Jess Hill: A few years ago, electricity in Australia was cheap. Now we pay some of the highest prices in the world. This dramatic increase has been driven by an unnecessary overinvestment in the poles and wires, otherwise known as the network.

Bruce Mountain: I haven't seen network charges higher in any other region or country of the world.

Jess Hill: Every time we pay a power bill, more than half of it now goes on network charges. And depending on where you live, these charges may continue to go up and up.

Bruce Mountain: The long and the short of it is the networks are still seeking to milk the system for what it's worth. I don't think there's been the sort of realisation that should have occurred, taking account of the extraordinary expenditure and profits of the businesses.

Jess Hill: As customer anger grows, solar retailers are getting a flood of new enquiries.

Steve Madson: Most people that come in are angry, they're angry that they've continued to be told that their electricity price is going down and it's continued to go up, one way or another, so yeah, they want to leave the grid.

Jess Hill: Disconnecting from the grid is now becoming a realistic option for the mainstream. And that's because of the arrival of a game-changer; solar battery storage.

Elon Musk: You can actually go, if you want, completely off-grid. You can take your solar panels, charge the battery packs and that's all you use. So it gives you safety, security, and it gives you a complete and affordable solution and the cost of this is $3,500. [crowd cheers]

Jess Hill: Nobody was expecting solar storage to be this cheap so soon.

Tosh Szatow: They're hitting a price point that I don't think people thought would be likely, certainly until 2020, maybe even further away. So that's really shaken things up.

Jess Hill: We're entering a new era, and solar batteries represent an existential threat to the networks.

Tosh Szatow: Really for 100 years, network companies haven't had to contend with a competitor. They've just been able to sell power down the lines; the more power people use, the more money they make. Then solar comes along, there's this cheap alternative, and their revenue and the volume of sales starts dropping away.

Jess Hill: Faced with this new threat, energy networks are devising new ways to keep you paying, no matter what.

Tosh Szatow: I think the companies that take that approach are at risk of really missing out altogether, and forcing their consumers to leave the grid.

Jess Hill: Hi, I'm Jess Hill, and on Background Briefing we're looking at how the electricity networks are driving their customers away, and towards the next energy revolution.

This is exactly what's happening on the far north coast of NSW, in a charming little village called Tyalgum, population 500. One of the first things you see as you turn onto Tyalgum's main street is a big old shed called the Buttery, and on it a handmade sign with cut-out letters that spell 'Tyalgum Energy Project'.

It almost looks like a sign from the school fete, but it really matches the town.

Kacey Clifford: I know, and Andrew's like, 'Seriously?' I printed them all out, cut them all out and laminated them, and he's like, 'Seriously, you want me to go stick them up?' And I'm like, 'Seriously, yes. Go and stick them up on top of the Buttery.'

Jess Hill: This is Kacey Clifford, the project coordinator for the Tyalgum Energy Project. Her sign might look folksy, but the project is serious. Locals here have had a gutful of rising power prices and blackouts, and they're planning to do something that no other Australian town has ever done before.

Kacey Clifford: I went to the community and said we would like to take you off the grid entirely, we would like to have you run by 100% renewable energy and take you off the grid entirely so you would be independently running your own network within Tyalgum.

Jess Hill: The town is looking at building a $7 million micro-grid powered by solar panels and solar batteries. Even though the details on how they would disconnect were hazy that night, the response was immediate.

Kacey Clifford: I've sort of been blown away. They definitely want their energy independence, they definitely want to be self-sufficient, they don't like the way that they've been treated, and they don't like the look of the poles and wires.

Jess Hill: How have they been treated?

Kacey Clifford: What it is is basically being out in a rural area, the network providers don't get their bang for buck that they would in the city, so unfortunately the level of reliability out here is minimal compared to what you would see in a bigger city.

Jess Hill: That's a double-standard that's common to little country towns. But for locals building properties outside Tyalgum's main village, electricity isn't just unreliable, it's expensive: just to be connected, they have to pay tens of thousands to build new poles and wires, which then get handed back to the local network, Essential Energy. Then there's the fees. In Tyalgum, like the rest of Australia, about half of everybody's power bill is made up of network charges.

Kacey Clifford: The network charges are massive. The proportion of network charges on your bill are ridiculous. I guess when you compare that to the level of service they're receiving, it's not nearly justified. So everyone is more than happy to get rid of those charges, and part of the promise of this project is that everyone will be better off pricewise, and reliability wise.

