Consumer and housing groups are calling on Energy Ministers to reduce household electricity bills by agreeing at their meeting next week to increase energy efficiency standards for new and existing homes and fixed appliances.

CHOICE, National Shelter, Renew, the Australian Council of Social Service (ACOSS) and 32 other community groups have signed a joint statement calling on the COAG meeting of energy ministers to commit to higher energy performance standards in the next update of the National Construction Code from 2022 and mandatory minimum energy efficiency standards for rental properties.

ACOSS Energy Adviser, Kellie Caught, said improving energy efficiency would collectively save households billions of dollars in electricity bills.

“The Morrison Government says one of its top priorities is reducing electricity bills. The COAG energy ministers’ meeting is a golden opportunity for federal government to work with state and territory governments to drive down electricity bills, while acting on climate change.

“Up to 95% of homes have poor energy performance, so many people are now living in homes that are damp, too cold in winter and too hot in summer and people on low incomes have little means of escape from these weather extremes.”

“Modelling done for COAG Energy Council shows that improving energy efficiency in existing homes by even just 1 per cent would save Australian households $1.5 billion a year.

“Better energy efficiency is good news for everyone, especially people on low incomes.

“People on low incomes spend a far greater proportion of their income on energy bills and are forced to go without essentials like food, heating and cooling to afford their bills. Acting on energy efficiency is critical to tackle poverty and improve health and wellbeing.”

Renew CEO, Donna Luckman said “While energy prices have been rising and climate risks getting worse, our efficiency standards for new homes have been standing still. With work already starting on the 2022 update of the national code, we can’t afford for Energy Ministers to miss this critical opportunity to commit to higher standards for new homes.

“Cutting energy waste by improving the efficiency of our homes is also one of the quickest and cheapest ways to reduce carbon emissions.

“New energy performance standards could reduce average energy costs by up to $900 per household annually, reduce emissions and improve the resilience of the electricity grid.”

National Shelter Executive Officer, Adrian Pisarski, said renters faced the greatest barriers to improving energy efficiency.

“Renters can live in some of the worst housing and have little control over the energy efficiency of their homes, which can greatly impact their energy bills.

“We’re calling on governments to work together on a national strategy that includes mandating a minimum energy efficiency performance standard for rental properties and, if necessary, incentives for landlords to upgrade properties, with priority given to affordable rental properties.”

CHOICE campaigner, Linda Przhedetsky, said consumers were looking for savings on their energy bills but there was only so much they could do without government action.

“We know many consumers are looking for ways to save on their energy bills by making changes, such as installing energy efficient appliances or solar panels, but these changes cost money and are often out of reach for low income earners.

“Consumers should not be made to carry the ongoing burden of expensive energy bills because they have no choice but to live in homes that are wasting energy,” Ms Przhedetsky said.

Link to joint statement

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Rocketing power bills have allowed energy giant AGL to rake in massive half-year profits of more than $622 million, up 91 per cent on the previous year.

Those profits come directly from the pockets of ordinary Australians, who have been forced in recent times to spend hundreds of dollars a year extra for the privilege of powering their homes.

AGL’s announcement on Thursday came a day after the Australian Bureau of Statistics revealed the cost of living in Australia rose two per cent in 2017 – the biggest jump in 3.5 years.

The pressure on Australian households is further compounded by stubbornly lacklustre wage growth.

With all this in mind, The New Daily decided to put a magnifying glass to the energy industry to find out how AGL is managing to profit so handsomely from Aussie households’ pain.

How AGL got away with our money

AGL has two core businesses: energy generation and energy retail.

The first involves the generation of electricity through AGL’s nationwide network of power stations. AGL sells the electricity it generates to the ‘wholesale market’ – that is, the energy retailers that sell you your energy.

The second part of the business is as one of those retailers it sells electricity to.

The bulk of AGL’s $622 million profits came from the energy-generation side of its business.

David Blowers, an energy expert with think tank the Grattan Institute, put this down to supply and demand forces.

The sale of electricity takes place on something called the “spot market” – a government-regulated market place where the price of electricity is set every half hour according to supply and demand.

All trades between generators and retailers must go through the spot market. This keeps the cost of electricity transparent, essentially forcing energy companies to charge no more than the market price.

Mr Blowers explained that the reason electricity is so expensive at the moment is that there is an under supply of energy being sold on the spot market.

This under supply means when a retailer goes to the spot market to buy electricity, it doesn’t have a lot of choice. And when there isn’t a lot of choice, but there is a lot of demand, prices go up.

So why is there an under supply of electricity?

In a word, uncertainty.

“No one is investing in new generation apart from renewables, and you need that investment to push down prices,” Mr Blowers told The New Daily.

“And the reason companies aren’t investing is because they don’t know what the government’s policy is.”

The result, he said, is that “people are paying far more for their energy than it costs to produce”.

Retailers, incidentally, don’t benefit from this. They have to pay extra for the electricity, and while they pass on most of this to households, competition means high prices actually eat into their profit margins.

So, it’s just the electricity generators that are making a killing off the current under supply (although AGL, of course, is retailer and generator).

Who should you blame?

While Mr Blowers said it was understandable to want to blame electricity producers like AGL, he said the current high prices were just a result of “the market doing what the market does”.

When the government handed over electricity generation to the private sector, it knew that private companies were intrinsically self-serving enterprises whose sole raison d’être is to maximise returns for shareholders.

“You could argue the way in which the market works is not producing good outcomes for the consumer. But you also have to say the government has mucked around for too long,” Mr Blowers said.

He said Prime Minister Malcolm Turnbull’s National Energy Guarantee “could provide the stability” needed for more investment, but he said that was a long way off – and it would need the support of state governments, which was far from certain.

“The good news is the renewable energy target means there will be a lot more renewable energy coming into the market over the next few years, and that will push prices down a little bit.”

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