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Consumer electricity and gas prices across Australian capital cities: Structural breaks, effects of policy reforms and interstate differences

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  • Valadkhani, Abbas
  • Nguyen, Jeremy
  • Smyth, Russell

Abstract

We detect, and analyze, the most significant structural changes in the quarterly growth rate of consumer electricity and gas prices in Australia and estimate their corresponding seasonal effects. To do so, we apply the general modelling framework of the Bai-Perron breaking regression to all available quarterly data for capital cities, individually, and Australia as a whole (1989Q3–2017Q2). Retail energy prices in most Australian states were deregulated in the 2000s. We find that increases in average quarterly growth rates of electricity and gas prices consistently occurred in the third (September) quarter, and find very few instances of increases in any other quarters of the year. In the post-deregulation period, price increases are significantly higher than in the pre-deregulation era. Results for some capital cities are stark: in Perth, third-quarter growth in electricity prices has been five times higher after the structural break. In Australia, as a whole, third-quarter growth in gas prices has been three times higher after the structural break. We discuss several possible explanations for energy price rises in the period since deregulation.

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  • Valadkhani, Abbas & Nguyen, Jeremy & Smyth, Russell, 2018. "Consumer electricity and gas prices across Australian capital cities: Structural breaks, effects of policy reforms and interstate differences," Energy Economics, Elsevier, vol. 72(C), pages 365-375.
    • Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:365-375
    DOI: 10.1016/j.eneco.2018.04.038
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    Cited by:

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    2. Johnstone, David & Havyatt, David, 2022. "Sophistry and high electricity prices in Australia," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 88(C).
    3. Ciarreta, Aitor & Pizarro-Irizar, Cristina & Zarraga, Ainhoa, 2020. "Renewable energy regulation and structural breaks: An empirical analysis of Spanish electricity price volatility," Energy Economics, Elsevier, vol. 88(C).
    4. Valadkhani, Abbas & Smyth, Russell & Nguyen, Jeremy, 2019. "Effects of primary energy consumption on CO2 emissions under optimal thresholds: Evidence from sixty countries over the last half century," Energy Economics, Elsevier, vol. 80(C), pages 680-690.
    5. Ivanovski, Kris & Awaworyi Churchill, Sefa & Smyth, Russell, 2018. "A club convergence analysis of per capita energy consumption across Australian regions and sectors," Energy Economics, Elsevier, vol. 76(C), pages 519-531.
    6. Prakash, Kushneel & Munyanyi, Musharavati Ephraim, 2021. "Energy poverty and obesity," Energy Economics, Elsevier, vol. 101(C).
    7. Awaworyi Churchill, Sefa & Smyth, Russell & Farrell, Lisa, 2020. "Fuel poverty and subjective wellbeing," Energy Economics, Elsevier, vol. 86(C).
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    More about this item

    Keywords

    Electricity price; Gas price; Consumer energy prices; Structural break; Australia;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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