OPED written by NSW Business Chamber CEO, Stephen Cartwright.
The recent Federal Court decision to give the green light to NSW’s electricity networks increasing electricity charges is yet another glaring example of the failure of successive Federal and State governments to adjust energy market settings to make electricity and gas services work for consumers – both business and residential.
With both electricity and gas costs projected to continue rising, businesses are being put between a rock and a hard place in trying to manage these rapidly escalating costs.
The NSW Business Chamber’s Business Conditions Survey, which surveys 1,000 businesses across NSW every quarter, found that almost 45% of businesses have been or will be affected by recent and projected energy price rises and supply issues.
Many of these businesses have cited a 50% increase in gas costs and a 30% increase in electricity costs since last year, and alarmingly we are starting to see even higher figures emerge.
For a small to medium manufacturer already struggling to remain competitive, these increases can add hundreds of thousands of dollars to an annual power bill. With little ability to pass on these costs, something will have to give, be it expansion plans, jobs, or even entire operations. Many of the businesses we have heard from are in regional locations where medium sized job-creating employers are few and far between.
For far too long energy policy has been dominated by a chest beating, finger pointing blame game between the different tiers of government. With the issue well and truly tipping over the edge, this has to stop right now. Businesses need both the federal and the state governments to accept responsibility for these higher prices and take real action to restore confidence to ensure we don’t see jobs and businesses moving offshore.
The upcoming Finkel Report must provide a blueprint to modernise our energy market framework. We need all governments to agree a path forward that can be implemented quickly.
Even before that review is handed down, however, there are things that could be changed to start addressing these issues. For example, changing the energy market rules to allow greater use of demand response, especially during times of peak demand, is needed now more than ever.
Gas supply continues to be a big concern for many businesses and fears of gas shortages are affecting business confidence. Already businesses are being impacted by a tight gas market and often can only access one or two offers from retailers, leaving them with little leverage to negotiate.
The Federal Government’s pragmatic decision to intervene to address the impending gas shortage has been welcomed by gas users but it is not a long term option, and to be useful it has to address price, not just availability, issues.
Ultimately, we need more gas in the NSW market. Federal interventions aside, the NSW Government must finalise its gas framework and encourage the gas industry to come back into NSW to ensure we don’t have to rely on imports for 95% of our gas needs.
There are also quick wins to be had in the retail market. While the Australian Competition and Consumer Commission (ACCC) is taking a look into these issues why can’t we make some simple changes now to make retail offers and energy bills more user-friendly? For both residential and business customers it should be easy to compare offers and understand what you are being charged for - but unless you’re a big business with a dedicated resource scanning offers constantly, you’re more likely to be left scratching your head about whether you’re on the best deal.
Finally, an immediate opportunity is for businesses to squeeze more productivity out of their energy consumption, and they need better energy efficiency know-how and help to shorten payback periods for new investment. Government efforts should be re-doubled to address these barriers.