Cost of electricity to double in the next 6 years

Those people in Perth (Western Australia) who read the weekend Sunday Times would have come across an article warning us that the cost of electricity is going to double over the next four to six years. The forecast being that the average annual cost per household for electricity, which is apparently now around $980, will climb to $2,000.

On the face of it, as you sip your hot comforting morning cup of coffee, without reading the rest of the article you would probably nod your head knowingly and think something like: Yes, I can see why that might be the case—with the rising cost of oil, coal, and gas.

But when you read the article the primary reason given for this doubling is not directly related to the rising cost of oil, coal, or gas. Basically the primary reason that the cost of electricity will have to double is that we are not using enough of it!

The key problem seems to be that the relative amount of electricity being used per household is significantly below the usage forecasts that were done in the past because of contributing factors such as: the wide-spread use of low power consumption CFDs and the rapid adoption of the new LED-based lights; new LED televisions (which use half the power of a plasma television and a fifth of the power of a CRT television); new technology ovens, new technology reverse-cycle space heating/cooling; people using gas or solar for hot water; and the massive take-up of the state government’s feed-back tariff scheme for people who put solar power into their houses.

“So what?” you might ask. Well due to this significant relative reduction in the use of electricity per household compared to the forecasts, the costs of various capital project undertaken over the last ten years is not being recovered (which is code for: cannot be paid for as quickly as planned). In fact the cost of these project is no where near to being recovered over the intended pay-back period.

On top of this, despite the recent massive resources boom, the WA state government is seriously (very seriously) in debt so they do not have the capability to bail these projects out.

So the only answer then is to put the cost of power up and to reduce the feed-back tariff paid to homeowners who installed solar power by 25 percent in FY14 followed by a further 25 percent reduction in FY15.

In the case of my ‘household’ our annual power bill is already significantly higher than the $980 average cited in the reference article. Unless we cut back even more then my power bill in six years time is going to be up around $3,000. Maybe it really is time to consider downsizing.