Bundaberg Cane Growers
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Clarke and Dawe - The Energy Market Explained

Rural businesses switch to diesel power as electricity prices soar

Video: Sugarcane farmers in Queensland are turning to diesel power to save money. (Photo: ABC News/Lucy Barbour) (7.30)

 
"I'm pissed off and I've had a gutful."

A long, dry summer is enough to frustrate any sugarcane grower, but Allan Dingle's anger is directed at the pile of electricity bills in front of him.

"You start to wonder why you get out of bed in the morning," he said.

Mr Dingle uses electric powered pumps to water his cane fields near Bundaberg, on Queensland's central coast, and the price to run those pumps has more than doubled over the past decade.

The soil here is rich-red and fertile and locals say, if you can add water, you can grow anything.

But as power prices rise, some farmers have been forced to turn off the pumps.

The local irrigators' council representative, Dale Hollis, is hearing that concern right across the district, and the country.

He says right now, irrigators have two options:

"They have to switch off the pumps and go back to dryland [cropping], and that impacts upon the productivity of the region and impacts on jobs," he said.

"The second option is to go off the grid and look at alternatives."

Another option is solar and there are plenty of farmers installing panels, but many growers irrigate at night and can't afford the millions of dollars it could take to buy battery storage.

That's pushing many of them back to a dirtier option.

"Right now, diesel stacks up," Mr Hollis said.

Bundaberg Sugar moving to diesel


Across the district, black power lines snake above cane fields that rustle in the breeze. But Simon Doyle says they may as well not be there if electricity prices continue to rise.

He's in charge of farm operations at Australia's most famous sugar company, Bundaberg Sugar, which produces 220,000 tonnes of raw sugar every year. Gradually switching to diesel is saving the company some serious coin.

Diesel pumps aren't pretty. One spits out fumes as it whirs into life, but Mr Doyle says it's the only option for his company right now.

"When you're backed to the wall, you don't have the luxury of thinking about how environmentally friendly diesel is versus electricity," he said.

He's done the maths carefully and it's already 30 per cent cheaper to pump water with diesel than electricity.

"With what we understand electricity prices are going to do into the future, that number will become even greater," he said.

Farmers get a rebate from the Federal Government for diesel fuel, but even without it, Mr Doyle says diesel is still the most cost effective option.

For Mr Dingle, diesel has always been a good backup option, but he's worried about what it would mean to ditch electricity altogether.

He says electricity is "cleaner, more user-friendly, probably more reliable" and worries that abandoning the grid altogether will hurt his neighbours.

"If I went to diesel all I do is put my share of what I was paying before into the electricity prices, onto all my neighbours and their prices increase as well."

Power bills continue to grow

Rural businesses right across the country are grappling with the same issues.

Glen Dobinson's father started as a blacksmith in a backyard tin shed in Rockhampton, Queensland, in the early 1950s. Since then the company has grown dramatically; it exports springs and other four-wheel drive parts all over the world and employs more than 40 people.

He and his dad are "proud as punch" of how far they've come and now Glen Dobinson would like to take a step back to let the younger generation over.

But mounting electricity bills are making that difficult.

"Back in 2007, our power bill was about $100,000 to $110,000 year in, year out previous to that," he said.

"Now it's about $350,000 a year."

He's worried his bills could double again by 2020 as Queensland's regional electricity distributor, Ergon, changes the way it charges small businesses for power.

Mr Dobinson says that will mean a new daily service charge of $155,000 per year, and a new demand charge.

"Then we'll have our power bill on top of that," he said.

Like the irrigators in Bundaberg, he is being forced to consider cheaper alternatives like diesel.

"I feel like we're going back to the future," he said.

"My dad had diesel forges and other diesel running here in the old shop on the other side of town.

"I feel like we're going backwards."

Ergon says it's changing its tariffs to become more "cost-reflective", and to encourage consumers not to use as much power during peak periods.

Energy companies have previously said they needed to invest more money because electricity consumption was growing and they believed that would continue.

'Obvious conflict of interest for governments'

For the past eight years, companies said that investment was essential if they were going to meet that rising demand.

But the electricity market is unpredictable, says the Grattan Institute's Tony Wood.

"Electricity consumption had actually been falling for a whole range of reasons. And the question now is, who should pay for that?" Mr Wood said.

While power prices are causing concern across the country, Mr Wood says network prices have risen most sharply in Queensland and New South Wales, where state governments own energy companies.

"Now partly there's an obvious conflict of interest for governments. Do they put downward pressure on prices to help their consumers, or do they try to make money out of the companies they own?" he said.

"I think that's an unhealthy conflict and I think that's partly behind why we ended up with very high costs in Queensland and NSW."

Energy economist Bruce Mountain sees that conflict as more of a "racket".

He says state governments who still own electricity networks are raking in billions of dollars each from energy companies by using the national electricity market's pricing rules to their advantage.

Those rules mean the prices consumers pay are largely influenced by the value and estimated running costs of the individual electricity companies.

