Up to a third of looming residential power bill hikes could be avoided if governments crack down on electricity networks, research shows.
The monopoly power networks should not continue to reap large profits while households pay skyrocketing electricity bills, the independent Institute for Energy Economics and Financial Analysis said in a report released on Thursday.
The recent draft default market offer for NSW, southeast Queensland and South Australia, and the Victorian default offer, indicate consumers face steep electricity price rises.
But 15 to 33 per cent of these draft residential retail bill rises could be avoided if the federal government worked with state governments to change the rate of return allowed for networks, the report found.
Networks charge a price for getting power from where it is generated to where customers need it.
According to the Australian Energy Regulator, the rate of return should be high enough to encourage network owners to build networks needed to supply electricity and gas, but not so high that consumers are paying too much.
The regulator last month completed a three-year review of electricity network charges and concluded the system used to set returns should remain largely unchanged through to 2028.
But the new research by analyst Simon Orme found the regulated electricity network prices were nearly 11 per cent or $10 billion higher than necessary over 2014 to 2021.
Mr Orme estimated if "supernormal monopoly network profits" were removed, it would save each residential consumer $67 to $166 of the bill increase.
The regulator's failure to recognise or tackle this problem confirms that monopoly network regulation can only be fixed by government leadership in overturning the regulator's decision, according to the report.
If the government acts quickly, as it did with recent gas and coal price caps, these changes could be made by the end of 2023, and take effect from July 2024.
"This is the perfect time for state governments to make changes that families will appreciate by reducing power price rises," Mr Orme said.
Longer-term, he recommended changes to laws on regulation of monopoly networks and new independent monitoring of regulator performance by the federal government.