Jess Hill: For some people here, electricity has gone from being a basic service to something they can barely afford.

Kacey Clifford: You know, there's some real people who are struggling. I remember when we started doing this project I had one of those people come and see me and she had to use candles at night, because she was on a carer's allowance, her partner was disabled to some extent through an accident, and she couldn't afford to care for him and use the power, because the power bills were too high.

Jess Hill: That's a disgrace, says Kacey Clifford. She hopes the Tyalgum Energy Project will be a big wake-up call to the networks.

Kacey Clifford: You know, $10 a week here and there means a lot to someone, and they're not seeing that anymore. They've lost sight of who they're doing this for. Essentially it was all created so that people had access to power. They've lost sight of that. It's now created to continue making money. It's not about people getting power anymore, because the people can't afford the power, and that's not okay, that's not okay.

Jess Hill: As Tyalgum prepares to disconnect, networks across NSW are fighting to drive power prices even higher. If they don't get what they want, they say they won't be able to guarantee safe, reliable electricity.

High up in the Law Courts building in Sydney, Networks NSW, which runs Ausgrid, Endeavour Energy, and Essential Energy, is appealing the regulator's decision to cut billions from their next five-yearly spending allowance. But it's not just NSW, there's lawyers here from networks across Australia, because this is a case with national implications; what gets decided here will set the precedent for what they can spend too. Standing in the way of the networks is the regulator, and a little NGO, the Public Interest Advocacy Centre or PIAC, who is up against both the networks and the regulator, in a bid to lower prices. There's a lot at stake here for the networks. They're asking for an extra $5.7 billion in revenue, all of which will be paid for by customers. So it's little surprise they came so well-armed.

Edward Santow: Just to give you a sense, when the tribunal convened, it had before it 1.3 million pages of material.

Jess Hill: That's Edward Santow, the head of PIAC. His team of three lawyers were up against more than 40 lawyers from networks across the country.

Edward Santow: It's almost unprecedented for us, that we are coming up against such a well-resourced opponent.

Jess Hill: This is the first time a consumer organisation has ever challenged a regulator's decision on how much the networks can spend. To do it, PIAC has had to cobble together $275,000 to employ two barristers. The networks' legal fees are reported to be in the tens of millions, and all paid for by the taxpayer.

Edward Santow: If you're a network business, it seems that you can spend almost limitless funds that you can simply then recoup back from the taxpayer. And it is, I think, a bitter irony that the net effect, if their arguments are successful, the net effect will be a double whammy, because New South Wales consumers will also be paying higher prices for their electricity.

Jess Hill: Background Briefing approached Networks NSW and the Australian Energy Regulator for interviews, but both declined, citing the ongoing court case.

PIAC's numbers show that if the networks win their day in court, their customers will have to pay more than $500 extra a year on their power bills. For tens of thousands of these customers, electricity is already too expensive: in NSW alone last year, a record 33,000 households were disconnected.

It's the lives of the most vulnerable, however, that's apparently moved the NSW government to support the networks' case. The NSW Energy Minister is Anthony Roberts.

Anthony Roberts: There's some 30,000 customers for example who are on life support. So for many of us, to have an outage of a couple of hours is an inconvenience. For those 30,000 people, an outage of a couple of hours could be a life and death situation. And that's where they have responsibilities to ensure that the network is safe and reliable.

Jess Hill: But if they are successful, if Networks NSW is successful, it will result in hundreds of dollars more for NSW consumers on their electricity bills every year. What's the government's opinion on that?

Anthony Roberts: I've got to say that these are from PIAC. The information that I have suggests that what the networks are appealing is a combined opex reduction of $324 million per annum, which represents around $94 per customer across NSW.

Jess Hill: Opex means operating costs, which covers things like wages and maintenance. But this is just a fraction of what the networks are asking for. What the Minister hasn't mentioned is the biggest component in the networks' bid to raise prices. Essentially, the networks are fighting for the right to charge customers an interest rate on their borrowing costs that's far higher than what they're actually likely to be charged. This is where the big money is, and the big price hike, says PIAC's Ed Santow.

Edward Santow: Let's say they are able to persuade the regulator that their borrowing costs will be 6.5%, but then they go to the market and their borrowing costs are only 4.5%. We as consumers will be charged the full 6.5%, even if they make a huge saving on the cost of their debt.

