5 Key Impacts of AEMC’s Fixed Power Charge Proposal

The rule-maker for Australia’s energy markets is proposing a change to the nation’s electricity network tariffs. 

Proposal To Shift To Fixed Connection Charges

 In a draft report published in December, the Australian Energy Market Commission (AEMC) says it considers adopting reforms that include shifting the network charges from variable rates that depend on the consumers’ energy consumption to a fixed connection charge.

The body says the proposed changes seek to provide a more equitable pricing framework for all consumers. 

“[W]e recognise that market design can create structural barriers that entrench inequities and contribute to vulnerability over time. Through these reforms, we expect that future vulnerabilities will be reduced, supporting all consumers to access and benefit from the energy market.”

Winners and Losers

But critics are pushing back on the proposed pricing structure. In a statement, Solar Citizens CEO Heidi Lee Douglas says this would negatively affect low-income households and users of renewable energy.

“In effect, high fixed charges would flatten the electricity price signal. When your bill barely changes no matter how much energy you save or generate, why change your behaviour or invest thousands in solar and batteries to use less electricity from the grid?”

In a draft submission to the electricity pricing review, Solar Citizens says that if the proposed reforms push through, the electricity cost of low-income, low-energy use households would increase by $127 to $217 per year, while median households face an increase of $15 to $101 per year.

The body says high-income, high energy-use households will be the winners with savings of $791 to $1,401 per year.

“When fixed charges rise, the portion of the electricity bill that households can control shrinks. This weakens the business case for solar, batteries and energy efficiency upgrades, lengthens payback periods, and reduces the reward for shifting demand to times that benefit the system,” Solar Citizens says.