"The main reason why the network charges have risen is because the regulator's valuation of the network has risen, and that more expensive asset base has to be charged for," Mr Mountain said.

"They can reduce prices by revaluing those assets down closer to a market valuation."

Mr Wood says there's nothing wrong with turning a profit, but he points out that the national electricity market was designed so that energy companies, regulators and governments could develop and maintain a system that works in the long-term interests of consumers.

The Queensland Government is providing help for regional businesses affected by increased charges but business owners like Glen Dobinson say it won't help them.

"We don't know where to go. Honestly, it's my biggest bugbear. I want to keep employing local people and making a great product but without the direction and being competitive, I lose a lot of sleep."

 

NIC Brief for the Hon Josh Frydenberg Minister for the Environment And Energy

 Supporting industry and jobs through accessible and affordable energy

 27 February 2017

UPDATE

The National Irrigators’ Council (NIC) is the national peak body representing irrigators in Australia, supporting 29 member organisations covering the Murray Darling Basin states, irrigation regions and the major agricultural commodity groups. Membership of the Council includes water entitlement holders and irrigation infrastructure operators. NIC is fully funded by the membership.

The Council represents the voice of those involved in irrigated agriculture who produce food and fibre for Australia and significant export income. The total gross value of irrigated agricultural production in Australia in 2014-15 was over $15 billion.  {ABS} The sector produces essential food such as milk, fruit, vegetables, rice, grains, sugar, nuts, meat and other commodities such as cotton and wine.

The Council aims to develop policy and projects to ensure the efficiency, viability and sustainability of Australian irrigated agriculture and the security and reliability of water entitlements.

 

At our last meeting with yourself and advisors (13 October 2016) we undertook to provide information that supported our request for a rule change that would allow a write down of the networks Regulatory Asset Base. This has been provided.

At your suggestion, we also undertook to engage with the Finkel review, which we have also done, and our submission will be lodged on time this week.

In the past 4 months process we have discovered that “...The allocation of stranding risk is entirely a contingent artefact of a regulatory framework that has been in place since 2006.  It stemmed from concerns during the Howard government's last term that the mining boom would confront infrastructure bottlenecks which could drive inflation.  It is a deliberately pro-investor regime, which may have been justified for a short period but there has never been a review as to its ongoing validity.” 

Up until the formation of the AER and its adoption of a roll-forward method, the Regulated Asset Base (RAB) was set using a method called Optimised Depreciated Replacement Cost (ODRC).

The use of ODRC is consistent with outcomes in competitive markets, where asset stranding/optimisation risk sits with suppliers, not customers.  The existence of optimisation risk in competitive markets is also reflected in the recoverable amounts (Impaired Assets) test under International Financial Reporting Standards (IFRS), and associated provisions for accelerated depreciation charges.

Under IFRS, indications of asset impairment (IAS 36.12) include:

External sources:

  • market value declines
  • negative changes in technology, markets, economy, or laws
  • increases in market interest rates
  • net assets of the company higher than market capitalisation

Internal sources:

  • obsolescence or physical damage
  • asset is idle
  • part of a restructuring or held for disposal
  • worse economic performance than expected for investments in subsidiaries, joint ventures

Asset optimisation is a normal feature of markets and is currently being experienced in a number of sectors in Australia, including resources and associated transport infrastructure, in response to the downturn in global commodity prices.  Similarly, due to falling demand for remote thermal electricity, over the last five or so years 4.7GW of serviceable generation capacity has been withdrawn (and hence optimised) from the National Electricity Market. 

Due to our involvement in the Agricultural Industries Energy Taskforce we have also become aware of specific failings with regard to the AER /ERGON Tariff Statement namely that Ergon is trying to avert a hefty network expansion bill with penalising tariffs which aim to reduce electricity usage when Ergon’s own data shows there is a lot of spare capacity in the network.

An independent report conducted for CANEGROWERS by Sapere consulting concluded:

Ergon’s 2016 Distribution Annual Planning Report shows that 98% of the low voltage network has enough spare capacity to meet all forecast peak demand growth for the foreseeable future.

The network congestion data used by Ergon in its tariff proposal overstates congestion by a factor of approximately 375. The scale of the pricing distortion at $1.8 billion over five years.

The same flawed approaches have been applied to Energex and in other parts of the National Electricity Market in NSW and Victoria.

There appears to be significant rationale to mount a “crowd funded” Limited Merits Review application to the Australian Competition Tribunal to challenge the AER’s application of National Electricity Rules should the ERGON application be accepted in its current form.

As a result of our research, we request that the COAG Energy Council:

  • Recommends reinstatement of the original (pre-2006) NER rules that required the regulator to optimise the transmission and distribution network regulated asset bases.
  • Recommends that network tariffs be designed to ensure that irrigators and other businesses in non-congested parts of the network are not required to meet the costs of network investments made to overcome congestion in other parts of the network. 
  • Thoroughly review the governance structures of Australia’s regulatory oversight framework to ensure it is working efficiently and effectively for the long-term benefit of the Australian economy.
  • Commission an independent assessment of the economy-wide costs and benefits of revising the electricity network and transmission businesses’ regulated asset bases to efficient levels.
  • Supports the creation of local distribution grids.
  • Recommend that network service providers and their shareholders be required to face the risks associated with their network investment decisions, removing that burden from consumers.
  • Investigates the impact of unsustainably high electricity prices on national energy security and the international competitiveness of Australia’s export and import competing industries and the communities they support.
  • defines and targets an affordable and sustainable electricity price as one that has a ceiling of 8 cents per kilowatt-hour for the electrons and 8 cents per kilowatt-hour for the network.

