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Electricity network pricing changes to drive utility

ICT spending within the utility sector in Australia is forecast to grow by five-year compound annual growth rate of of 2.3 per cent to more than $1.9 billion in 2015, according to IDC's Utilities Market Forecast and Analysis report.

IDC Australia's vertical markets analyst, David So, said this growth is to be mainly driven by pressure from the federal government to amend the electricity network pricing rules.

"It's going to be less towards capital expenditure -- the formula would not be purely based on capital expenditure, which it is right now," he said. "It would encourage more operating expenditure or outsourcing, as opposed to [utility companies] doing everything by themselves.

"The more utility companies or the network distributors invest in the network the more revenue they generate. That's why Prime Minister Julia Gillard said the utility companies right now are 'gold-plating' the networks because they are encouraged to invest in these networks even though they don't require the bandwidth for these networks. But they do it anyway just to drive up revenue."

Instead of increasing the capacity of the networks, So suggested 'smart-plating' the networks with technologies that control the distribution of electricity based on demand would help better regulate electricity prices.

He said this would encourage more investment in smart grids and smart meters, cloud computing and mobile applications to allow consumers to monitor their energy usage in real time.

"Once they change that policy I think there's going to be more outsourcing of the ICT work, which means cloud computing will also be a major factor driving ICT spending. Cloud computing is based on an operating expenditure model, where you pay-as-you-go as opposed to [making an] investment in capital."

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