Power cost relief for irrigators but more needed
THE NSW Irrigators' Council has welcomed the Australian Energy Regulator's final decision on the regional network's electricity charges for the next four years, but says more needs to be done to ensure that irrigators are getting long-term relief from rising electricity costs. The council's policy manager Stefanie Schulte said the council was pleased to see that the AER has stood firm against criticism of its draft determination by the NSW Government and the network companies, and only approved a total revenue allowance of $3.8 billion, compared to the $5.5 billion requested by NSW's regional network, Essential Energy. The AER expects the decision to reduce power bills for NSW regional customers next year by 11.9 per cent. Irrigators will keep a close eye on their network charges to ensure that the gains are not offset by further increases in retail prices. "Electricity prices for irrigators have increased by over 300pc over the last five years, mainly due to network charges. Those price increases are unsustainable and something had to be done to address this cost acceleration for regional customers," Ms Schulte said. “Irrigators are price takers in international commodity markets for their food and fibre products, so they are not able to absorb such excessive electricity price increases, and power costs have begun to undermine their viability." Ms Schulte said the AER had answered what was a totally unrealistic request by Essential Energy for further revenue increases, setting a revenue allowance that should bring some welcome relief to regional power users. “Many irrigators have been facing the difficult decision of either switching off their pumps and pressurised irrigation equipment or going off the grid. We hope that the AER determination will provide a third option for irrigators in NSW - staying on the grid and remaining financially viable," Ms Schulte said. "It is very important for both power users and for the network that we don't end up in a electricity network 'death spiral' where we have an expensive power network with a large number of stranded power assets and a declining customer base bearing unsustainable increases in power prices. “The AER determination is a first step in the right direction, however we need to ensure that it translates into lower ongoing power costs for irrigators in NSW." Ms Schulte said the battle to achieve better power tariffs for irrigators and other primary producers was far from over. She said recent changes to the electricity rules mean network tariffs will from now on need to be 'cost reflective', which remains a serious concern to irrigators in regional NSW because they often use large amount of power over a short time period and do not have the opportunity to utilise off-peak tariffs. This means that without easier access to off-peak power rates irrigators remain very vulnerable to future cost hikes. "What irrigators really need is flexibility, with electricity tariffs that suit their requirement to draw power when seasonal conditions dictate water needs. They need tariffs that are based on overall annual power use, not cost reflective prices for short periods of use," Ms Schulte said. NSWIC has restated its commitment to working with Essential Energy, the regulators and policy makers to find a sustainable electricity cost solution for irrigated food and fibre producers in NSW into the longer term. Meanwhile, the council has expressed disappointment with the Federal Government's Energy White Paper - pointing to the paper's lack of recognition of the energy use patterns and cost pressure on irrigators. Ms Schulte said that while the previous Energy Green Paper acknowledged the particular circumstances of irrigators who have little flexibility in changing their energy usage patterns, the White Paper is silent about irrigators and other rural users' energy challenges. "NSWIC has emphasised on many occasions that irrigators who utilise electricity are extremely vulnerable to price increases and regulatory changes because of the inflexibility in their electricity use. We had expected that the White Paper would also recognise this," she said. The council said it was particularly concerned about the Federal Government's support of cost reflective tariffs. Despite the White Paper comment that 'most consumers will gain from cost reflective tariffs', Ms Schulte said the was genuine fear within the irrigation sector that this will simply lead to even higher electricity prices because irrigators are heavy power users over short periods, and have limited opportunities to access off-peak power tariffs. "NSWIC supports the White Paper's objective of keeping prices down, however we cannot see how this will be achieved for the irrigation sector and other agricultural sectors, without tariffs specifically designed for agricultural industries usage patterns,” she said. “Irrigators can either use their pumps to water their crops when the weather dictates or switch off their pumps and pressurised irrigation equipment and walk away. There is no 'in between' and cost reflective tariffs are not the answer." "Electricity prices are already unsustainable for a large number of irrigators in NSW and if there are further cost increases it will force even more growers to go off the grid. The end result will be a death spiral of an expensive power network with a large number of stranded power assets and a declining customer base from which network costs can be recovered - leading to even steeper cost increases for those remaining on the grid."