Deregulation is crucial for lowering Australia’s electricity costs

The issue of deregulation of the energy retail market is an important one and I think the much-anticipated Energy White Paper, released by Energy Minister Martin Ferguson yesterday, does well to emphasise it. The last round of electricity market reform focused on the wholesale market rather than on the retail market. The idea was to introduce competition into the generation sector and to empower independent regulators to approve tariffs for the natural monopoly network operators. However, by not allowing market forces to determine retail tariffs, the reform process was incomplete and many problems of waste and inefficiency remain. In all states but Victoria, the retail price of residential electricity is set by government agencies rather than by competing retail firms. Such government control of the retail market always leads to a politically motivated price setting regime. In other words, the electricity price is used as a political tool