Energy Pricing Reform in Australia: A Case Study

Abstract

Economic theory predicts that pricing electricity to better-reflect the costs imposed by peak demand will benefit consumers by deferring network capacity augmentation. To date, the Australian Capital Territory is one of the first Australian jurisdictions to see significant uptake rates of more cost-reflective network electricity tariffs by small consumers. This paper identifies lessons learned from the implementation of these tariffs, suggesting consumers have responded to price signals, thereby improving network utilisation. It also finds that the uptake of cost-reflective tariffs is considerably greater under an opt-out tariff assignment policy, and consultation plays an important role in gaining community support.