Jess Hill: The regulator actually already has granted the networks 6.4%, around 2% higher than the rate for the average home loan. But the networks say even that's not enough, they want almost 8%. And if they can get a higher interest rate than they end up paying, each percentage point translates into pure profit.

Edward Santow: It can literally be hundreds of millions of dollars. We're paying that difference, and we get literally no benefit from it.

Jess Hill: In NSW and Queensland, where the networks are still government-owned, those profits flow directly into state treasury coffers. In NSW last year, that amounted to around a billion dollars. In Queensland, it was $3.2 billion. When it comes time for NSW to sell its poles and wires, they'll be more valuable if they can get a higher interest rate.

David Johnstone is a leading expert in electricity regulation, and a professor of finance at Sydney University. He says energy networks used to be a low-cost, public good, until state governments realised that tariffs, or electricity prices, were actually a nifty way of taxing their constituents, without them knowing it.

David Johnstone: Then bit by bit governments realised that these tariffs could be like taxing arrangements. For state government owned assets, if you could push the tariffs up, that was effectively a good way of taxing people. So they were seen more and more as taxation arrangements.

Jess Hill: Back in the early 2000s, David Johnstone was one of many academics who became what he calls 'hired guns' for the networks, paid to come up with complex financial arguments to persuade the regulator to approve electricity price hikes.

David Johnstone: It was a bit of a game, consultants knew that. We used to be amused, to say the least, about what was going on. I think that people who's…I'm a university paid person so my whole livelihood wasn't at stake, but if you're an economic consultant working for a consulting firm who was working for the state government, then you certainly knew very clearly what the objectives were for the state government, and you would angle your economic arguments to suit. The contrivance worked really well until finally the tariff stream became embarrassingly large.

Jess Hill: And the contrivance is all really about pushing up electricity bills?

David Johnstone: Yes, that's right, so raising more sale proceeds for governments, greater dividends to asset owners. And then the private sector operators, well they were just trying to maximise profits. Their interests happened to coincide very closely with state government asset owners as well, they were both in the same camp in that regard, so both of them, between them, had all the power in the game. Especially since the state governments themselves actually appoint the regulators.

Here's where the problems started. In 2005, former prime minister John Howard got rid of the state-based regulators, and replaced them with one federal body, the Australian Energy Regulator. The states agreed, but on a condition: that they be put in charge of the body writing the rules for the regulator, the Australian Energy Markets Commission. But that wasn't all, they were also allowed to appoint two out of three commissioners in charge of the regulator.

Bruce Mountain has been advising electricity regulators for almost 25 years. He says this appearance of an arms-length arrangement was ideal for state governments.

Bruce Mountain: From a political point of view, if you like, it was an ideal outcome: they could obtain greater profits, but they could defer the political heat for the higher prices to a regulatory authority, which I guess became even easier when there was a federal body, where they could say it's not us that's done it, it's the national energy regulator.

Jess Hill: Every five years, this new federal regulator was to determine how much the networks could spend and earn, but only within the rules set by the state-government controlled rule-maker. From the outset, the networks were given a juicy incentive to build: for every dollar they spent on infrastructure, they would get a guaranteed rate of return.

Rob Murray-Leach: They basically over-incentivised these companies to build stuff.

Jess Hill: That's Rob Murray-Leach from the Energy Efficiency Council.

Rob Murray-Leach: So it's almost like asking somebody to go out and say, look, I want you to find me the best house for me, but I'm going to give you an incentive based on the amount of money that that house is actually going to cost me. That's going to create a pretty obvious incentive for somebody to build it much bigger than it needs to be, or get you a much bigger house than you need. And that's exactly what happened with the electricity system. Very strong incentive for private companies and state governments in New South Wales and Queensland to build much, much bigger networks, poles and wires, than we needed, so to really gold-plate the system.

Jess Hill: The more they built, the more they got paid. In 2009, when the time came for the new federal regulator to make its first decisions, the networks said they would need tens of billions to build and upgrade the poles and wires. Electricity demand was about to go sky high they said, thanks to Australia's new love of air-conditioners, and nowhere were projections as high as in NSW and Queensland, where the networks are government owned.

Rob Murray-Leach: We saw a lot of very over-inflated estimates of demand, and I think one of the problems in the past is the networks who get reimbursed based on how much they build were also being tasked with predicting how much they were going to need to build, predicting demand.

