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AU: Proposed electricity price hikes could push some horticultural growers to the wall

Last week, the Queensland Competition Authority (QCA) released its Draft Determination on electricity prices for the 2014-2015 financial year (available at its website here).

Growcom Chief Executive Officer Alex Livingstone said that the draft determination recommended that the transitional tariffs used for irrigation and other farm activities (e.g. tariffs 22, 62, 65, 66) should rise by 15 to 16.3 per cent. “This will increase the annual electricity bill for an ‘average’ fruit and vegetable grower by almost $10 000,” Mr Livingstone said.

“However, large integrated producers with on-farm packing and storage facilities could see their annual electricity bills increase by as much as $200,000. This comes on top of other massive price hikes over the past few years. And even if the carbon price is repealed, these tariffs will still increase by 10 per cent,” he said. “Clearly, these cost increases are simply not sustainable for these farm businesses, regardless of their size.

“There is little or no opportunity for these increased costs to be passed on because, in most cases, produce prices are determined by the market rather than being set by producers.”

Mr Livingstone said that farmgate prices were not "cost reflective". “There is often little opportunity to reduce electricity consumption as it is an essential element in producing fresh, healthy and safe food for the public,” he said.

Production horticulture (fruit and vegetables) is one of Australia’s largest agricultural sectors, with an annual farm-gate value of more than $6 billion. The industry’s high reliance on electricity for irrigation and refrigeration makes it arguably the most energy-intensive agricultural sector.

“Last year, the QCA recommended that farm tariffs should increase by 20 per cent,” Mr Livingstone said. “However, the State Government stepped in following intense lobbying from Growcom and other agricultural bodies, and capped the increase at 10 per cent for the 2013-14 financial year. Based on these recommended increases, a similar intervention will be required again to prevent numerous small farm businesses from going to the wall.”

Comments on the Draft Determination can be made until 28 February 2014. The QCA is required to publish its Final Price Determination by 31 May 2014.

For more information:
David Putland
Growcom
Tel: +61 07 3620 3844

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