The Fair Pricing for Power report proposes significant reform of electricity network tariffs to improve equity among customers and also the efficiency of the network.

While Ergon does not explicitly endorse all of the report's recommendations, it recognises the need for tariff reform and is already two years in to a program of reforming its network tariffs as part of the strategy to achieve effective market reform.

As such, Ergon believes the report by Tony Wood and Lucy Carter makes a valuable contribution to an important debate and urges customers to read and consider it.

In the report, the authors say reform of electricity tariffs is urgently needed to prevent all Australians paying too much for power and some people paying more than their fair share.

They propose that tariffs should consist of:

  • A capacity charge, based on a customer's maximum electricity consumption, to replace tariffs based on overall electricity use.
  • A critical peak price tariff in areas where a change in user behaviour could remove or delay the need for new network investment.
  • A standing charge to cover the cost of account management and fixed costs to maintain the network connection.

They say these reforms would raise prices for consumers who use more power in periods of peak demand, and reduce them for consumers who use less power in these times.

In the short term, the total consumer bill would stay the same, but in the long run, as unnecessary infrastructure is no longer built, prices across the board would fall.

The full Fair Pricing for Power report is available from the Grattan Institute.