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Population growth drives electricity prices up - Kelvin Thomson

Kelvin Thomson MP: "It seems to me that a key driver of rising electricity prices that doesn’t get much attention in the electricity prices debate is population growth. This growth was driving electricity prices up at twice the rate of CPI long before the carbon price ever showed up. I did a detailed speech in Parliament in late 2010 about this issue, which pointed out that electricity prices in Sydney and Melbourne had doubled in the previous decade, which was twice the rate of CPI."

Population a key driver of Electricity Prices


[Originally published at http://kelvinthomson.blogspot.com.au/2012/12/electricity-prices.html Headings are by candobetter.net editor]

It seems to me that a key driver of rising electricity prices that doesn’t get much attention in the electricity prices debate is population growth. This growth was driving electricity prices up at twice the rate of CPI long before the carbon price ever showed up. I did a detailed speech in Parliament in late 2010 about this issue, which pointed out that electricity prices in Sydney and Melbourne had doubled in the previous decade, which was twice the rate of CPI.

Poor understanding of impact of population growth on infrastructure among policy makers

The impact of population growth on the cost of infrastructure isn’t well understood, not even by policy makers. If the average life of the nation’s infrastructure is 50 years, then you’ve got to set aside 2% of the nation’s income every year to keep replacing it and deal with it wearing out. But if your population is increasing by 2% a year then the new people need 100% extra infrastructure for their needs, so you’ve got to set aside another 2% of the nation’s income for that, that is, twice as much as with a stable population.

A 2% population increase only gets you 2% extra income, but it doubles your infrastructure spend. That’s why electricity, gas, water, council rates all keep rising higher than inflation. I don’t think it’s fair that pensioners and ordinary consumers should have to pay for this. I think that it’s the beneficiaries of population growth who should pay for the costs of it. The principal beneficiaries are the property developers whose land values rise when population rises.

Classic example where developers should pay to change zones

A classic example was reported in Melbourne a couple of days ago of property developers wanting to build 30 storey high-rise buildings at Fisherman’s Bend. These developments inevitably require more electricity infrastructure – I don’t think pensioners in my electorate and other inner city residents should have to pay for that. I think that when they put in an application for rezoning or planning permits that mean more people are going to live on the site, there should be a financial contribution that genuinely reflects the extra infrastructure costs that come with that population growth. The mechanism for that needs to be worked out between governments, electricity companies and Councils, but the principle should be that the beneficiaries of population growth pay for the extra infrastructure costs that come with it.

Comments

Kelvin Thomson suggests here that the cost of infrastructure of new denser development in an established suburban area should be factored in. In contrast, Roz Hansen who advises the Victorian State Government on planning matters is reported to have suggested that when more people are squashed into an established area, that the current home owners should pay for the infrastructure through a levy. (recent report in Melbourne Herald Sun) Her justification is that the forefathers of the residents of established suburbs paid for the infrastructure in the past, implying that current home owners got a free ride and so it is fair for them to pay now for the additional infrastructure to support a higher population! Hansen's proposition completely disregards the fact that the home owners in the area paid more for their houses because they water and power supply and probably good public transport. They paid already! What's more these residents will be disadvantaged through loss of amenity -increased competition for parking, access to open space, loss of light with increased building heights, loss of leisure time now spent fighting planning issues to minimize damage - by having the population increased where they live!

It's an absurdly wrong statement that current home owners in established suburbs get a "free ride" with regards to infrastructure! The cost of the house a land package rests largely on location - land costs and amenities. Buyers pay more for housing in developed suburbs, and infrastructure is what is "developed". It's not FREE!! Council rates are also proportionally higher. Expecting the public to pay for something that they are unlikely to benefit by, or even worse, contrary to their interests, would be political suicide!

What's interesting in this plan of Roz Hansen, that people in developed suburbs pay for the infrastructure for population growth, is the admission that population growth doesn't pay for itself. Instead of being a source of funds, it's a sink. The way to tackle infrastructure costs is through addressing our increasing immigration visas.

Net Overseas Migration is set to increase in the 2013-14 period to 229,400. This is much higher than predicted in the 2010 Intergenerational report with an average of 180,000 per year. It's a knee-jerk reaction to the need to increase the size of our economy at whatever costs.

These politicians sit in their ivory towers, studying figures and economic data, and simply make devastating decisions in a vacuum, without public debate and without considering the impacts on our citizens, environment and lifestyles. We have a remote, disinterested government, with their noses in the trough of "growth" and "big" to satisfy massive egos and their megalomaniac personalities.

The front page story of today's Herald-Sun, Families will pay $1300 more for CityLink, water and power appears to bear nimby out:

FAMILIES face a blowout in basic household bills of up to $1300 next year.

A CityLink toll rise is the latest hip pocket slug, driving up costs by as much as $76.80 a year for the average motorist from January 1.

The latest sting follows increases to electricity and gas bills, as well as myki fares, also set to take effect from January.

The rest of the story is behind an on-line paywall. My hard copy further advises me:

Victorian Households will be paying up $310 more per year for water ... while gas and electricity prices will rise by up to $250 per month ...

No explanation is given for the increases by the Herald-Sun.