Jess Hill: In the end, the regulator gave the networks around $45 billion to spend over five years and, critically, the networks also secured a 10% interest rate. Every dollar of this is being charged back to consumers through their bills, and will take decades to pay off.

But just as the networks were getting ready to start building, Australians were changing the way they used electricity. Gone were the clunky old power-draining appliances, and in were a new breed of energy efficient ones. Rob Murray-Leach says he and several other experts tried to warn the networks and the regulator that their demand projections were way too high.

Rob Murray-Leach: When we started to see some changes and we started talking to people about these changes, really nobody would believe us. They said, 'You're not getting it. Maybe we're in a short downturn right now. It's probably a little bit due to the global financial crisis.'

Jess Hill: But it wasn't the global financial crisis. In 2010, for the first time in Australia's history, energy demand went down. It went down again the next year, and the next, and it's been going down ever since. As demand fell through the floor, the networks did rein in some of their spending, but not enough to stop electricity prices going through the roof.

In 2012, electricity analyst Bruce Mountain did a tally of worldwide prices, which ranked us the third most expensive, behind Germany and Denmark. But prices have kept going up since then, and now he says:

Bruce Mountain: We're probably close to the most expensive in the world as an overall household average.

Jess Hill: As electricity prices have soared, so have the profits of the state-owned networks in NSW and Queensland. Bruce Mountain's calculations show that for every connection, every single wire going into every house and business, these network companies are now earning around two to three times more than they were back in 2008.

Bruce Mountain: Back in 2008, that was around $180 per end user per year. Current profits per connection in New South Wales and Queensland are around $500 each year.

Jess Hill: Internationally, that kind of profit is virtually unheard of.

Bruce Mountain: I haven't seen network charges higher in any other region or country of the world.

Jess Hill: But these profits are perfectly permissible, according to the networks' chief lobby group, the Energy Networks Association. Its CEO is John Bradley.

So how can networks explain making such exorbitant profits when so many electricity consumers are struggling just to pay their bills?

John Bradley: Yeah, so look, profits that are achieved by network businesses are due to two things. One, there is a return on equity, which basically allows for…that's provided by the regulator, that's approved by the regulator, that is effectively an allowance that would provide investors with an incentive to allocate their capital to that long-life infrastructure. But additional profit can be achieved under the regulatory framework, where network businesses are working hard to drive down costs that will provide, in the next regulatory period, direct benefits to customers in terms of the cost profile.

Jess Hill: But it's not giving direct benefits to customers in terms of what the networks are asking for. What the networks are asking for is over a $500 increase in the electricity bills for the people of NSW, and in the meantime, making enormous profits. Why not perhaps hand back some of the profits that have been made over the last few years and take it back to the reasonable state that it was at six or seven years ago?

John Bradley: There's been longstanding work done by the Productivity Commission and others, which has put a focus on trying to make sure there is a regulatory framework which drives efficiency through these businesses through appropriate incentives, but also recognises that it needs to be a predictable investment framework for long-term investments of assets that can have asset lives of 30 to 50 years.

Jess Hill: But Bruce Mountain says that many of these long-life assets were built for electricity demand that hasn't eventuated. And much of the $45 billion the networks spent was for infrastructure their customers will never need.

Bruce Mountain: I think also one needs to ask the question have they profited from an expansion of their capacity? Was this something in which they stood to gain? The answer is obviously yes, they stood to gain very sizeably.

Jess Hill: As the Australian Competition Tribunal deliberates over whether to give the NSW networks more money, it's clear that the higher electricity prices go, the less electricity people will use, and, as we'll hear, this could create major problems for both the networks and consumers.

There are now more than 1.4 million Australian households with solar panels on their roofs. High electricity prices and government subsidies have made solar very competitive, and now Australians will be able to choose whether they want to use the grid at all.

Elon Musk: Welcome everyone to basically the announcement of Tesla Energy. So what I'm going to talk about tonight is about a fundamental transformation of how the world works, about how energy is delivered across Earth. [Audience cheers]

Jess Hill: In April this year, Tesla founder Elon Musk announced the Powerwall, a lithium ion battery system that stores solar power during the day, so it can be used at night.

Elon Musk: You can actually go, if you want, completely off-grid. You can take your solar panels, charge the battery packs and that's all you use. So it gives you safety, security, and it gives you a complete and affordable solution, and the cost of this is $3,500. [Applause]

Jess Hill: Note the use of the plural—battery packs—because you'd need several to get off the grid, and right now investment bank UBS says the total cost of disconnecting would be almost $40,000. But for people who just want to reduce their reliance on the grid, one would be enough.

