The formal announcements of big jumps in household energy bills – intentionally delayed until after the May 21 federal election – have begun, with a 5 percent price hike for Victorian households.
The price hike — expected to be repeated by other states — follows a massive jump in wholesale prices, driven by a potent mix of rising gas and coal prices, coal outages and pricing power from the lack of competition in the market.
The jump is already taking its toll on small energy retailers, some of which — like bundled energy – forced to hire trustees and close stores and others, such as LP Energy, who are actually urging customers to move elsewhere to ease the strain on their balance sheets.
It takes time for wholesale prices to flow into retail accounts and the Australian Energy Regulator, as RenewEconomy pointed out last week, had expected to release its new directive on May 1, but postponed it until after the election so it could “do more research”.
That announcement is now expected any time from tomorrow, but in the meantime, the Victorian Essential Services Commission has… revealed that the annual bill for a typical residential customer in that state will increase by about 5 percent.
It expects bills to rise from $1,342 under the Victorian Default Offer as of January 1, 2022, to $1,403 for fiscal year 2022-2023, or an average of $61.
“The main reason for the increase is a projected increase in wholesale electricity costs, due to recent changes in market conditions and rising energy prices,” the ESC said.
“For residential customers, the wholesale electricity price benchmark is up about 12 percent, accounting for nearly two-thirds of the increase in the Victorian Default Offer.”
And more of the same – both in terms of expected increases in retail prices and the justifications given for them – is expected from Australia’s energy regulator on Thursday, when it announces its direct market offer for 2022-23.
In its own statement to the VDO on Monday, the ESC said it had also postponed the disclosure of its contract price market estimates for this determination period, which reads until May 6, 2022.
In the case of the ESC, the Commission said the delay was due to “the importance of wholesale costs to the Victorian standard offer and the recent sharp changes in electricity market prices.”
But whatever the reasons, the timing seems very favorable for the deposed government of Morrison and its Secretary of Energy, Angus Taylor.
Taylor, who has taken credit for past cuts in electricity prices from renewables even as he complained there was too much wind and solar on the grid, repeatedly claimed during the election that electricity prices would double under a Labor government. .
And wouldn’t you know, they’re headed that way – though for none of the reasons Taylor claimed (claims that were very quickly and completely debunked).
Already this year, wholesale prices in the national electricity market have been on average about 50% higher so far this year than last year in Victoria, South Australia and Tasmania, about 80% higher in NSW and 150% higher in Queensland.
These soaring spot prices are said to be driven by a mix of factors, including global geopolitical ruptures, a series of unfortunate local outages at coal-fired power plants and a national electricity market that – thanks to a long-term lack of clear policies from the top – is lagging far behind the path to renewables. .
“The market is completely busted – I’ve never seen anything like it in my 20 years of trading,” an industry insider told RenewEconomy last week† “We’re going to lose jobs, we’re going to lose industry… It’s absolute madness.”
And a fine mess to hand over to a new government, which, if analyst Tristan Edis pointed out last week, would inevitably be blamed.
“If Labor is elected on Saturday, I can see them being blamed for the surge in electricity prices that is already happening in the wholesale market, but will only reach home sales prices in a few months,” he wrote last week.
“The real causes – rising coal and gas prices and coal outages – will be ignored.”
Tim Nelson, a former AGL economist and now head of markets at Iberdrola Renewables, noted in another Tweet Tuesday that prices in NSW — which have averaged 300/MWh so far in May — are likely to end the quarter. at twice the level of the previous quarter.
“Right now (1 week before winter) there is (approximately) 4GW of coal in NSW and VIC alone,” Nelson tweeted. “And people keep talking about capacity markets – paying factory that is not available!”
In the meantime, AEMO has revoked Pooled Energy’s license, which was supported by a $2.5 million grant from ARENA to pursue efficiency and demand management in backyard pools.
The Australian Energy Regulator is expected to use its “retailer of last resort” mechanism for the first time in more than three years to allow Pooled Energy’s customers to be redistributed to other retailers.
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