Carbon tax impact on economy

[boomtown]

Treasury is currently modeling a 10 percent rise in electricity prices as a result of the carbon tax coming into effect on 1 July.

The feedback I am getting from participants in the electricity industry is that the Treasury modeling is wrong and that they will be putting up their prices by 30 percent on 1 July. I think our household electricity bill is about $3k per annum so we face an increase of about $900 per annum.

You guys will be aware that introduction of the GST had a clear impact on inflation. I expect a significant impact on CPI with the carbon tax however this aspect does not seem to be getting any press coverage.

Given the current decline in the Aussie dollar (down to 98 cents) we face a short term double whammy of imported inflation due to the rising cost of imports coupled with the carbon tax impost.

As a result we can expect a significant spike in CPI for the July quarter. Further the structural adjustment to the carbon tax can be expected to take longer to flow through the economy than the GST as everyone starts trying to force their customers to take on the additional cost burden and it flows down the chain.

I think this means a continued weak economy coupled with inflation that rapidly climbs out of the RBA's target range. We could be seeing rate hikes in the face of growing unemployment which would really scupper things. On the upside this would lift the dollar which would relieve some of the inflationary pressure like it has the past two years.

All of this is only some quick thoughts I have had and would be interested in other peoples opinions.

 

[Aaron_C]

Here in Victoria we've had more than 20% increases in electricity prices even prior to any carbon tax being implemented. So I can't see why the carbon tax is only expected to add 10% to electricity prices seeing as it is more than just profiteering - which is why this is a rort.

 

[Ideo]

Hmmm...

10% you say.

My annual bill is around $780 a year.

I run 2 air conditioners, a fridge, a dryer, a washing machine, a dishwasher etc on that.

You know what the trick is? Turn off stuff when you ain't using it.

This will just be another incentive to modify wasting electricity.

You do know that if you use less, it costs less, right?

I also elect to use a percentage of my electricity as renewable. AFAIK this does not attract any carbon tax as it does not create any carbon.

ETA - this is addressing the price based on electricity consumption for households only.

There will obviously other expenses elsewhere.

 

[Aaron_C]

You do know that if you use less, it costs less, right?

In Victoria we now have 'smart' meters which measure usage during the day. So for Victorians, at least, they will start trying to charge us by the hour based on 'peak' and 'off-peak' usage. I don't know what those rates will be but there is always a large portion of power that you simply cannot go without all day.

 

[Aaron Sice]

ah Victoria - the California of Australian Taxation.

 

[Ideo]

In Victoria we now have 'smart' meters which measure usage during the day. So for Victorians, at least, they will start trying to charge us by the hour based on 'peak' and 'off-peak' usage. I don't know what those rates will be but there is always a large portion of power that you simply cannot go without all day.

Interesting. I did not know that - in NSW you can elect out of that scheme and it only applies to energy australia customers as far as I know.

I'm just on a straight usage = cost equation.

 

[Aaron_C]

Yes it's compulsory for us. I've had at least 5 of my properties changed so far. I'm always very nervous when Governments introduce new toys because it is always a pretext to charge me more.

 

[DavidMc]

I work in the Energy Industry. The Smart Meters will cost far more than any carbon tax effect.

 

[Belbo]

I work in the Energy Industry. The Smart Meters will cost far more than any carbon tax effect.

Just you wait until Sunfish unlocks his silo and starts broadcasting above ground again.

You'll be in for it!

 

[buzzlightyear]

Yes it's compulsory for us. I've had at least 5 of my properties changed so far. I'm always very nervous when Governments introduce new toys because it is always a pretext to charge me more.

There is nothing more certain. Dynamic pricing models will always work to maximise revenues, it works with airlines and hotels, and it will work for the energy industry.

Maybe time to invest in some thicker jumpers & thermals

 

[Player]

There is nothing more certain. Dynamic pricing models will always work to maximise revenues, it works with airlines and hotels, and it will work for the energy industry.

Maybe time to invest in some thicker jumpers & thermals

You could move up north

 

[buzzlightyear]

You could move up north

Well I am looking for a change in my career, just not sure the GF wants to live in QLD again!

 

[HiEquity]

$3k per year on electricity! What are you growing in your house?