Plausible explanations that come to my mind, many of which should be obvious to the Herald-Sun include:

  1. Profit gouging by the private corporations that own the utilities that were once owned by us;
  2. Loss of economy of scale and duplication that resulted from breaking down what were once public monopolies into allwfedly 'competing' private companies; and
  3. Diseconmies of scale and less to go around as a consequence of population growth imposed upon us.

In previous decades, those promoting population growth have repeatedly and loudly proclaimed, contrary to intuition and common sense that population growth will make us a wealthier society. Those promoting privatisation, deregulation, which commenced with Paul Keating's 'floating' of the Australian dollar in 1983, have made similar claims.

The evidence that all of us have seen around us in our daily lives, which has ben confirmed by the Herald-Sun, has shown these claims to be hogwash. Those who made these claims could not have failed to realise that they were hogwash. Only because they stood to gain at our expense have they promoted policies which have made society as a whole, poorer.

Other policies from which a minority gain from the destruction of wealth include:

  1. The use, by educational institutions and other government bodies, of expensive copyrighted intellectual property, particularly Micro$oft Windows in preference to free open-source software;
  2. Failure of governments to set up public banks and allowing the continuation of needless national and global financial crises caused by private banking cartels. (See Ellen Brown, Public Banking Institute.)
  3. Failure of governments to plan cities so that we live in easy commuting distances from our places of work, education, retail, entertainment, recreation, etc. Consequently many of us have have to spend hours every day burning up petrol on gridlocked freeways getting to and from work.
  4. Planned obsolescence and spare part incompatibility. As a consequence, many of the artifacts, we buy to make our lives easier and more enjoyable, break down after only few years at most, after which they end up in landfill.
  5. War: Every war fought in modern times has been needlessly prolonged to enrich a few. Almost all, with the exception the Second World War, have been thoroughly pointless or else unjustly waged against a weaker adversary for economic gain as happened to Iraq in 2003.

Another day another headline about rising cost of living pressures.[1] As ever increasing population builds financial pressure on state budgets the government must find new ways to gouge residents to pay the bills.

And I don't understand the neo-liberal obsession with budget surpluses.[2] Cut backs in government spending simply decrease government services and pull money out of the economy. Ballieu says we have to live within our means and pay our way with savings. Did Ted pay for his home in cash? Maybe he and his rich mates can but the rest of us borrow to buy somewhere to live and improve our lot. Debt is an investment in our future. We accept the risk and, mostly, come out ahead.

And did you know Ted is a socialist neo-liberal?[3] He socialises the costs of Big Australia and privatises the profits. All these cost of living increases are public subsidies for the Big Australia lobby. They make the money from this Ponzi immigration scam and we take the pain. The burden is being disproportionately absorbed by low and middle income households. The "death by a thousands cuts" (to government funded services and increases in every damn government imposed fee and charge known to mankind) is the fate of the 99%. The cost of living increases aren't even felt by the wealthy elites who benefit from Big Australia but it amounts to misery and virtual slavery for us plebs. And if you don't think it's slavery, let me what happens when you refuse to pay exorbitant prices rises.

Footnote[s]

[1] See Herald-Sun story linked to above. - Ed

[2] The supposed necessity for governments to achieve financial budget surpluses is a fraud. What if that 'financial surplus' is achieved by cutting economically and socially necessary service as was 'achieved' by Prime Minister John Howard during the early years of his (mis)rule. Howard slashed and burned spending on Federal Government services including education and training. In the latter years of his rule, he suddenly 'discovered' a massive deficit in skills in the Australian workforce and so ramped up his skilled immigration program. - Ed

[3] I was unable to find the term "socialist neoliberal" either on Wikipedia or by searching Google. I presume the self-contradiction in combining too virtual opposites is too much for it to be considered a useful term. However it is true that neoliberal extremists like Baillieu, Newman, Howard, Costello and Keating will endeavour to socialise the losses of corporations. - Ed

With high density and high rise living, something we are forced to "choose" more due to population growth, then inevitably the demands for electricity will grow. With more buildings exposed to the elements, without trees and natural shade, air conditioners and heaters will be ultimately used more. It's not just population growth and urban sprawl that will exacerbate the distribution costs, but the increasing demands of energy-guzzling lifestyles.

The privatization of public assets under the Kennett government means profits for private owners, and it benefits not the consumers but the power companies. There's nothing ''sustainable" about Victoria. Neo-liberalism means caving into whatever is "good" for the Economy, and being enslaved to economic growth at whatever environmental and social costs. Instead of the Economy being a tool, a system to support our lifestyles, it has become a our Master to eat away at our future - the terrestrial rock we survive on (our part of the planet) - and our well-being.

Energy Minister Angus Taylor chooses to ignore the population explosion when he flogs cheaper power prices through to 2030 (State deals to drive down power prices, Canberra Times 18/11).

In 10 years to 2030, Australia's permanent population will grow by 4-million. The temporary visa population, now over 2-million, will likely grow to 3-million. Seven million more people need a lot more than more power stations, solar farms and expensive batteries. They need lots more high tension power lines, suburban transformers and housing estate poles and wires. Dozens of new suburbs will need to be built into bushfire fringes. Seven million new people also need water, and in drought stricken eastern Australia, that will mean more desalination powered by ever more heavy electricity.

In a lifetime of paying taxes and utility bills, new migrants will pay their share of all this new electricity grid construction. Our problem, Minister Taylor's problem, is having all the work done and ready to switch on the day the new migrants step off the plane.

David Z Hughes