Albo has inherited an electricity cluster-fuddle. But there is a way out.
Get ready for the great electricity price shock of 2022.
Seriously, it looks like things are about to get ugly.
Last week, the Australian Energy Regulator (AER) approved price increases of up to 18 per cent in NSW and 12 per cent in Queensland from July 1.
That sucks.
But it’s only getting started. Because wholesale electricity prices are on a tear away and aren’t coming down anytime soon.
The numbers are actually kind of terrifying.
In September last year, electricity was $48.90 a megawatt-hour.
They were up to $77.17/MWh by January…
… and then to just over $100/MWh by March…
… and now they’re running at more than $300/MWh!
Ouch!
And while some of that is from temporary factors (3 reactors at various coal-fired power plants are off-line right now thanks to malfunction), the futures markets only have prices coming back to something like $100 – $120 / MWh.
So we’re effectively talking about wholesale electricity prices tripling, and staying there.
This creates a heap of pain all down the line.
First there are the retailers, who buy from the wholesale market. If they’ve hedged well, they’ll survive, but many haven’t. Three have gone bankrupt in recent weeks, and customers of Electricity in a Box have been told that their prices will go up 95%!
(How many of those customers are going to stay?)
Then you have the impact on industry. Gas prices have surged four-fold for two textile manufacturers in Melbourne. This might be enough to kill off what remains of Aussie manufacturing.
Then you have the impact on consumers, as rising electricity prices eat into disposable income and cause a reduction in spending across the board.
And finally, since all of this feeds into the CPI, you’re looking at higher inflation rates, and potentially, more aggressive rate hikes out of the RBA.
None of this is good news.
So, can we do anything about it.
Well, we could do what the Tories in the U.K have just done. They’ve introduced a Windfall Profits Tax – basically, big energy companies have made a tonne of cash simply because Russia invaded the Ukraine and prices spiked.
They’ll now be taxed 25% on their extraordinary profits, with the proceeds being funnelled back to consumers to help with their power bills.
Every household in the UK will receive £400 in October. Low income households will receive more.
So there’s that.
Alternatively, Albo could trigger the ADGSM – the Australian Domestic Gas Security Mechanism. This was introduced by the last government under Malcolm Turnbull, and creates a way for us to stop exporting energy when we need it at home.
Because we don’t have a shortage of coal or gas. We just export most of it. (Three quarters of our gas goes to China.)
What impact would that have?
Well, we have evidence. Western Australia runs their own domestic reservation program. And whereas people were paying $50 Gj on the east coast last week, over in WA they were paying just $9 Gj.
Smart
You’d also need some kind of mechanism for coal as well, but it’s not hard.
The point is we have a choice.
We keep exporting everything we dig up, and risk watching the whole economy go down in flames.
Or we introduce a domestic reservation, and look after the Aussie economy first.
Kinda seems like a no-brainer to me.
JG.
Peter Klitscher says
It’s time the Albanese government enacts the Australian Domestic Mechanism NOW, or why did we elect a spineless Government all talk no action, your the prime minister JUST DO IT ANTHONY kind regards Peter Klitscher
Edwin Serra says
Why don’t we cut gas exports to China by a large percentage., Flood our domestic and commercial markets with cheapest ever gas ,,to ease the pain from electricity price hikes.. ,and follow Britain’s example of giving every household 400GBP .or nearly double the $400 SCOMO promised before the election.., ,and stop this Charade where we were supposed to pay half the excise on petrol at the pumps. .,but I look at BP prices at $2.23 p/l everyday. What a joke.. Let ‘s face it .., the printers have been running hot for years.. ,and we all know they will not stop or slow down ,despite what they tell us., as, as much as certain media bodies are relentlessly trying to convince us that there is a BOOM going on ,and try to create one with gold, lithium, plastics , nano chips ,plastics etc. .and Real Estate.. ,I think we are facing an inevitable end to the honeymoon EVERYTHING period we’ve had.. ,and if I am wrong it will probably happen to isolated pockets..mainly in the Eastern States, and rural W.A lifestyle properties. But don’t expect Bitcoin to reach a million dollars.. because there will be no buyers to be found.. ,when they;re all trying to off load them,, BUT NO BUYERS AT THAT PRICE…,hence why the big boys who who manipulate the CFD’, keep making sure that the daily YOYO scenario is the Bread and butter ,whist ensuring the coin will never surpass the 50 to 60 K USD mark.. because that is a liability to them..,and questinable move..