Coalition’s claim on Australia’s electricity bills isn’t the full picture

With electricity prices shaping up to be a hot-button issue at the upcoming federal election, the Coalition has claimed we’re paying some of the world’s most expensive electricity bills, but experts say global comparisons are complicated.

Both Opposition Leader Peter Dutton and energy spokesperson Ted O’Brien have made the claim while taking aim at Labor’s future energy plans. When asked for evidence, Dutton’s office pointed to a comparison of prices — what some people in South Australia pay against Canadians in Ontario and Americans in Tennessee, both of which have nuclear as part of their energy mix.

Are our electricity bills really among the world’s most expensive?

Experts AAP FactCheck spoke to gave varying levels of credit to the Coalition’s claim, but they agreed on one thing: international comparisons of electricity prices are highly problematic. For a start, there’s a lack of quality in data sources. 

Tony Irwin, a nuclear power expert from Australian National University, pointed to a 2021 comparison carried out by UK company BestBroadbandDeals.co.uk (then known as Cable.co.uk). It ranked Australia 88th most expensive of 230 countries. 

Tony Wood, director of the Energy and Climate Change Program at Grattan Institute, pointed to data on Statista which takes its figures from the website Global Petrol Prices. For the most recent period (three months to June 2024), Australia was ranked 26th most expensive out of 148.

However, both said such global comparisons mean very little. Instead, countries should be compared with those with similarly developed economies.

For example, Associate Professor Irwin pointed to BestBroadbandDeals.co.uk’s four most expensive countries — Solomon Islands, St Helena, Vanuatu and the Cook Islands — which are mainly powered by expensive diesel. By comparison, the cheapest — Libya, Angola and Sudan — have heavily subsidised rates.

When looking at OECD countries, Australia sits 15th most expensive out of 38 countries for household electricity, according to Global Petrol Prices. A comparison made across 29 similar economies by insurance company Compare The Market puts Australia at 13th most expensive, based on December 2023 data.

But even comparing similarly developed economies is problematic, the experts say.

Bruce Mountain, director of the Victoria Energy Policy Centre, explained there are various costs that make up the price consumers pay for electricity. As well as the usage cost, the final rate paid by customers may or may not include various taxes, distribution charges, network charges and subsidies.

There’s no international standard for such comparisons.

“Ideally [comparisons] should distinguish customer categories (households, small businesses, commercial, agricultural) and also, as far as possible, split out wholesale prices from network charges,” Professor Mountain said. 

“This can be done in Australia but not always easily in other countries that haven’t deregulated their electricity industries.”

Tristan Edis helped establish the energy research program at the Grattan Institute and is now a director at Green Energy Markets. He said certain costs included in the final bill can make such comparisons misleading, particularly when used to make the case for certain energy production sources.

In Australia and many parts of Europe, a number of taxes are often added to electricity supply, but Japan and Korea have lower levels of tax on electricity, he said. As a result, you’re often left “comparing apples with oranges or apples with bananas”, he said.

Edis also pointed to Australia’s high distribution charges and said there’s a very high cost to reach some remote regions, which is reflected in everyone’s power bills, regardless of location. 

Associate Professor Irwin said Australia’s size also makes such comparisons difficult, given that the prices paid by some in South Australia, which has the most expensive bills in the country, would be unrecognisable elsewhere in the country.

Other experts pointed to wholesale electricity price — at which it’s bought and sold in bulk before reaching consumers — as a better way to gauge the price of energy production, before extras are added to bills.

Australia is the ninth cheapest (at the time of writing) when it comes to wholesale prices out of the 31 OECD countries tracked by the International Energy Agency.

Wood said wholesale prices can be useful for comparison, depending on what you’re trying to establish.

“Wholesale prices are … highly dependent on the energy sources, the natural resources of the country, and on the nature of any wholesale market,” he said.

Transmission and distribution, Wood said, will be highly dependent on a country’s size and where people live. 

“The costs will be bigger in a country with smaller populations and longer distances,” he said. 

“You have to pull these figures apart to decide how much of any differences is down to physical differences and how much to politics and policy choices.”

So where does that leave the Coalition’s claim?

Wood and Edis put Australia more towards the “middle of the pack”.

Acknowledging the difficulties of such a comparison, Mountain said it’s about right to say we pay “among” the highest bills in the world.

Irwin said the claim is true enough for those living in South Australia, while the average Australian is paying “nearer to the most expensive developed countries than the least expensive”.

While international comparisons are problematic, Mountain said they can offer a better understanding of the factors that affect electricity prices.

“It’s understandable that electricity prices can become a tool in political discourse,” he said, “not unreasonably considering their importance to consumers. 

“Critical thinking and a discerning mindset are incumbent on listeners when political actors make claims about electricity prices.”

This article is republished from AAP FactCheck.

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