 
 

Dale Holliss
National Irrigators' Council
Energy Committee Chair

 

 

REGULATORY REQUIREMENTS FOR ACCESS TO DIFFERENT ROAD CLASSES

 

Transport guidelines

Please click to enlarge.

 Projects and Events


SMARTCANE BMP

The “Smartcane BMP” Program is an opportunity for sugarcane growers throughout the state to showcase their farming practices. Smartcane BMP Facilitators in your local CANEGROWERS office are available to assist growers to register on the Smartcane BMP website and to complete assessment questionnaires about various aspects of their farming practices. Growers who have registered on Smartcane BMP and completed the assessments are invited to seek assistance from their local facilitator to achieve Smartcane BMP accreditation. Facilitated training and assistance sessions are held at CANEGROWERS office each Thursday morning. For further details on the Smartcane BMP Program click here.

Insurance

CANEGROWERS Insurance Scheme  - owned by growers, working for growers, was commenced in 2012 to look after our members’ insurance needs. Wide Bay Authorised Representative Colin Mobbs has extensive experience in looking after the insurance needs of the rural sector and has assisted many of our members to ensure that their insurance cover is tailored to their requirements. Col provides a personalised on-farm service to growers, primarily servicing CGU’s Canepol insurance policies. He also has access to a broad range of other insurance products and alternative underwriters so that appropriate insurance cover can be obtained for all aspects of members’ businesses at the best price.

To contact Col to discuss your insurance needs call 4151 2555 or on mobile on 0418 891 783.

 

 Irrigation Planning and Management Project

Bundaberg CANEGROWERS Ltd

Our Mission is to provide representation, leadership and services and promote unity in the interest of our members.

Our Goals are to provide an effective and efficient service through a focus on members' key concerns within a changing environment. To maximise member and industry proceeds by marketing current and future sugar production through a structure that is transparent and accountable to the industry. To ensure that industry growth is managed and market driven within a sustainable sugar industry. To ensure environmentally and financially sustainable production through managing and coordinating inputs and resources.

Our Vision is to ensure a secure and profitable future for Bundaberg CANEGROWERS members.


  

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Bundaberg Weather
As at: Thu, March 30, 2017 - 4:50 AM
Temp: 26.2°C
R/H: 95%
Wind Dir: NNE
Wind Speed: 30kph
Wind Gusts: 33kph
Pressure: 1008.0hpa
Rainfall (since 9am): 16.6mm

See full details and 4 day forecast >>
 
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Latest News

Australian Farmers Weekly Wrap

Click here to view this weeks news update.

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NIC CEO Update

National Irrigators' Council CEO Update - electricity, UpWater & NIC goes to Launceston

Read More >>

QFF Weekly Update

Here's 10 things to know from QFF.

  1. Tropical Cyclone Debbie is bearing down with authorities warning of damaging tidal surges in North Queensland. Track the cyclone’s future movement HERE. See QFF’s Farmer Disaster Support update HERE.
  2. Queensland’s agriculture industry is mourning the loss of former QFF president and life member Gary Sansom who passed away last week. QFF Statement HERE.
  3. QFF industry member CANEGROWERS has outlined it’s five-point plan to address the electricity pricing crisis in Australia. See the steps for a fair and competitive pricing system HERE.
  4. QFF has welcomed the passing of the government’s Farm Business Debt Mediation Bill including amendments to the Biosecurity Act. Minister Bill Byrne statement HERE. QFF statement HERE.
  5. Queensland producers can now receive grants of up to $2500 to help with succession planning. The State Government is providing $1 million per year over three years for the Farm Management Grants. Government statement HERE.
  6. QFF President Stuart Armitage has responded to the Queensland Government’s reef regulations discussion paper calling for long term investment in BMP programs. QFF column HERE.
  7. QFF industry members Queensland Dairyfarmers’ Organisation (QDO) is in Canberra this week meeting with politicians to discuss issues affecting Queensland dairy farmer members. Video HERE.
  8. The Primary Industries Health and Safety Partnership (PIHSP) is reminding creative students to enter its inaugural Farm Safety Student Video Competition for the chance to win $1,000. Application forms HERE.
  9. One Nation senators are going on strike until disputes between Queensland sugarcane growers and sugar mill Wilmar is resolved. ABC article HERE.
  10. Agribusiness trailblazer and mother-of-three Jacqui Wilson-Smith has been honoured with Queensland’s Rural Women’s Award for 2017. Full story HERE.

Read More >>
 

 

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