So, the carbon tax remains at least for the present, as Palmer United and Ricky Muir oppose its repeal, claiming absence of guarantees that the repeal savings would be passed on. Eric Abetz claims the government provided such guarantees and the ACCC has been desperately searching for a way to identify and police the anticipated price reductions.
Removing the carbon tax itself means a 13 per cent reduction in prices to households and rather more to most industrial users (because they have a smaller share of network expenses in their total costs).
But complications include the knock-on effect of renewable energy costs. These will increase unless the Renewable Energy Target (RET) Review (due to report this month) results in changes, because the high cost (mainly wind) renewable supplies will lose the de facto $24 per MWh subsidy they get from the carbon tax. That subsidy amounts to about 40 per cent of the wholesale price. And political ruminations have a very marked effect on these prices. The spot price for renewable energy increased by a fifth once Palmer United said they were inclined to retain the scheme. That effect alone would arithmetically increase prices to households by half a per cent.
Once the carbon tax is repealed we would expect to see a reduction of household prices close to the 13 per cent because the degree of retail competition in most states is such that the retailers will be forced to pass on cost reductions or see market share losses.
But, the complications of other regulatory interventions in energy aside, this may not occur immediately because retailers will have bought forward their energy on terms that may involve some cost sharing for the carbon tax obligations. They will try to pass these costs forward and in the short term may be able to do so.
The ACCC would never be able to determine the extent of such “justifiable costs” to the thirty plus individual retailers if it were to be the price justification tribunal; still less would it be able to attribute costs to the hundreds of different tariffs. And if it tried to do so this would require very intrusive regulations Liberal Democrat senator David Leyonhjelm has said he would oppose.