Electricity costs affect prices

The cost of supplying electricity is increasing right across Australia. The cost of supplying electricity in Queensland is currently lower than in many other states, as the majority of Queensland's power stations currently use high quality, low-cost black coal.

What is included in the electricity price?

Electricity prices are made up of four costs:

1. costs to create electricity at a power station, (known as 'generation' costs)
2. costs to build and maintain the state's extensive high voltage powerline infrastructure (known as 'transmission' costs)
3. costs to build and maintain the state's network of poles and wires that deliver electricity to homes and businesses (known as 'distribution' costs)
4. costs to connect customers, bill customers and manage accounts (known as retail costs).

To break it down, almost half of the cost you pay is network costs (transmission plus distribution) and generation costs are slightly less. Together these total just over 90 per cent of the cost of supply, while retail costs make up just less than 10 per cent.

Costs that impact on electricity prices

Electricity infrastructure

In the period 2005-10 Queensland will have spent almost $9 billion on electricity transmission and distribution infrastructure to cope with increased electricity demand. We all pay a portion of this cost through our electricity bill. This investment in our electricity system increases the transmission and distribution components of the regulated tariff.

Major storm damage

Severe weather conditions have also impacted on our electricity system. Events like Cyclone Larry and the Brisbane storms of late 2008 caused severe damage to our electricity network. The significant additional cost of repairing and restoring electricity supply to areas affected by natural disasters drives up the transmission and distribution components of the regulated tariff.

Fuel sources

Recently, as the cost of coal, gas, diesel and other fuels used to produce electricity has increased, this has raised the generation cost in the regulated tariff. As these fuel costs increase, these costs drive up the regulated tariff and the price we pay for electricity. The proposed introduction of a national scheme to reduce greenhouse gas emissions will also increase the costs of electricity from fossil-fired (coal and gas) power stations.

Renewables and carbon cost

Queensland will play its part in helping to lower Australia's contribution to climate change by using cleaner energy power stations.

In coming years, the generation cost component of the tariff is expected to rise because electricity retailers will have to purchase more electricity from power stations that use renewable energy sources like wind, geothermal and solar. While these have low fuel costs, the capital and maintenance costs are currently very high compared to traditional sources of generation.