Suggestion for power pricing could help homeowners

Suggestion for power pricing could help homeowners

A recent report from the Grattan Institute has turned the electricity sector on its head, suggesting a new method of determining power costs for end users.

The report, Fair pricing for power, says that change is urgently needed when it comes to electricity tariffs. While mortgage interest rates are currently favourable, homeowners will no doubt seek ways to cut costs. Hefty power bills can be a bane to many Australians.

However, it's not just tenants and those with variable home loans who could benefit - the suggested pricing method would also deliver cost savings for electricity networks.

"Fair pricing for power finds that a different way of charging customers could have saved network businesses nearly $8 billion in reduced investment over five years, with the savings passed onto consumers as lower bills," the Grattan Institute explained in a July 6 release.

According to Tony Wood, energy program director for Grattan Institute, the average power bill has soared by 70 per cent in the five years to 2013.

"Some of that burden is unfair, and it's falling especially heavily on some consumers, whose bills are subsidising others. We have to find a better way," Mr Wood stated.

The new report suggests that a proportion of households' power bills should be based on the burden they place on the electricity network, compared to charging consumers entirely on their total energy use.

Currently, 43 per cent of consumers' power bills go towards funding the network. The Grattan Institute is suggesting this proportion of their bill should be based on the pressure each individual puts on the network, rather than their actual electricity consumption.

"Calculating bills based on a household's maximum load far better reflects the real cost of running the network. If we can get this cost down, we can get consumer prices down."

Image credit: Ian Britton

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