{"id":2676,"date":"2024-07-21T17:47:24","date_gmt":"2024-07-21T07:47:24","guid":{"rendered":"https:\/\/www.ecam.org.au\/?p=2676"},"modified":"2025-02-14T15:02:06","modified_gmt":"2025-02-14T04:02:06","slug":"viva-la-revolution","status":"publish","type":"post","link":"https:\/\/www.ecam.org.au\/index.php\/2024\/07\/21\/viva-la-revolution\/","title":{"rendered":"Vive la revolution! or why SEC will disappoint Victorian electricity customers"},"content":{"rendered":"\t\t
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One of the state’s former chief regulators has called for structural change in a paper that calls out the false narrative<\/i> of the National Electricity Market (NEM) over 25 years – the\u00a0false narrative<\/i> that is a barrier to our community successfully navigating the energy transition we so desperately need to make.\u00a0\u00a0<\/h6>

Ron Ben-David, former Chair of the Essential Services Commission, has a keen insight and a logical, clear voice, often with a twist of humour, and deserves attention. His latest deconstructs the false narrative<\/i>\u00a0that unconsciously guides all those that work in the energy sector, and shapes the universe in which you interact with your electricity (and gas) bill.<\/p>

There are 11 component ideas to the false narrative<\/i> that Ben-David spells out, and probably more that can be added to that list – the narrative <\/i>is not a document like the law that creates the NEM, it more like the vibe <\/i>of the thing. The narrative <\/i>shapes the world in which those working in the NEM think and take action.<\/p>

In this series we’ll step through the key concepts and explore why the system is broken and what Ben-David’s proposal to turn towards fixing it looks like. Those interested in the whole paper can find it a\u00a0<\/span>Monash University here<\/a>.<\/span><\/p>

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Part 1 - When is a market not a market?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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It is hard to choose which wrong idea to begin with as a few are quite essential, but one that we’ll connect readily with the community’s aspirations for the State Electricity Commission (whoops,\u00a0Corporation) is that the retail electricity market is not a market.<\/span><\/p>

Those of us old enough to remember calling the SEC to get the utilities put on will tell that it was just that – you called one number to speak with one customer service staff to set up new account details and initial reading of the meter to get the power turned on and billing started. You may have been told the rates but you didn’t necessarily ask – there was one tariff to pay (although customer classes and concessions applied much as they do today).\u00a0<\/span><\/p>

What you didn’t do was shop around – after all, what would you shop around for? Turning on a light was turning on a light.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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In economics it is called \"utility\".<\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Customers are motivated to shop around for value for money. That value may come from a difference in price, but more likely it will come from what economists call “utility” – what additional benefits one product\/service or another may provide that I attach a particular value and for which I am willing to pay a price.<\/p>

Economist love markets because in real life we are are surrounded by them – do I value more one brand of canned tomatoes or another? do I prefer Gary’s service in the butchers or the supermarket’s pre-packaged beef? do value the performance of one EV or the seats and towing capacity of another? I might even want the cheap, sometimes bruised apples and pears from my local green grocer as they are better for making stewed fruit – they have a higher utility<\/i>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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A simple way to think about utility is to take money out of the equation – think about a barter society. You and I meet and have things to trade – if I find utility in you chicken and you find utility in my spade we’ll agree to a trade. But what if I don’t want to trade a whole spade, or you just want a hole dug? I can offer my time digging with the spade instead. The market facilitate a trade, and we are both better off as a result.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Ben-David highlights the telephony market with which energy markets are frequently compared. In the 1990s the mobile phone increased the utility of a communicating via a fixed line because you could move around and people could find you anywhere. In the 2000s the smart phone and data services opened a universe of new consumer benefits to enjoy – even monitoring my home energy consumption, PV performance and EV charging and pre-heating the cabin.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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\"So, what role does utility play in motivating so-called \u201cenergy consumers\u201d to shop around or trade? None.\"<\/h6>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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“Shopping around for electricity does not deliver greater utility. Trading electricity load, supply and storage does not enhance consumer well-being. Shopping around and trading delivers no bounty of additional comfort or ease. The entirety of the promised benefits from shopping around for electricity \u2013 or trading electricity load, supply and storage \u2013 are exclusively financial in nature.<\/a>“<\/span><\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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All electrons are the same, I can’t buy better electrons. I can shop around retailers for some financial saving – but as economists will tell you the benefit is usually marginal – “at the edge”.\u00a0<\/p>

And what does it mean if the benefit is marginal, but the cost to our time as customers is not? Most of us don’t shop for better energy contacts, we never have in 20 years, and probably never will.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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But that's not all, there's more...<\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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What’s the other key characteristic of those markets?<\/p>

What if I cannot find my favourite brand of\u00a0canned tomatoes? What if I don’t like the sausage flavours at the butcher’s this weekend? What if I cannot afford either electric car? What if those apples and pears are just too bruised?<\/span><\/p>

I can choose not to buy.<\/span><\/h5>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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So is the retail electricity market really a market? or to rephrase that question in an important way, are the failures in the retail electricity market (we won’t enumerate them just yet) actually market failures, particularly in the economists view of the world?<\/p>

The answer is no. The retail electricity market and the whole electricity system artifact is a constructed idea, dreamed up in economists and lawyers minds in the 1990s, codified in laws, rules and regulations. It is as real a market as the clouds, except one that trades billions dollars in Australia alone, and you and I depend on every day.<\/p>

It follows that the outcomes in the electricity system are the one that the design facilitates (I won’t say intended, that implies it’s creators understood entirely what they were doing).<\/p>

The answer is they are design failures. And the only way to fix the failures is to change the design. Hence the revolution.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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What's this got to do with bringing back the SEC?<\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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So why was the concept of the SEC so appealing in the Victorian election. To those that grew up with it, it harks to a simpler period- the SEC took care of all that complicated stuff, we just paid our bills. It’s the nature of that contract between the supplier and consumer of electricity that is the theme of Ben-David’s paper and this series.<\/p>

So why will people be disappointed in what the SEC is? Because it is not a revolution or a reversion to what the name stood for. It is a new player in the existing game, it will pick up roles the existing rules allow it, and those rules explicitly exclude the thing it used to be. It cannot go back there. At least not until the revolution comes.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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This series inspired by Ben-David continues here<\/a><\/h6>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

One of the state’s former chief regulators has called for structural change in a paper that calls out the false narrative of the National Electricity Market (NEM) over 25 years – the\u00a0false narrative that is a barrier to our community successfully navigating the energy transition we so desperately need to make.\u00a0\u00a0 Ron Ben-David, former Chair […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,14],"tags":[],"class_list":["post-2676","post","type-post","status-publish","format-standard","hentry","category-green-energy","category-community"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/posts\/2676","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/comments?post=2676"}],"version-history":[{"count":41,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/posts\/2676\/revisions"}],"predecessor-version":[{"id":2961,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/posts\/2676\/revisions\/2961"}],"wp:attachment":[{"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/media?parent=2676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/categories?post=2676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ecam.org.au\/index.php\/wp-json\/wp\/v2\/tags?post=2676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}