10% is roughly right, depending on where you are. 30% is way out of the ball park. I'm not aware of any serious study predicting that level of increase. It doesn't gel with the carbon intensity of coal.

Average Australian power generation CO2 intensity is around 1tCO2e/MWh
Although this is dropping with more gas deployment
Carbon price $23/tCO2e
Therefore price of generation increases by $23/MWh

Existing retail price of electricity is circa $220/MWh inc GST

So electricity price increase is around 10%, give or take depending on whether your supplier mainly gets their power from brown coal or not (slightly higher) or gas (slightly lower).

 

[Ausprop]

my last house was between $4-5k but the new place is a bit friendlier. voids are very hard to heat, avoid them if you are looking to buy a house with one. Oh and marine aquariums - choose a natural lighting solution

 

[turk]

$3k per year on electricity! What are you growing in your house?

10% is roughly right, depending on where you are. 30% is way out of the ball park. I'm not aware of any serious study predicting that level of increase. It doesn't gel with the carbon intensity of coal.

Assuming 100% electricity came from black coal:

Average Australian power generation CO2 intensity is around 1tCO2e/MWh
Although this is dropping with more gas deployment
Carbon price $23/tCO2e
Therefore price of generation increases by $23/MWh

Existing retail price of electricity is circa $220/MWh inc GST

So electricity price increase is around 10%, give or take depending on whether your supplier mainly gets their power from brown coal or not (slightly higher) or gas (slightly lower).

HiEquity

Not sure if I have this correct, but wholesale generation cost increase of around 10%.

What is the current differential between retail and wholesale?

 

[eKwatee]

I went to a strata meeting for one of the apartments I own as an investment. It has 40 apartments in the complex over 3 levels so has quite a large carpark & common area on the ground level & the walk ways. As the electricity retailers know that strata managers prepare budgets in advance, they had sent out a suggested increase in electricity prices to the strata managers. Our current usage for the group is $10,000, they suggested an increase to $12,000, up $2,000 or 20%. Then the gas company has sent a letter to our strata manager also suggesting a potential 20% increases in their prices which need to be budgeted for.

Guess who's tenant is going to get a huge increase in their rent this year.

 

[HiEquity]

HiEquity

Not sure if I hae this correct, but wholesale generation cost increase of around 10%.

What is the current differential between retail and wholesale?

Hi Turk

Retail cost goes up circa 10%. Wholesale cost is a difficult term - depends on whether you're a 330kV customer or a 415V customer i.e. it depends on whether you include network charges or not. I prefer to use the terms - generation, network and retail charges and GST.

Current breakdown of those goes something like (very round average numbers that vary around Australia):
Generation cost $70/MWh
Network cost $100/MWh
Retail cost $30/MWh
Sub Total: $200/MWh
GST: $20/MWh
Sub Total: $220/MWh
Carbon Tax: $23/MWh + GST = approx $25/MWh
Total around: $245/MWh give or take...

As you can see the carbon price doesn't do that much at the retail level but it does change the dynamics of the generation market quite a bit because of a $23/MWh change to a $70/MWh base cost. The main impact of that is to favour gas over coal in future, until the gas price kicks at least...

 

[Ausprop]

Guess who's tenant is going to get a huge increase in their rent this year.

hard to say - your existing one will most likely walk

 

[HiEquity]

I went to a strata meeting for one of the apartments I own as an investment. It has 40 apartments in the complex over 3 levels so has quite a large carpark & common area on the ground level & the walk ways. As the electricity retailers know that strata managers prepare budgets in advance, they had sent out a suggested increase in electricity prices to the strata managers. Our current usage for the group is $10,000, they suggested an increase to $12,000, up $2,000 or 20%. Then the gas company has sent a letter to our strata manager also suggesting a potential 20% increases in their prices which need to be budgeted for.

Guess who's tenant is going to get a huge increase in their rent this year.

Yes electricity prices will rise by more than 10% because of reasons unrelated to the carbon tax. Catching up on historical under investment in power networks is the main reason. I started a thread on this earlier but it received little interest.

 

[Ideo]

Yes electricity prices will rise by more than 10% because of reasons unrelated to the carbon tax. Catching up on historical under investment in power networks is the main reason. I started a thread on this earlier but it received little interest.

Yeah, but you see the outcry when a government actually spends money on a country