The prepay “poverty premium”: Perspective on Australia's Northern Territory prepayment tariff

Abstract

The affordability of prepaid electricity - in common use in jurisdictions where the proportion of Indigenous Australians living remotely is greatest and Indigenous poverty rates are uniquely high (above 40 %) - represents an exceptional yet under examined aspect of the nation's energy transition. Here we explore a previously overlooked element of the prepaid electricity system in Australia's remote and regional Northern Territory (NT): how it disproportionately burdens high consumption households with a “poverty premium”. Our findings reveal financial disparities arising from the application of two discrete electricity payment types operating throughout the Territory since 1998: the prepayment tariff versus the residential tariff plus fixed daily supply charge. By appraising three decades of NT Electricity Pricing Orders (EPOs) we highlight the mechanism by which prepay households using more than a threshold rate of electricity - that has varied over time - are penalized financially. Using known rates of household energy consumption, we demonstrate that while a subset of households are better off, prepay imposes an annual premium of AUD$57–$253 on those with higher consumption (26-48kWh daily in 2018/19) - homes that incongruously experience both an elevated risk of disconnection during temperature extremes and greater energy expenses than all other Territorians. Our perspective complicates the trope that prepay is a fairer way to distribute energy costs in Australia's most remote jurisdiction.