High wholesale energy prices have been driven by unplanned power outages, the wild climate, the conflict in Ukraine and increasingly “peak” demand. (Source: Reuters, Getty)
If small retailers cannot withstand rising wholesale energy prices, Australia could face a less competitive energy market and higher prices in the future.
High global energy prices, caused by the Russia-Ukraine conflict, unexpected power outages and a cold pot, have pushed several smaller retailers to the brink.
Joel Gibson of One Big Switch was worried that these smaller retailers might not be able to withstand the storm, which would have less competition in the market.
So far, only one commercial gas supplier has gone out of business.
However, half a dozen retailers have warned their customers about rising rates, with a small retailer raising their prices by 285 percent.
Four of those companies advised their customers to go elsewhere, Gibson said, with two “closing the store” to new customers.
Gibson said there was a real risk that these retailers would go bankrupt under these conditions.
“With fewer retailers, there is less competition and competition is good for consumers,” he said.
“It’s pushing the markets down and keeping the big ones honest.”
He said ReAmped Energy, one of the retailers that advised its customers to move their business elsewhere, had consistently been the cheapest retailer in four states in recent years.
“This is a real loss for customers.”
Gibson said larger retailers are likely to be more resilient to price hikes because they own their own power plants.
“Because part of their business is currently making money with these rising black coal and gas prices, they may be able to subsidize their retail business to some extent and pass on lower price increases to customers,” Gibson said. .
“That’s the hope.”
Large retailers are even likely to raise their prices due to market volatility, with Gibson estimating an increase of around 15-20%.
The story goes on
How much will energy cost?
Roberto Aguilera, an energy economist at Curtin University, said the increase in energy use due to the cold weather, combined with disruptions in coal production, was putting strong upward pressure. of prices.
“Normally, gas could replace coal, but it is in short supply, as much of it is contracted for export to Asia,” Aguilera said.
“Some of these countries are also experiencing shortages and high prices due to supply disruptions in Russia: gas markets around the world are interconnected, so when supply declines in a region, prices tend to rise. everywhere”.
However, Aguilera said there could be a price cut on the horizon.
“As weather improves in the eastern and northern hemisphere states, and as the global economy continues to slow, gas consumption should decline,” he said.
He also said that new gas projects were expected to be launched in most producing regions, which would help boost supply.
“And while Russia’s supply has slowed, it is unlikely to decline significantly: Europe has no real substitute, while Russia depends on export earnings,” he said.
He said the combination of all these factors should help reduce prices by the end of the year.
What should energy customers do in the meantime?
Gibson advised energy customers to buy if their retailer had raised prices.
He also recommended taking one of the few remaining competitive fixed rates “because they are disappearing day by day.”
People could still save on variable rates, but he said they should keep changing to dodge the worst of the rises.
“If you’re not ready to buy and change, we’ve seen that some people would get increases of more than $ 1,500 a year for a typical home if they didn’t move.”
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