Prime Minister Julia Gillard is right to draw attention to rising electricity prices and ask whether we can improve the regulation of our electricity networks, with a view to promoting cheaper ways of guaranteeing reliable power supplies.

The Queensland Independent Review Panel on Network Costs presented its interim report to the Government last month, and it identified potential savings of $5 billion in network costs over the period to 2020 if its recommendations are adopted (see p. 38). The recommendations include giving Powerlink, Energex and Ergon more flexibility in how they provide a reliable power supply. Currently they are required by regulation to build a lot of redundancy (e.g. by having lots of backup transformers available, I imagine) into the system, which some commentators refer to as “gold plating”.  The Independent Review Panel has also recommended privatisation of Energex and Ergon but I expect that is less important than getting the regulations right.

Another recent report highlighting potential savings from better regulation was released by the Grattan Institute on the weekend:

Putting the customer back in front