Power profits up by $100m despite users cutting back

On the rise ... electricity prices.
On the rise ... electricity prices.

The profits of electricity companies increased by $100 million in the past financial year and power bills are rising, despite consumers using less electricity, an audit of state-owned energy companies has found.

The NSW auditor-general, Peter Achterstraat, said wholesale electricity prices had fallen in 2010-11 because NSW consumers were using less electricity, but retail prices were increasing because the companies were spending more on maintenance of the distribution systems, especially poles and wires.

"The wholesale prices are down, down, down, but the retail prices are up, up, up," Mr Achterstraat said.

However, he said there was no evidence companies were price-gouging.

"The electricity market is a very, very complex one and the price of electricity can vary from three dollars a megawatt hour up to $6000, depending on spikes [in demand]," Mr Achterstraat said.

"It's the same electricity you're getting, but it all depends on various components [including] if everyone switches it on at the same time."

Mr Achterstraat has recommended that the boards of the power companies be required to demonstrate "an efficient and prudent capital expenditure program" in their submissions to the Australian Energy Regulator.

The audit shows that after-tax profits rose from $1.1 billion to $1.2 billion in 2010-11. The dividends and taxes paid to government by electricity companies rose from $1.16 billion in 2011 to $1.43 billion this year.

It found that consumer electricity bills were "rising sharply", having increased by 80 per cent over the past five years. The price paid to electricity generators for electricity had fallen over the same period.

Spending on poles and wires contributed half the cost of residential electricity bills. The next highest cost was energy generation (25 per cent). The cost of retailing the electricity contributes 10 per cent, the carbon tax added 8 per cent and "other green schemes" contributed 7 per cent, the audit found.

Mr Achterstraat said spending on poles and wires was due to companies upgrading their networks to cope with demand for electricity at peak times. He said he would like to see electricity companies innovate to improve their demand management.

"If we want to reduce the peak demands, I'd like it if I can get an app, or a text or a tweet from my electricity company saying, look we're reaching a peak demand time, would you mind switching off your dishwasher or power point or power tools until later on in the day," Mr Achterstraat said.

"That would reduce the peak demand. And if we can reduce the peak demands, that would put less pressure on the system."

This story Power profits up by $100m despite users cutting back first appeared on The Sydney Morning Herald.