With all the electricity price rises and controversy Queenslanders have faced over the last couple of years, one wonders – where does all our money paid to electricity companies go? Who is benefiting and is our money going to good use?

The short answers are that the Queensland Government is benefitting and no, our money is probably not being put to good use. The Queensland Cane Growers Association who represent around 80% of Queensland’s cane growers, asked CME to carry out an analysis of electricity prices as they fear increasing prices will force farmers into losses of income between $7500 – $30 000 per year.

The report, titled “Rising electricity prices in Queensland: Evidence and Reasons for Action” shows that the Queensland Government are raking in higher profits and these “high profits do not reflect efficient operation.”

Rising network charges have resulted in an increase in total monetary benefits for the Queensland Government of $632 million in 2007/8 to $1380 million in 2011/12. That is a net profit increase of $46 million in 2007/8 to $970 million in 2011/12. The report calculates that this is a compound annual growth rate of 114% per year.

Other than the forever increasing network charges, electricity price rises are also due to the Government revaluating its assets, inflating their values and therefore they are able to charge us more to use them. So much so that their return on equity rose almost three fold from 8% in 2007/8 to 21% in 2011/12.

The main recommendations are that the Newman Government bear the cost of network investments that are deemed unnecessary and the potential write down in value of assets. These actions are within the Newman Governments power and would lower electricity prices for us all. Millions in infrastructure upgrades are deemed unnecessary and the forecasted demand was never met – these costs should not be paid for by consumers.

“In addition to over-estimating demand growth, Queensland’s (network providers) have had to meet more stringent network planning standards. The need for such higher standards has not been clear,” the report notes. “As a result of these two factors, there is likely to be substantial excess, under-utilised, network capacity in Queensland.”

The report says that the Queensland networks are still state-owned and as such, they should be able to provide electricity cheaper. The report’s damning figures show that less is now being spent but more is being collected by the Government.

“A successful regulatory regime should protect consumers from the exercise of monopoly power, provide incentives for efficiency and provide reasonable certainty to investors that they will recover necessary investments plus a reasonable return,” the report notes. “The current regulatory regime has failed at the first two and instead, as the data shows, has provided a financial bonanza for (the networks’) owners.”

The report continues to say that if no action is taken against these price rises, it will spur on a “death spiral.” In other words, rising costs will force people to take their own measure to cut costs by finding alternative sources of power. This in turn will drastically reduce demand and thus send Government profits into a continual downward spiral. If they haven’t already, many Queenslanders will turn to solar power systems. With these latest price rises due at the start of next month, even commercial farmers and other businesses are likely to benefit significantly from funding such solar energy systems in house. It has definitely become a more financial viable option.