Australia will be one of the first countries to receive the Tesla battery, later this year. But other battery manufacturers have already landed, and they say there's no better place for batteries right now than Australia.

Paul Nahi: Even Europe doesn't have quite the environment that Australia does today.

Jess Hill: Paul Nahi is the CEO of Enphase Energy, an American company that chose Australia for the global launch of its new solar battery system. He says Australia has exactly what it takes to become a world leader in the use of solar and storage.

Paul Nahi: Australia's very forward-looking as a leader of solar, and a very mature solar market. The next step in energy, beyond solar, is storage, and is that energy management system, and Australia is really the first to take a step in that direction.

Jess Hill: Australia's reputation as a world leader in rooftop solar is making it the ideal launch pad for battery manufacturers from around the world.

Penelope Crossley: We saw an announcement yesterday that one of the world's largest battery manufacturers, who traditionally specialised in mobile phone batteries, is actually looking to launch a combined solar and storage product, and the first market they're targeting is the Australian market.

Jess Hill: That's Dr Penelope Crossley, a specialist in energy and resources law, and the senior industry advisor to the Australian Energy Storage Alliance. She says there are three winning factors wooing solar battery brands to Australia.

Penelope Crossley: We have excellent solar resources, very high penetration of residential solar, and in addition we've got exceptionally high electricity prices.

Jess Hill: Six years ago there were only 41,000 households with solar. Today there are 1.4 million. Penelope Crossley says we're about to see a similar story with solar batteries.

Penelope Crossley: The battery storage market in Australia is very similar to where the solar market was in Australia about five or six years ago. I would say in the first six months of 2016 we will see significant movement within the battery storage market in Australia.

Jess Hill: Investment banks are already making staggering predictions about how big this market could get. Former investment banker Jemma Green is now a research fellow working on disruptive innovation at Curtin University.

Jemma Green: Earlier this year, Morgan Stanley produced a piece of research predicting the size of the battery market actually on the NEM, the National Electricity Market, to be around 2.4 million households by 2030. So it's very rapid growth. I would suggest that those forecasts are quite conservative and we're going to see an even faster rate of growth in the deployment of solar, and that will be driven by the battery storage. Because a lot of people haven't put solar on their roofs because perhaps they're not home during the day, and the economic payback period isn't that attractive, but batteries really change that situation.

Jess Hill: Batteries don't just change the situation for solar, they basically demolish the networks' monopoly business model, says Tosh Szatow.

Tosh Szatow: The clash between the networks and the solar market is a bit like what's happened to the music industry, what's happened to the media industry with the arrival of the internet. Essentially a new technology comes along and delivers what a customer wants cheaper, direct to their door, so there's no middle-man involved.

Jess Hill: This transition has long occupied the mind of Tosh Szatow, both when he was project leader for the CSIRO's intelligent grid project and now, as director of his own consultancy, Energy for the People, which is helping Tyalgum in its plans to leave the grid.

Tosh Szatow: People warned about this happening with solar for at least five, probably ten years, but certainly five years there was a really strong sense that it was a matter of time before solar power prices dropped. There was kind of this wilful ignorance of that within energy companies, that they just didn't think it was possible.

Jess Hill: Do you think the same thing could happen with battery storage?

Tosh Szatow: I think the same thing has happened with battery storage.

Jess Hill: Investment banks like Morgan Stanley and UBS are predicting that solar storage will go mainstream within just a few years. But Australia's official national forecaster, AEMO, has a very different view of the future: it says the battery storage revolution may be on its way, but it won't get here for another decade.

Ian McLeod is the head of Ergon Energy, whose poles and wires criss-cross regional Queensland. Ergon has been trialling a number of new projects using solar and storage across its vast network. But given the choice between the future envisioned by the investment banks, and that of our national forecaster, Ian McLeod says he's putting his money on the forecaster.

Ian McLeod: The reality is people don't want to be worried about electricity. They don't want to be worried about energy. They want to be passive. They're more concerned at the moment about price increases. It will be problem-led solutions using batteries initially, and early adopters, and edge of grid.

Jess Hill: The reason he's not expecting storage to take off anytime soon, is because around 70% of solar users in Queensland still make good money selling their solar power back to the grid.

