The Independent Pricing and Regulatory Tribunal (IPART) of NSW is debating whether or not to allow electricity suppliers the ability to charge households as much as $130 for terminating energy contracts. The fee represents an exorbitant mark-up over other termination fees. By comparison, Victoria residents need to pay only $20 to terminate their energy contracts. The steepness of this fee relative to other municipalities already makes the increase seem drastic, but it may be even more harmful when you consider the households that may be charged the fee.
Why Charge a Fee?
Electric companies feel the need to charge high exit fees to disincentivize consumers from switching off of their service. The fee would most likely serve its purpose, in many cases forcing customers to live out their contract before cancelling services. However, this fee stands in direct contrast to other policies enacted by the NSW government.
The reason why many customers are cancelling electricity contracts is due to their adoption of new electricity generation technologies. For example, a consumer who wants to take advantage of a sale or subsidy on solar power for their house would be charged this fee once they switched to producing their own power. By allowing this fee, the government would in effect be placing a fee on any service or technology a consumer may wish to adopt.
Many remote customers who are currently charged very high rates for electricity service may wish to switch to an off-grid system, or personal microgrid. In most cases, these systems are run at least partially on renewable energy, and are an important market for new smart grid technologies such as inverters and smart meter systems. These customers would also bee charged the steep cancellation fee before they could switch to off-grid power.
The NSW government has clearly stated their support of renewable power by enacting a Renewable Energy Action Plan to have 20% of its electricity generated from renewables by 2020. Allowing this fee would be a direct contradiction of their goal to “remove barriers to and promote investment in renewable energy.”
The most common adopters of renewable energy in Australia are households seeking to provide their own power: precisely the same customers who will have to shoulder this fee. To allow this fee would be to construct an additional barrier to renewable energy adoption. Meetings will be held in the coming weeks to decide the fate of the proposed fee. If the NSW government wishes to follow its stated policies and aid the growth of renewable power, they must stand against the fee.
- 24 Nov, 2013
- Clean Energy Corp
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