Watchdog warns business on power cheating The ACC says electricity bills should drop quickly after the repeal of the carbon tax. Photo: Tamara Voninski The head of Australia's consumer watchdog insists that electricity bills should drop quickly after the repeal of the carbon tax - warning businesses not to claim they are unable to pass on the full savings to consumers. Electricity prices went up fairly quickly on the way up and they will go down fairly immediately on the way down. Australian Competition and Consumer Commission chairman Rod Sims told Fairfax Media that the ACCC was well prepared to ensure power companies did not profiteer from the repeal of the tax, scheduled for July next year if the Abbott government can get its legislation passed. "It's not a massively complicated process," Mr Sims said. Armed with a team of analysts scrutinising the impact of the carbon tax repeal, the ACCC will levy fines of $1.1 million if companies are found to have pocketed the savings. A number of business groups warned this week that prices might not fall as much as forecast, claiming they had absorbed some of the impact of the tax when it was introduced and should not be expected to pass on the entire decrease if it were removed. Mr Sims responded: "I think this is a bit exaggerated." The government has said the repeal of the tax should lead to a 9 per cent fall in power bills and a 7 per cent drop in gas prices. However, Mr Sims said it was important to remember there were ongoing factors impacting on electricity and gas prices that were unrelated to the carbon tax. He said this was especially true in the gas sector, where Australian prices were rising sharply as they moved into line with the higher global price resulting from changes in the industry. Australians spend less than half on gas what they do on electricity, where the news on prices is much better. In the five years to September 2012 - just after the carbon tax was introduced - power prices rose almost 70 per cent, with the carbon tax contributing only a small fraction of that increase. Consumers have responded to the blunt price signal by reducing their consumption of electricity, leading to only the second year-on-year decline in demand since 1904. Partly as a result, electricity prices rose just 6 per cent in the 12 months to September this year, less than half the average increase of the previous five years. An indication of the pain that consumers have been feeling - and the availability of energy-saving household technologies - is that even the two world wars and the Great Depression had not led to similar decreases in electricity consumption, said Hugh Saddler, an energy consultant with Pitt & Sherry. The only other period when consumption had fallen was in the 1980s, in response to sharply increasing prices during a period of centralised wage restraint. Most of the recent rises in electricity bills resulted from regulators allowing power companies to hike up wholesale prices to pay for infrastructure spending. The rises came during five-year deals done with the Australian Energy Regulator, and most major power companies will be subject to new agreements next year. With enhanced powers, the regulator should be better able to resist power companies' insistence on high fixed rates of return on investment, Mr Saddler said. He said the consistent double-digit growth in energy bills was likely to be a thing of the past, irrespective of whether the carbon tax was repealed.