Queensland Government's mixed messages on cost of living

The Queensland Government is very concerned about the cost of living.

That is why the government has proposed investing proceeds from the asset sales long-term leases into a “cost of living fund”.

The fund will cover the additional cost of the solar bonus scheme, which is currently borne by electricity consumers through higher power bills.

The solar bonus scheme, which essentially involves the network buying solar power from households (through "feed-in tariffs"), has to be paid for by somebody, and currently that somebody is electricity consumers. The cost of the scheme is estimated to make up around six per cent of your power bill. The remainder of your bill is made up of wholesale generation (21%), network costs or "poles and wires" (47%), retail (23%), and other green schemes (3%).

Under the government's proposal announced today, the cost of the scheme will be removed from your power bill and paid for out of the cost of living fund.

But you shouldn't expect your power bill to magically drop by six per cent. According to the energy minister Mark McArdle, the whole point of removing the cost of the solar bonus scheme from power bills is to make the leasing of power assets more attractive to prospective investors.

Minister McArdle commented today that scrapping the scheme would help to increase market interest in power assets. He said, “the simple reason is this: if you deduct a cost from the price of operating a business, it then would increase the potential capacity to sell that… It would increase the attractiveness of that business, there is no question about that. But, at the end of the day, this is about relief for Queenslanders.”

Ignoring Minister McArdle’s obvious error in referring to the sale of assets (the government is instead proposing leasing the assets for 99 years, which is completely different, apparently) there are some obvious problems in logic here.

Why does scrapping the solar bonus scheme make the power assets more attractive? Basically, it would reduce the costs of production. Those cost savings could then either boost the profits of the business or flow through to consumers as savings, or do a bit of both. Given the focus on making the assets more attractive to would-be investors, the assumption must be that at least some of the savings would be pocketed by the businesses, not the customers. On top of that, the government is not doing anything to actually reduce the cost of the solar bonus scheme; it is simply moving the cost from your power bill to its own budget. So, instead of paying for solar generation through your power bill, you'll be paying for it as a taxpayer. In the short term, these costs will be covered by proceeds from the asset leases, but it is still a net impact of billions of dollars on the government's balance sheet.

For a government determined to cut spending and reduce the State's debt, it is a strange direction to take.