The Queensland Canegrowers lobby group says new farm-specific electricity tariffs are needed to fix the state’s “broken” power pricing system.
Canegrowers will present fresh modelling to prove its case for special irrigation tariffs in its response to the Queensland Productivity Commission’s (QPC) draft report into electricity pricing, released earlier this week.
“They [the QPC] highlight that the current fixed and variable charging model is inequitable and doesn’t really work, and that’s been the nucleus of our argument for some time,” Canegowers CEO Dan Galligan said.
Despite the QPC concluding there was insufficient evidence to “suggest proposals for industry-specific tariffs are viable”, Mr Galligan believed the door remained open to mount a case before a final report went to the State Government at the end of May.
The QPC report also said it was “difficult to justify industry assistance for agriculture” over other sectors of the economy, such as manufacturing.
“They say they haven’t found enough evidence and they’re looking for that information … so we’re ready to do so,” Mr Galligan said.
“What we’re about is trying to increase utilisation of electricity on an under-utilised network.”
Electricity prices the biggest challenge in managing costs
Canegrowers has long argued for power-price relief, saying electricity costs have doubled over the past 10 years on some farms.
Current irrigation tariffs are due to be phased out by 2020.
“Within 10 years, electricity has now escalated itself to our biggest challenge if we’re going to manage the costs of production,” Mr Galligan said.
Figures cited in the QPC report showed electricity costs had increased by 77 per cent on farms in the Tablelands district, in far north Queensland, over the past five years.
Power price regulator, the Queensland Competition Authority, has previously rejected calls from Canegrowers to cut prices by as much as 30 per cent, saying tariffs below the cost of supply were not sustainable in the long term.
“Our argument is, as you increase the use of electricity because of lower prices, that offsets the loss of revenue that might come about as a result of the lower network prices,” Mr Galligan said.
“We need to distribute that network charge across more users.”
The QPC identified escalating network costs as the main driver of electricity price hikes, accounting for 82 per cent of recent price increases.
“We have a real structural problem that the Productivity Commission has identified,” Mr Galligan said.
“As those prices go up for those on the network, you lose all of the benefit of the efficiency gains that you’ve made.”
More than 60 per cent of sugar cane grown in Queensland is dependent on irrigation.