The price of power"Cost of living pressure" is a phrase that receives a lot of attention particularly in the mainstream Australian media. Due to recent rises in the price paid by consumers of electricity and other related hot political topics (such as putting a price on carbon), there is intense community interest in the price of energy in general.
So what's going on? How much does electricity actually cost in WA and what do consumers get for their money? How do we compare with other parts of Australia? What can consumers do to lower the impact on their family budgets?
What it costs and who pays
Western Australian domestic users of electricity pay 24.8866 cents per unit (kilowatt hour) on average.
The price stack below gives an indicative view of the relative costs involved in supplying electricity to residential customers in WA. It also shows that the price paid by consumers remains below the cost of supply.
*Other includes: market fees, ancillary services, excess generation capacity, permits for small scale (e.g. solar renewable obligations, permits for large scale renewable obligations
+Transmission & distribution networks (incl. tariff equalisation)
The State Government pays for the deficit – estimated to be worth $371 million in 2011-12.
Western Power invests money raised by the ‘networks’ component of the tariff into building, operating and maintaining the electricity network.
Price rises since 1998
The price of electricity (retail tariffs) in WA is set by the State Government. This price was frozen for a number of years and remained the same from 1997 to 2009 (other than the rise associated with the GST in 2000). Of course the cost of supply throughout this period continued to grow so the gap between cost and price widened.
Though the price has rise 78 per cent over the last 15 years (excluding GST), which equates to an average annual increase of 4.6 per cent, most retail tariffs remain below the total cost of supply.
How WA compares with the rest of Australia
Making comparisons of retail prices between states is difficult because in NSW, SA, ACT, Tasmania, NT and Queensland, although tariffs are regulated, retailers can and do offer discounts. This is because the exist in a contestable market where residential consumers can choose between competing retailers. It is perhaps more revealing to compare network charges between states.
The other important point to bear in mind when comparing WA to other states is that we have a very low population density resulting in generally higher costs associated with building and maintaining a transmission and distribution network over a large geographical area for a smaller number of customers.
The cost of home energy compared to other household costs
You might be surprised to learn that according to ABS data, the average Australian household spends just two to four per cent of its budget on electricity and gas.