Ian McLeod: So there is no value in them storing that energy, they actually make more by feeding it in. So the market's not as big.

Jess Hill: But customers aren't just driven by price, says Penelope Crossley. People won't buy batteries just to save money, they'll buy them to get control.

Penelope Crossley: One of the things we know though about consumers in Australia is that 1.4 million homes have actually already taken steps to put solar on their roofs. These are not passive consumers. These are consumers who are actively interested in their own energy usage, and it is these consumers who will drive the uptake of solar and storage. I think the electricity networks have been really quite surprised at the speed at which the uptake is occurring.

Jess Hill: Why are they surprised when no-one else seems to be?

Penelope Crossley: Because they've got a vested interest in maintaining the status quo.

Jess Hill: Until recently, the status quo had never been challenged. The networks had a monopoly on providing electricity, and were therefore a protected species. Tosh Szatow says this new world is a hard one for the networks to navigate.

Tosh Szatow: Really for 100 years, network companies haven't had to contend with a competitor. They've just been able to sell power down the lines; the more power people use, the more money they make. Then solar comes along as this cheap alternative, and the volume of sales starts dropping away.

Jess Hill: They haven't really had to think about consumers either have they, because they weren't selling the electricity, they were just providing it, and the retailers were doing the rest.

Tosh Szatow: Absolutely, it's quite funny listening to…some of the network businesses in the past have talked about their consumers as meters. Right? Because essentially all they're doing is managing a meter. So they've had quite an impersonal relationship with customers for a long time.

Jess Hill: That 'impersonal relationship' has created a wave of anger in electricity consumers across the country. Steve Madson, the head of Country Solar, says this anger is what's driving a massive level of enquiries for battery storage.

Steve Madson: We actually didn't forecast that we'd be in this position for at least another 12 to 18 months, but our level of enquiries are huge. It's not really a price point that people are talking about, they're just angry. Most people that come in are angry, they're angry that they've continued to be told that their electricity price is going down and it's continued to go up, one way or another, so yeah, they want to leave the grid.

Jess Hill: This raises a terrifying spectre for networks, what's referred to in the industry as the death spiral. As electricity prices go up, more people will be pushed towards solar and storage, which means demand will go down. Network charges then have to be spread across a dwindling customer base, which means prices go up, more people go solar, demand goes down, prices go up, and so on.

This is a fate that network companies are keenly trying to avoid. They have billions of dollars' worth of infrastructure that they still need customers to pay for. Penelope Crossley says that's why the networks are coming up with new ways to make sure consumers give them their guaranteed rate of return.

Penelope Crossley: We're seeing debate around whether in fact all consumers, regardless of whether they're connected to the grid or not, should have to pay a compulsory fixed charge, similar to a rate from a local council. Other proposals have included things like very high fixed charges for grid connection, and that's something that we've actually just seen occur in Queensland with the 20% increase in their fixed connection charge.

Jess Hill: And that's just the most recent one, isn't it?

Penelope Crossley: And that's just the most recent one. And we've got a number of other states actively looking at that at the moment.

Jess Hill: When solar user Terry Vertigan heard about this increase to Queensland's fixed network charges, he was astonished. He's the Sunshine Coast team coordinator for the advocacy group, Solar Citizens.

Terry Vertigan: I had another Solar Citizen who lives up the coast, he got in touch with me, and he said, 'Have you seen this increase? It's extraordinary!' And then I did the sums on what it would mean for my next bill, or even my current bill and I thought, wow, this is extraordinary, how can they do that?

Jess Hill: Terry Vertigan dug out his old electricity bills and did some sums on what these fixed charges were costing him per day.

Terry Vertigan: Back in 2011, it was around about 27c. Around about the middle of 2014, it went to 50c, the end of 2014 it went to 83c, and in September quarter it went to $1.16.

Jess Hill: Wow, that's a steep increase, isn't it.

Terry Vertigan: It's huge!

Jess Hill: That's a 400% increase compared to what Terry Vertigan was being charged four years ago. The reason for the increase is simple: if you're using the poles and wires, you need to share the burden for paying for them, says Ergon's Ian McLeod.

Ian McLeod: The fixed charges transformation was a three-year program that was put in place by the Queensland Competition Authority. These networks are predominantly big asset networks, with 40- or 50-year lifecycle assets on them, and like any large asset, like our home et cetera we've got to pay the interest bill on the debt and get a return on our equity. So we're trying to make sure everyone pays an equal cost.

