subsidy situation also provides artificial barriers to the use of natural gas in Tasmania, which cannot compete against the subsidised electricity heating tariffs, even though it arguably offers a more efficient fuel for this purpose.”

“We welcome that both Aurora Energy and TasNetworks have started to remove the cross-subsidies in their tariffs at the same time as they implement other tariff reforms, but there is too little known about both how long this will take (with periods of up to 15 years proposed) and the transition path to removal.”

“Individual small businesses may be able to benefit from some of the new tariffs being offered and we suggest that they examine their ability to do so more closely.”

“Small business activity would be stimulated by a rapid removal of electricity tariff cross-subsidies,” Mr. Mallett concluded.

[1] A cross-subsidy exists when the costs of supplying one class of consumers are over-recovered (the Source of the cross-subsidy) and redistributed to another class of consumers where the costs are under-recovered (the Recipient).

[2] This is compared to the commonly used household tariff combination provided by Aurora Energy, which includes light and power, and heating.

Cross-Subsidies in Tasmanian Electricity Tariffs and Small Business

2018-08-06T15:40:33+00:00November 16th, 2016|

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