Energy giant AGL is raising alarm over a proposed overhaul of the way customers are billed for the upkeep of the electricity grid, adding to controversy over a scheme that threatens to impose higher charges for households using rooftop solar panels and battery storage systems.
The Australian Energy Market Commission (AEMC) is weighing a fundamental redesign of how consumers should pay for the build-out and maintenance of the national networks of power poles and wires. Currently, the so-called network costs – which can account for up to 50 per cent of a total electricity bill – fluctuate depending on how much power a household uses.
However, the AEMC is proposing a shift toward higher fixed charges, a move it insists will ensure grid-connected customers pay a fair share for its upkeep, regardless of whether they have the means to reduce their grid usage via solar and battery systems.
To support its case for change, the AEMC points to modelling that suggests the reforms would reduce costs for the majority of households, while delivering $6 billion in cumulative network savings by 2040, the equivalent of between $40 and $80 per household per year.
However, AGL, one of the largest power and gas suppliers in the country, is calling for closer scrutiny of those projections before the rules are finalised in June.
“Getting it right for customers … requires careful scrutiny of the modelling and assumptions behind these proposals, so reform does not introduce unnecessary cost or complexity,” an AGL spokesperson said.
Concerns have surfaced within the Australian energy industry that the AEMC’s promised benefits may be relying on limited evidence and modelling that lacks transparency.
AGL, which provides energy to more than 4 million customers nationally, said it recognised the need for pricing reform that better reflected how the electricity system was evolving. However, it warned that moving too heavily towards fixed network charges threatened to strip customers of control over their bills, giving households less incentive – and less ability – to lower their costs by reducing consumption during peak times.
Experts say adopting fixed charges could lower costs for wealthy, large families who are among the biggest energy users, who may benefit by as much as $1400 a year, while leaving low-income households $200 a year worse off, and those with solar panels and batteries $700 out of pocket.
“AGL will continue to work constructively with the AEMC to help ensure reforms deliver an efficient energy system while getting the right outcomes for customers and keeping affordability front and centre,” the company spokesperson said.
The pushback from AGL follows warnings from renewable energy developers, who argue the proposal undermines a decade of government incentives designed to spur investment in household solar and battery systems to cut bills and help manage the grid. The Clean Energy Council says the new rules effectively “change the ground rules” mid-game, potentially devaluing those private investments.
However, other energy experts and major power suppliers have voiced support for the principle of spreading the network costs evenly across everyone connected to the grid.
Every home with a grid connection benefited from the network, regardless of battery or solar-panel ownership, said Nicole McKechnie, chief corporate affairs officer at EnergyAustralia.
“This is fundamentally about fairness,” she said.
“Customers who can’t install solar or batteries shouldn’t be left to carry a growing share of costs that everyone benefits from.”
The AEMC argues significant savings to network upkeep costs can be achieved by allowing electricity networks to impose “dynamic” network charges that incorporate grid location and peak usage time into the cost. Dynamic tariffs work like the surge pricing employed by ride-share companies at major events or accommodation price spikes during holiday periods.
However, the commission also assumed that by 2030 there would be 2 million household batteries installed across the country. While there are nearly half a million batteries installed across Australia already, experts have warned that the commission’s fixed charges proposal would reduce the current take-up rate by raising costs.
The commission’s proposal included an example that said an average battery owner would receive $3312 less in energy savings over 10 years under higher, fixed network charges, compared with the current rules.
The AEMC was contacted for comment.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.