An act of desperation

After imposing a carbon tax and jumping in bed with the greens, now the Prime Minister is concerned about electricity prices.

JULIA Gillard has unveiled a plan to reform the electricity sector, vowing to save households up to $250 a year on their power bills.

Ms Gillard said under the current system there was a “perverse incentive” for electricity companies to keep “gold-plating” or overinvesting in poles and wires in the system and keep passing on the full cost to consumers.

“I will have a Council of Australian Governments meeting at the end of this week and I will be taking there a plan to make a difference, a plan to make sure that families pay $250 less per year for electricity than they would if we just let the current system run,” Ms Gillard told Network Ten’s Meet The Press program.

This is the tricky position that Labor has put itself into. In trying to curb emissions, it has imposed a carbon tax, driving electricity bills up 15%. Barack Obama demonstrated this feeling towards power prices that exists on the left. The average consumer needs to hurt for the sake of the planet. However, politicians exist to win elections, and making a key commodity more expensive tends to alienate a lot of voters.

One wonders why this announcement has come about. Julia Gillard has been under a lot of pressure in recent days over the AWU scandal. This is a perfect distraction and is seemingly an opportunity to try to win back some voters. It can only be an act of desperation. Power prices have gone up 89% under the ALP and they only now take up any sort of concern? And after levelling the carbon tax. They’re not going to be fooling anyone.

The details of the plan fail to inspire any confidence of success:

  1. End gold-plating of electrical infrastructure. This probably would reduce costs, but could it come at the expense of safety (pink batts, anyone?)?
  2. A Consumer Challenge Panel plans to give consumers a say in pricing decisions. Consumers already do get a say. They can simply switch providers. It’s called free market competition. What this panel amounts to is price controls, which do not work because they do not address the underlying problem of supply. All they do is disincentivise producers to produce by reducing the profit motive, which further impacts in supply.
  3. Throwing $23.2million at the Australian Energy Regulator. More price controls.
  4. Smart meters (because they’re so popular).
  5. Paying companies to reduce consumption during peak periods. Why do you have to incentivise companies to cut back on energy wastage? I thought they were selfish and greedy. Any reductions in electricity use will come at the expense of productivity, for which businesses will be duly compensated with redistributed wealth which has already been produced, only to be wasted.

The only way to have any significant positive impact on electricity prices is to allow supply to increase. Ditching the carbon tax is a good start, but we need to lift the toxic regulatory environment that hampers fossil fuel power development in this country. In a nutshell, environmentalism is the problem.

UPDATE:

Henry Ergas.

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About Climate Nonconformist

Hi, I'm the climatenonconformist (not my real name), and I am a global warming skeptic, among the few in generation Y. With Australia facing the prospect of a carbon tax, we need to be asking the simple question; where is the evidence that our emissions are causing any dangerous warming?
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2 Responses to An act of desperation

  1. techapilla says:

    So when is the absence of ‘gold plating’ going to make itself felt? Why, on the hottest days of summer, of course. So if the electricity infrastructure is unable to cope with the increased demand at this time, what will happen? Why, people will die, of course.

  2. nigelf says:

    Electricity gets cheaper when the producers make more of it. You’re right, environmentalism is the problem. Get rid of these expensive useless regulations and make it so the producers sell electricity cheaper the more you use…like any other business.

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