The Snowball Effect – Electricity Increases and Carbon Tax

Well it is upon us again, a new financial year, which brings such joyous gifts as price increases in your electricity accounts. Tariffs are up compounded from last years increases, network charges are up and sustainable taxes are up.

It isn’t surprising that there is so much frustration and anger from everyday consumers (including accommodation providers!) about the pain of increases in electricity. In comparison to other countries, we have relatively cheap power yet that doesn’t mean a thing when you are a business or a family that has to pay the increasing costs.

Electricity retailers are copping a bashing at the moment, yet if you look at where the real increases are coming from it is not the electricity retailers. They are just the bill collection agencies for the networks and the governments. This is where prices are really being forced up.

When put under a microscope, you will find that what is really affecting the rise in your electricity bills is not because of the retailers as their increases in Queensland were only 10% of the regulated tariff increases, retailers increases included (wages and CPI) the remaining 90% of this years increases were in network and energy costs (including taxes) the retailer has to charge the consumer and collect on behalf of our governments.

There have been a few interesting developments this year when it comes to increases in electricity pricing. One of the notable changes was the increases in taxes applied to contestable accounts. As of the 1 January 2011 the REC (renewable energy certificate) charge on a contestable electricity bill was replaced by two charges: LRET (large renewable energy target) and SRES (small renewable energy scheme) another “federal tax”. Bottom line was a 5-8% increase to electricity accounts. LRET and SRES were supposed to uniform tax applied by the government to the retailers to pass through but each retailer charges differently and it is going up again next year.

So why were LRET and SRES imposed on your electricity accounts? Answer to fund the delivery of the new federal government’s Renewable Energy Target by 2020. Funny, isn’t that what the carbon tax is for? Everyone is now paying these taxes as they also contributed to retail tariff increases. So my question is, if we are already being taxed to achieve our Renewable Energy Target why apply yet another tax? If the carbon tax goes through at current estimates we can expect to see another 16-20% on the bottom line again, how much is enough?

If carbon tax is approved you will have a minimum of three federal taxes and one to two state taxes on your electricity accounts, all for the purpose of sustainability. GST is also being applied on top of your current taxes. So you are being “taxed on taxes”.

Where is all the money we are paying on these taxes going now at the moment? Why isn’t the public being told that some of the increases in there electricity costs are because they are already being taxed in this area?

From what we have been hearing from the retailers if a carbon tax is introduced it will most likely be a line item on your contestable electricity account. Again the government is pitching the big polluters will be paying for this tax. Am I missing something? Big business is not everyone who has a contestable electricity account. Again I reiterate we are already paying sustainable taxes.

The Snowball Effect – let’s put it in perspective: a large commercial laundry that supplies services to the accommodation industry has an electricity account of $2 million per year. If you added the current taxes + a new carbon tax this would equate to an approximately 24% increase. The laundry would be looking at an extra $480,000 on the bottom line in taxes just on electricity, not to mention increases in materials and wages. No business can sustain or absorb these increases so the price increases will no doubt be pushed down the line to the accommodation industry.

The accommodation industry has their own price increases to battle with in operational costs like power for the site and other costs. Will they absorb these costs? I find it had to believe they would.

Scenario outcome – The accommodation industry has to put its room price up to cover these rising costs and who pays for it all, that’s right the end consumer “only” if they can afford it.

To now go on holiday it will become significantly more expensive as you also add increases in flights, entertainment, food etc. What happens if lower a income family cannot afford the increases as they are already stretched, it is a shuddering thought and sends a big vibration through the industry and affects everyone.

The government’s modelling tells us the majority of people will be better off because of tax cuts and financial assistance to households. What about the cost to taxpayers to implement, manage, police and sell this to the public? What about the cost to business to manage and absorb the snowball increases. If it has to be this complicated, is it masking the facts of the real impact to everyday consumers?

To me the government selling this as only “big” polluters have to pay and the rest of us will be okay, yet isn’t sustainability everyone’s responsibility? I think most Australians would have the opinion we all should be responsible for sustainability as that is the only way we will achieve the end goal. If more money is required for sustainability initiatives why not increase the current taxes we are paying on our electricity accounts and rebate those who cannot afford it with discounts. Why create a whole new complicated system (like the GST) to collect revenues.

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