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Social impact considerations to factor into Essential Services Commission (ESC) pricing determinations for electricity providers

Proposed amendments to the Electricity Act create additional price determination considerations for the ESC in respect of the social cost of carbon (SCC) and the health effects of coal.

On 17 May 2017 the Electricity (Feed-in Pricing) Amendments Bill was introduced into the Legislative Council. The Bill proposes an amendment to section 35A of the Electricity Act to include additional general factors in pricing determinations by the ESC under section 25(4) of the Essential Services Commission Act.

In addition to the existing requirement that the ESC have regard to the fair and reasonable value to a retailer of electricity fed into the network by qualifying customers in respect of feed-in mechanisms, it is proposed that ESC also have regard to:

  • the prices of electricity in the wholesale electricity market; and
  • any distribution and transmission losses avoided in South Australia by the supply of small renewable energy generation electricity; and
  • the avoided costs of:
    • the human health costs attributable to a reduction in air pollution.
    • the social cost of carbon; and

Proposed new section 35A(2b) of the Electricity Act would allow the Governor, by notice in the Gazette, to specify a methodology or factor for the determination of the avoided SCC and human health costs attributable to a reduction in air pollution.

In February this year, Victoria introduced a similar amendment. Simplistically, the proposed amendment allows a dollar value to be assigned to the benefit of reducing carbon dioxide emissions and the effects of such emissions on human health through air pollution.

If passed, the Bill will see South Australia follow in the footsteps of other countries like the United States where the EPA assigned a SCC in 2010 of US$21 per tonne of carbon dioxide rising to US$33 in 2030 and the United Kingdom who have assigned a price of £26 per tonne of carbon dioxide.

If you would like further information about the Bill please contact Kathryn Walker or one of our team.

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