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In Ravenshoe, a small town in far north Queensland about 1,600 kilometres north of Brisbane, Cameron Boscacci's family owns and runs the local wholesale bakery. Central to the operation is a set of electric ovens that churn out about 1,200 loaves of bread every night. For Mr Boscacci and his father, both trained electricians, the ovens make practical sense - they're easy to fix and make good bread. But he says they no longer appear to stand up financially. "All our ovens are electric at the moment, but due to [the] cost of electricity, we're actually going to put it in a gas oven now," Mr Boscacci says. "That should save us a fair chunk of money. "To be [a] successful business, you can't just throw away the money." Underlying Australia's push to decarbonise is supposed to be a move away from fossil fuels such as gas.(Getty Images: Sean Gladwell) At a time when Australians are being encouraged - in some cases induced - to shift away from gas appliances and towards electric ones, the Boscaccis are steering the opposite course. Mr Boscacci blames a complex and little-known electricity pricing scheme known as a demand tariff for the decision. Demand tariffs are based on the maximum amount of power a customer draws from the grid over any 30-minute period during peak hours in the evening. The higher the demand during that one period, the higher the charge for the customer for the entire month. Mr Boscacci says the family have tried to work out ways to reduce their demand at peak times, but the nature of the business means they have little room to move if they want to keep using power. He describes the switch to gas as a last resort, coming despite the rising price of the fuel and its unpredictability. "At the moment, our electricity bill is around that $8,500 a month," he says. "The demand part of that, the penalty bit, is around $2,500 a month. "During the day, we don't use anywhere near as much electricity as night-time. "Because as you can imagine bread is baked during the night and early hours of the morning to be fresh the next day." Along with time-of-use rates that charge customers more for power at peak times, demand tariffs are part of a suite of so-called cost-reflective prices being rolled out on a vast scale across the country. They are enabled by smart meters that supposedly allow householders to see how much power they are using in "real-time" while giving regulators and the industry better oversight of customers' usage. Every Australian home is due to be fitted with a smart meter by the end of the decade. Better using Australia's daily glut of solar power is a priority of energy boffins.(Supplied: Project Symphony) According to the Australian Energy Regulator (AER), cost-reflective tariffs help make the grid more efficient by sending consumers price signals about the underlying costs of their power during the day. These days, wholesale power prices crater in the middle of the day when solar output is greatest, but soar in the afternoon and evening as the sun goes down. In the case of demand tariffs, the AER said: "Demand tariffs charge a consumer based on their maximum point-in-time demand at peak times. "Consumers can reduce their energy costs by shifting demand to off-peak periods. But even one day of high use at peak times will lead to higher charges for the whole billing period," the regulator wrote in its most recent state of the energy market report. "This structure is intended to encourage consumers to stagger their energy use and reduce congestion on the network at peak times, also reducing system costs." Jennifer Brownie, the coordinator of the Queensland Electricity Users Network, says the Boscaccis' experience with costly and complex power bills is not unique among small businesses. She says a big part of the problem is low energy literacy among many consumers, making changes to complicated pricing schemes all the more problematic. "Most businesses, particularly small businesses, just open up their power bill at the moment and they can't afford it and they're not quite sure why they can't afford it," Ms Brownie says. Jennifer Brownie believes consumers need more education on power prices.(Supplied: Jennifer Brownie) "And if you ask them any question in relation to the tariff, many would actually struggle to tell you what tariff they're on. "And if they don't know what tariff they're on, they don't know if they're on a time of use, a demand tariff or a flat tariff." Ms Brownie is calling for a slowdown on the widespread shift towards cost-reflective pricing along with a "literacy" campaign to make sure consumers are better informed. She worries a failure to take stock could end up hurting many users - including businesses - that are unable to deal with the new tariffs. To illustrate her case, she points to AER figures showing the number of small businesses in Queensland fell by 74 in the three months to the end of December. "In regional Queensland, we've lost nearly 7,000 small businesses," she says. "If you combine the high energy bills with labour costs, which people are finding just unbearable, on top of insurance costs that they can't afford. "A lot less small. And that's not good because that's what drives the economy." Paul Simshauser, an energy economist from Griffith University and an authority on electricity pricing, says there are legitimate concerns about the way tariff reform is being handled in Australia. By their nature, he says tariff changes create "winners and losers" and it is essential that any case for reform be made clearly to ensure consumers are prepared. Paul Simshauser says you've got to do tariff reform "gently".(ABC News: Lucas Hill) To that end, Professor Simshauser describes as concerning reports that hundreds of thousands of consumers are being shifted on to cost-reflective tariffs often unwittingly. "That's the thing about tariff reform - you've got to do it gently," Professor Simshauser says. Despite his qualms, he says there's a pressing need to use the grid efficiently, especially given the rise of technologies such as electric vehicles that could put it under severe stress. "If we're not sending the right price signals and getting the right activity off households at the right time, we end up having to build a lot more infrastructure very poorly … which will mean we'll end up with structurally high electricity prices." What's more, Professor Simshauser warns the consequences of failing to reform prices would be just as bad, if not worse. He says flat rates - which charge people the same price for electricity from the grid regardless of when they buy it - had led to entrenched energy inequality in their own right. Under flat rates, he says the costs of paying for the upkeep of the electricity system are recovered through the power consumers buy from the grid. But he says households with clean tech such as rooftop solar are able to generate much of their own electricity and so avoid many of these costs - even though they still need the grid just as much as other customers at peak times. "There's a big prize there to avoid layers and layers of needless investment and creating structurally higher electricity prices," he said. "And that's an important goal for society. "If we don't go down the reform path over time I can guarantee we're going to end up with a greater incidence of energy poverty." Loading Some pricing schemes charge households based on their maximum demand from the grid.(ABC News: Lincoln Rothall)Demand tariffs: carrot or stick?
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