It’s the blind leading the blind.
Please excuse this bevy of eye-glazing acronyms but while energy bills hit nosebleed heights, and the AER looks on nonchalantly, the AEMC has blithely followed the AEMO and ignored the fall in peak demand for the NEM.
You get the picture.
This hodgepodge of entities and a byzantine industry structure are enough to suffocate any debate over rising electricity prices but let’s have a crack anyway.
The Australian Energy Markets Commission (AEMC) is the rule-maker for the National Electricity Market (NEM).
It has handed down its new set of draft rules for the regulation of Australia’s electricity networks. Bizarrely though, these draft rules continue to propagate the mythological electricity industry mantra that “peak demand” remains a problem.
“Since the current rules were developed the environment has become more dynamic. There are a range of reasons for this. They include growth in peak demand relative to average demand requiring additional infrastructure; increased reliability requirements; and changed costs associated with post-GFC capital markets.”
This is from the AEMC’s draft determination statement. And it would appear that the Commission has failed to read, or perhaps comprehend, the latest National Electricity Forecasting report put out by the AEMO.
Not that AEMO spelt it out either. In a rather suspicious fashion, AEMO provides state-by-state figures for peak demand but no national figure.
Joining the dots, AEMO has furtively admitted that the growth rate for peak demand is now the same as annual energy demand in general. Peak demand is now a furphy in other words, a scapegoat at which to direct the community anger over electricity prices. It is proof that peak demand can no longer be blamed for excessive network spending, and therefore rampaging power bills.
It is AEMO’s job as energy market operator and planner to do the forecasts, forecasts which have been used to justify excessive spending, or “gold-plating”, which has led to high prices.
Recently, in NSW alone, the 2020-21 forecast for peak summer demand has been clipped by 18 per cent in only 12 months. It now matches general demand growth at 1.2 per cent while in Queensland the rate of peak growth has actually fallen below general growth by 0.4 per cent and in South Australia and Victoria it is now just 0.1 and 0.2 points higher respectively.
Why then would the AEMC be ignoring the reality of falling peak demand?
No doubt the good folk at the AEMC are hard-working. No doubt they hold the finest of intentions as they agonise for long hours over their “methods and processes to achieve efficient outcomes”.
One can only assume that peak demand is a sacred cow, an idol, an unmentionable. Its passing is being silently mourned, while a bereaved industry pines for its next great pricing pretext. The AEMO might have reluctantly conceded that the peak demand party is over – via a few numbers in a clandestine table the other day – but neither AEMC nor any other player in the electricity industry is willing broach the topic publicly.
This is an industry whose price rises are hammering low-income families – indeed they act as a drag on the entire economy. And yet the power industry can’t even be upfront with the public when it comes to the most elementary information.
For years, capital expenditure and therefore rising prices hinged on fanciful forecasts of consumption. They were plain wrong.
Now, when its time to face up to the reality of falling demand and a rate of peak demand in retreat, they just can’t do it.
It is the wilfully blind leading the wilfully blind.