Fact Check: Have electricity prices dropped $550 since the carbon tax was abolished?

Extract from ABC News

Posted 17 Aug 2015, 10:09am

Photo: Joe Hockey says scrapping the carbon tax has reduced electricity prices by $550 (AAP: Carol Cho)

Prime Minister Tony Abbott has repeatedly claimed scrapping Labor's carbon pricing legislation would save the average household $550 a year.

• The claim: Treasurer Joe Hockey says that Treasury documents show "that electricity prices have come down $550 per household as a result of us abolishing the carbon tax".
• The verdict: The documents, dated up to February 2015, contain predictions that household savings - not electricity savings - will be $550 over 2014-15. The ACCC's most recent estimates for annual savings on electricity bills - which are based on the actual savings passed on by companies to consumers - range between $100 and $200 depending on which state or territory the household is located. Mr Hockey's claim is wrong.

He also said the Government estimated electricity prices would fall by 9 per cent and gas prices would go down by 7 per cent, making the average electricity bill $200 a year lower and the average gas bill $70 a year lower.
It's been over a year since the Government abolished Labor's carbon price, and on July 27, Treasurer Joe Hockey said: "Under Freedom of Information the Treasury released documents last week that showed that electricity prices have come down $550 per household as a result of us abolishing the carbon tax."
ABC Fact Check investigates.

Where does the $550 figure come from?

Before the Gillard government introduced its emissions trading scheme, which became commonly known as the carbon tax, Treasury modelled the impact of the legislation (based on a carbon price of $23 per tonne) and estimated the annual average cost to a household in 2012-13 would be $515.
The $515 included the following modelled costs:

• $172 for electricity
• $53 for gas
• $42 for food

Treasury also listed increases to nearly all consumable products including petrol, pharmaceuticals, furniture, holidays and sporting equipment.

Freedom of Information documents: Electricity down $550?

A series of documents, released under Freedom of Information, were published by Treasury on July 17, 10 days before Mr Hockey made his claim.
They include briefs and emails from late 2014 and early 2015 which make claims and assertions about the impact of the carbon tax removal.
They state that average household savings from abolishing the carbon tax will be $550 over the financial year 2014-15.
One of the documents says this estimate was generated using the same methodology Treasury used in 2011 to estimate the costs of the carbon tax.
A spokeswoman for Mr Hockey told Fact Check the Treasurer was "speaking broadly about electricity costs, because they would have fed into all household costs".
Some of the documents provide "snapshots" of gas, electricity and CPI figures over the September quarter and December quarter in 2014.
A briefing note dated October 2014 refers to ABS statistics for the September quarter 2014 showing electricity prices around the country fell by an average 5.1 per cent over the period.
The document states this was the largest single fall in electricity prices since ABS electronic records began.
It also says the ABS attributes the fall largely to the removal of the carbon tax.
The same document shows gas prices rose 1.2 per over the September quarter 2014, saying: "This would have been higher had it not been for the removal of the carbon price."
Another briefing note, written in January 2015, points to gas prices falling by 1.3 per cent in the December quarter and slightly reduced fares for public transport.
The documents say Treasury estimates that electricity prices will drop by $200 over the year, and gas prices will drop $70.
However because all the documents were written before June 30, they do not show estimates based on actual electricity or gas prices from July 2014 to June 2015.
Such figures were published by the Australian Competition and Consumer Commission (ACCC) the day after Mr Hockey made his claim.

The ACCC's figures

The legislation repealing the carbon tax gave the ACCC new enforcement powers to ensure companies passed on savings to customers.
The ACCC's website says: "Businesses that supply regulated goods will be required to pass through all of the cost savings, direct and indirect, that are attributable to the carbon tax repeal. The ACCC will enforce the law so that consumers benefit from expected price reductions following the removal of the carbon tax".
In July 2015, the ACCC published its final calculations from its monitoring of the repeal of the carbon tax from March 1, 2014 to June 30, 2015.
The report says annual savings on electricity bills range from $198 in Tasmania to $103 in Northern Territory.
Residents in NSW and Victoria were estimated to receive savings of $129 and $112 for their electricity bills over a year.

Estimated average annual carbon tax repeal cost savings for electricity
State	NSW	VIC	SA	QLD	ACT	TAS	WA	NT
Average electricity cost savings ($)	129	112	140	150	185	198	135	103

The report also says: "The ACCC believes that, given all the available information, the Commonwealth Treasury's estimated $550 cost savings to households is reasonable."

What the experts say

Lynne Chester, an expert in political economy and energy from the University of Sydney, told Fact Check the FOI documents do not support the Treasurer's claim.
She said it appeared Mr Hockey had confused falls in electricity costs - estimated to fall by $200 a year in 2014-15 - with savings to whole household costs, which include electricity, gas, food, transport and other costs.
While there were significant drops in electricity prices in some states in Australia, Dr Chester contends that in 2012 and 2013 electricity network costs, including major cost for upgrading the poles and wires were the real drivers in the price increases in household electricity at this time.
She said from July 1, 2014 there was significantly less pressure on prices because network charges dropped, so it's hard to isolate the impact of the removal of the carbon tax which occurred at the same time.
She provided Fact Check with a table showing average increases in household electricity prices from 2007 through to 2014.

Average increases in household electricity prices (per cent)
	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14	2007-08 to 2013-14	Electricity Price Index 2007-08 to 2013-14
NSW	7.5	7.5	20.2	10.0	17.3	15.7	1.6	114.5	105.5
Vic	7.3	7.4	13.5	6.0	12.0	18.0	7.1	103.1	80.4
QLD	11.4	9.1	15.5	13.3	6.6	10.4	20.4	125.8	101.8
SA	12.3	2.5	3.1	18.3	17.4	12.7	2.8	91.0	75.4
WA	0.0	1.0.	23.6	10.0	5.0	12.5	4.5	84.6	74.6
Tas	15.7	3.9	6.2	15.3	11.0	10.6	1.8	99.7	50.4
NT	4.4	3.4	18.0	5.0	2.8	23.4	5.0	78.1	84.9
ACT	16.7	7.1	6.4	2.3	6.5	17.7	3.5	76.7	49.9
Source: Lynne Chester and Australian Energy Regulator (AER, 2013)

Tony Wood, director of the energy program at the Grattan Institute, told Fact Check that drops in electricity prices "vary widely across Australia due to variations in both consumption and carbon intensity of supply".
He estimated the average household's electricity bill was reduced by $120 in 2014-15.
"I struggle to get anywhere close to the $200 on average," he said.
Mr Wood agreed that the Government's claim on the impact of the removal of the carbon tax on household savings is "of the right order of magnitude".
But he said it's difficult to place an exact figure on it, and that "the removal of the carbon price in 2014 has saved most consumers a few hundred dollars per year, not less than $10 and not more than $1,000".
Dr Chester said it's impossible to know the exact savings made from the abolition of the carbon tax because "we didn't keep one group with the tax to compare them to another group who had the tax removed".
She says this is the only way the cost could really be established.

The verdict

The documents released by Treasury under freedom of information do not show that electricity prices have come down $550 per household as a result of the Coalition abolishing the carbon tax.
Instead the documents, dated up to February 2015, contain predictions that household savings - not electricity savings - will be $550 over 2014-15.
The $550 household savings estimate has long been used by members of the Coalition in its campaign to abolish the carbon tax. The documents say this number was generated by Treasury based on modelling it undertook in 2011.
The ACCC's most recent estimates for annual savings on electricity bills - which are based on the actual savings passed on by companies to consumers - range between $100 and $200 depending on which state or territory the household is located.

Mr Hockey's claim is wrong.