Australia appears to be on the edge on an energy crisis very similar to the current crisis in the UK. It is feared that this could break many of their power retailers and create surge in the number of households unable to pay their bills.
The cost of wholesale energy continues to soar, which has triggered widespread panic among observers – with fears that a significant chunk of Australia’s retail electricity market being wiped out by the crunch. The Federal Treasurer, Jim Chalmers, performed a speech this week in which he suggested that Australia was facing a ‘perfect storm’ of challenges in energy.
More specifically, he pointed to revelations that gas prices in Victoria had jumped to more than 50 times higher than their normal levels. This led to an intervention from the body that runs the energy market. According to Mr Chalmers, Australia is paying the price for almost a decade of energy policy uncertainty from the previous coalition government.
He had this to say –
“On energy in particular, this is an incredibly challenging set of circumstances, particularly for Australian industry, when you consider this spike in gas prices, which goes hand-in-hand with a spike in the price of liquid fuels and a spike in the price of electricity as well… This is, unfortunately, a perfect storm of conditions and challenges in our energy market.”
There are already casualties from the crisis, with the New Zealand-based power provider ReAmped telling their customers to find supplies from elsewhere as they are no longer able to provide an affordable service. This firm has around 80,000 customers in Australia’s east coast and the Chief Executive, Luke Blincoe, said that they had taken the incredible decision to step back from the market.
Mr Blincoe stated that the company is already urging customers to find a new deal quickly, suggesting that they had limited time to act before retail prices soared ever higher. He had this to say –
“The wholesale energy market has just become so extreme that we’re now seeing a situation where wholesale prices are above retail prices… So, unless you’re a generator, there is simply not a sustainable position in the retail marketplace… We’re saying to our customers ‘the best way we can save you money is actually ask you to switch away… And now is the opportune time to do that while there are still some deals available.”
A Story Seen Before
The customers of ReAmped who don’t find a new supplier would likely see a doubling of prices from July, according to Mr Blincoe. Bruce Mountain from the Victoria Energy Policy Centre said ReAmped’s situation is a familiar one among smaller start-up energy providers across the national energy market. He went on to say that many of the firms that had entered the market in recent years with the intention of competing the incumbent suppliers would be particularly vulnerable. This is because they are effectively ‘resellers’ that generated very little of their own electricity, instead purchasing their volume from the wholesale markets.
Mr Mountain had this to say –
“I’m very worried about what this means for the retail market… The small retailers … they perform a vital role in our market in bringing competition and innovation and new ideas… If it wasn’t for them, the big retailers would face much less competition and they’d charge even more and customers would get an even worse service. So, I’m very worried about these smaller companies – they’re facing a very tough time.”
On the Edge
Mr Mountain has also said that the regulated tariff increase is actually tiny when compared with the reality of the wholesale market, where prices are vastly inflated. In a report from late April, the Australian Energy Market Operator noted that wholesale prices had risen 141% in the 12 months to March 31st.
But it is not just that prices had risen alarmingly, but that they are also staying at extreme levels as global instability and shortages of fossil fuels such as coal and gas push the market upwards. Mr Mountain believes there is a pronounced risk of Australia falling into a full-blown energy crisis, similar to the one rocking the UK currently. Rocketing prices have sent half of the electricity retailers in the UK to liquidation and fuelled a surge in energy poverty.
“It’s too far to say it’s in crisis right now, but there’s reason to be very concerned… I think we are on the precipice now and if these wholesale prices hold for much longer, I think there’s reason to be very concerned.”
Mr Blincoe has stated his upset at the decision to pull back from the market, but has said passing on the kinds of price required by the wholesale market was untenable. They may look to re-enter the fray once volatility and prices died down but acknowledged it could be a long while before that happened.
“We’ve worked our butts off for three years to build a really successful business… But the reality is if we want to be around in the future to continue to save Aussies money, we need to manage our position… No one wants to be sending out massive price increase letters when Aussie families are clearly already doing it tough with a big cost-of-living crunch.”
Customer Billing – Will I Be Affected?
As already mentioned, energy costs are spiralling – and the price rises are affecting all of us. For UK energy customers it is difficult to say how your bills will be affected due to the serious volatility in the energy markets. It is important to remember that energy prices as a whole are rising, and this will be passed onto consumers through energy bills, making it something to keep a close eye on.
Different suppliers will feel the pinch in different ways so it is crucial to be aware of the current situation your energy supplier finds themselves in. It is possible to view up to date supplier profiles with any recent changes for all of the energy suppliers in the UK, here.
At a time where bills look set to rise due to market volatility, it is also a good idea to ensure that you are not being overcharged for any of your utilities. It can be a tricky task to navigate but there are free online tools to remove the hassle available.
You can find a free online Gas Bill Calculator to see if you are being overcharged, here.
You can find a free online Electricity Bill Calculator to see if you are being overcharged, here.
Energy Solutions by Us, for You
At a time of great uncertainty in global energy markets, it is easy to feel lost in it all.
Keeping up to date with developing situations and the associated ramifications is a tricky and time-consuming job. It is also one that is not likely a priority for you and your business.
So, what do you do?
You partner with energy procurement experts to take the load off of your desk.
Energy Solutions have been trusted brokers for countless businesses for over twenty years, which means we know how to navigate the energy markets during a time of uncertainty.
Contact us today to find out how we can help you and your business
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