Jess Hill: If people do start installing storage at the rate that is predicted by investment banks like Morgan Stanley, which is a very high rate, if they then stop using so much of the grid, who is going to pay for the investment that's been made over the last few years, which is billions of dollars?

Ian McLeod: It's ultimately the customers. These are low-risk, regulatory businesses. The higher the risk goes, the higher the interest rate goes, and that gets passed on to customers. So they need to remain low-risk businesses, and there needs to be an orderly transition.

Jess Hill: As the networks try to create certainty in a world where increasingly there is none, one new strategy they're dreaming up is to charge people, whether they are connected or not. Rob Murray-Leach from the Energy Efficiency Council:

Rob Murray-Leach: I can't think of a single other industry, even telecoms, where people said, 'Well, you know what, I know that you don't have a mobile phone or a land line anymore, but we're still going to charge you as if you had one because we built this stuff a while ago on the hopes that you'd use it.' So that's a really big political question. I think it's going to be a very, very big debate in the next 5 to 10 years.

Jess Hill: It's the companies that should be responsible for their own bad decisions, says Tosh Szatow.

Tosh Szatow: It's a dangerous game for them to play, because network businesses are responsible for efficient planning and investment in their assets. So there is no case to be made for consumers being left to pick up the bill if stranded assets emerge. It should be the investors that have made those poor investment decisions over the last five years that are going to be left picking up the tab.

Jess Hill: Back in Tyalgum, Gavin Litfin has already decided not to pick up the tab for the networks.

So these are your cows?

Gavin Litfin: Yep. There's one bull in that paddock called Basil, and there's about 48 pregnant girls.

Jess Hill: Wow. Go Basil.

Gavin Litfin: And he has been. [laughs]

Jess Hill: Gavin Litfin is a part-time cattle farmer and consultant. He's building a new house here on his property, and when he asked the networks to connect it to power, he was told he would have to pay for the assets himself.

Gavin Litfin: Because the power here, there's no retail power to the site. There's high voltage lines that go through it, but to put in a transformer would have cost me $25,000 before I even started.

Jess Hill: So how much was that going to cost all up?

Gavin Litfin: It would have cost $25,000 flagfall, maybe $20,000 for the reticulation, and then I would still have the same problems of when the grid went out, I'd still be out.

Jess Hill: It wasn't the money that worried Gavin but the fact that even after spending it, he still wouldn't be guaranteed reliable power.

Gavin Litfin: I'm a consultant as well, so I'm not here all the time. When there's a power outage, and I use electric fencing, the cattle then sense the fence is off, and they start to push at them. So I really didn't want to have a situation where I'm away, and the farm's dead or the farm isn't working.

Jess Hill: So you were actually finding that to go to solar and storage, like having a battery was more reliable than regular power out here anyway?

Gavin Litfin: Yes it is.

Jess Hill: On the roof of his shed, Gavin has 21 solar panels. Inside, there's a new solar battery system, hooked up to a laptop. This is a big system and it needs to be, to power a working farm on solar and storage alone. But even if the sun doesn't show up for a week, these batteries will keep his farm running day and night.

Gavin Litfin: The centre of the universe is this control unit here. This tells you at a glance all the batteries are full, that we're using renewable energy, solar, and this tells us we're in float, which means there's more power coming in than is needed.

Jess Hill: Down on Tyalgum's main street, it's barely gone afternoon, but a few locals are already gathering for beers out the back of the Tyalgum pub. When I ask Eric and Rose Thompson what they think about Tyalgum disconnecting, they're a little sceptical; who's going to pay for it, they ask? But there's no doubt in their mind that living off the grid is a better way to go, they've been doing it for years, using solar panels and an old lead battery.

Rose Thompson: We've hardly ever run out of power, maybe 10 times in 20 years.

Jess Hill: Sounds like the power goes out more often down here than it does for you guys.

Eric Thompson: Well, we've turned up here and it's darkness. And they've got bottles of beer in ice, okay, and there's candles all over the bar, and oh, you've got a power outage, we just turned the TV off so we could come down and have a beer.

Jess Hill: Background Briefing's coordinating producer is Linda McGinness, research by Anna Whitfeld, technical production by Andrei Shabunov, the executive producer is Wendy Carlisle. You can follow us on Twitter on @BackgroundBrief, and you can download this show at your leisure. I'm Jess Hill, see you next time.