The New South Wales Irrigators' Council (NSWIC) and Cotton Australia have welcomed the repeal of the Carbon Tax by the Federal Government, but say the biggest driver of electricity price increases – network charges – remain a significant problem for irrigators.
NSWIC Economic Policy Analyst Stefanie Schulte said while the Carbon Tax added between 6 and 11 percent to an irrigator's electricity bill, network charges make up between 55 and 65 per cent of an irrigator's electricity bill – and they continue to increase.
"Network charges have risen steeply over the last five years due to significant capital investment by the networks to meet a forecasted demand which never materialised,” Ms Schulte said.
“Not only did electricity network providers get their demand predictions wrong by between 5 and 20 percent, but they also built a larger than required network. NSW electricity consumers will now be burdened with continuous maintenance and refurbishment costs for years."
The gloomy outlook is backed by the release of the networks’ regulatory proposal to the Australian Energy Regulator (AER). One of the NSW networks, Essential Energy, has asked the AER for overall revenue of more than $6.7 billion for the regulatory period, of which more than 40% ($2.8 billion) would be solely for further capital expenditure. In addition, the network seeks a rate of return of 8.83 percent, more than triple the current cash rate of 2.5 per cent and more than double the 10-year government bond rate of 3.4 percent.
Cotton Australia Policy Manager, Michael Murray, said networks continue to demand more revenue despite declining electricity demand across the state.
“Essential Energy is asking for an increase in revenue of about $1 billion over the next control period. Such an increase is clearly unacceptable and will severely impact agricultural production in the state,” Mr Murray said.
"Electricity costs are already too high and a continuous gold-plating of the network will not solve the cost problem. The networks must become more innovative to address peak demand issues. Investing more capital to build bigger networks while demand declines is simply not the solution."
“We are keen to work with the networks to find a better solution, but the rampant price increases must end first.”
Ms Schulte said NSWIC and Cotton Australia jointly called on the Australian Energy Regulator to thoroughly scrutinise the network's regulatory proposal, focusing on its capital and operating expenditure and required rate of return.
“Should the regulatory proposal be passed in its current form, it will most certainly cripple the irrigation industry in NSW,” Ms Schulte said.
"The numbers just don’t stack up - growers using irrigation equipment to increase their efficiency are now finding it prohibitively expensive to do so, so higher electricity costs now also mean decreased water use efficiency.”