Scrapping electricity rate exemptions could save regional communities millions

The Equitable Rating of the Energy Sector report (PDF 819.5 KB), commissioned by LGA South Australia, highlights electricity providers are not contributing their fair share to councils’ rating burden, leaving local residents and businesses to pick up the shortfall from their own pockets.

Rate exemptions have been ongoing since 1999, when the State Government at the time introduced ‘Rates Prohibition Clauses’ into the Electricity Corporations (Restructuring and Disposal) Act to try and maximise the potential sale price of SA’s electricity assets as part of the privatisation of the sector.

LGA has worked closely with the Hon Frank Pangallo MLC over the past 12 months on this issue, recognising the inequity of the current system, and discussed options to close this legislative loophole.

LGA South Australia President, Mayor Dr Heather Holmes-Ross said this legacy legislation serves no purpose today and should be removed to protect communities from having to subsidise the rates of big energy companies.

“For 25 years, local families and businesses have been forced to stump up and pay extra due to electricity generators enjoying a rates holiday – we cannot let this continue,” Mayor Holmes-Ross said.

“In the middle of a cost-of-living crisis, we shouldn’t be taking money out of the pockets of everyday ratepayers to cover the rates gap left by big energy companies – many of which aren’t even based in South Australia.

“Since the early 2000s, the amount of electricity being generated in South Australia through wind and solar farms has increased significantly, meaning the amount of rate revenue regional communities are forgoing has risen as well.

“Our state has a goal of net zero emissions by 2050, and there will continue to be significant investment in renewable energy projects in South Australia, with more electricity generators establishing themselves in our regions where land is most available.

“It is our regional communities who will be most impacted unless outdated electricity rating laws are changed.

“I thank the Hon Frank Pangallo MLC for the keen interest he’s taken in supporting our push to have this legislation rectified and we look forward to engaging further with him to address this long-standing issue for regional communities.”

Regional Development South Australia’s Regional Blueprint released in 2024 found electricity generation as a key growth area in coming years.

Mayor Holmes-Ross said the Australian Energy Market Operator anticipated renewable electricity generation in South Australia could increase by 500% in the next decade in a green energy exports scenario, meaning the time for action is now.

“All signs point to a massive influx of investment in renewable energy generation in South Australia over the coming five-to-10 years, which is extremely positive – but the longer we wait to fix this legislation, the bigger the shortfall in rates paid by electricity generators will be,” Mayor Holmes-Ross said.

“Every new parcel of land used for electricity generation is eligible for the rates discount meaning other ratepayers will have to fund the growing deficit, which hurts regional communities.

“Other states in Australia, like Victoria and Queensland, already have laws in place that ensure appropriate rate contributions from electricity generators, and they have lower power prices than we do.

“The electricity market is national, all generators are price takers – they don’t have any ability to pass cost increases on to electricity customers.

“Removing rate exemptions won’t impact electricity prices, but it will mean electricity generators are paying their fair share.”

Mayor Holmes-Ross said while electricity companies would need to absorb rate increases, the cost of rates is negligible in their businesses and evidence shows the electricity sector has been earning massive profits for many years.

“What it will do is change the rules so that obligations to pay rates are shared fairly amongst all ratepayers, easing cost of living pressures faced by many households and businesses,” Mayor Holmes-Ross said.

“LGA will advocate with all sides of parliament to remove these outdated rate discounts for electricity generators and remove the unnecessary burden from communities as South Australia enters a new phase of renewable energy growth.”

Regional communities are the worst affected

Wattle Range Council in the state’s South East is one example of this rate inequity in action.

The council has 135 wind turbines located within its boundaries and under current legislation, they are collectively valued at $6.75 million ($50,000 each).

In reality, they are worth $280 million ($2 million each) – 40 times that amount.

“Council rates are payable on the capital value of land which includes the infrastructure built on it,” Wattle Range CEO Ben Gower said.

“Given the extremely low valuations, this means electricity generators are not paying their fair share of rates and every other ratepayer is subsidising the bill for them”.

“In Wattle Range’s case, we anticipate electricity generators are being subsidised by $1 million per annum, and every other ratepayer would get a 5 per cent discount on their rates bill if this loophole in the legislation was closed.

“Our council has been advocating for changes to these regulations for more than six years and the time has come for the State Government to take action to address this inequity for the benefit of everyday South Australians, especially those in regional communities.”

Find out more

For more information or media requests, contact:

LGA media: media@lga.sa.gov.au or 0476 853 689

Wattle Range Council CEO Ben Gower: council@wattlerange.sa.gov.au or 0402 177 247