Households brace for Dumbstralia power shock

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Congratulations to all:

Households across the eastern states are about to be hit directly by the closure of the giant Hazelwood power station in Victoria and soaring gas prices, with sharp hikes in retail electricity prices from July 1 coming on top of the hefty increases in recent years.

Homes across NSW, the ACT and South Australia could see bill increases of up to 30 per cent, sources say, with some Victorian households about to see their second sharp hike this year as smaller retailers seek to offset the pain of soaring wholesale prices.

The ACT is the first to confirm the price hikes, advising on Thursday of an 18.95 per cent jump in standing offer power tariffs and a 17.3 per cent hike in gas prices. The increases will feed through to a $6.40 a week jump in the weekly power bill for homes using 8000 kilowatt-hours, supplier ActewAGL said. Gas bills will jump $4.75 a week for a home using 43 gigajoules.

ActewAGL chief executive Michael Costello admitted the price hikes were “unprecedented” and blamed them on “ten years of uncertainty in national energy policy” which had left investors paralysed.

Mr Costello said national policy had failed to take into account the impact on the local market of the “massive” gas export licences for the Queensland LNG producers, which meant the country now exports about 10 times the volume of gas as is used at home.

Andy Vesey, chief executive of retailing major AGL Energy, has also pointed to looming price hikes but told reporters on Wednesday the size of the increases have yet to be determined. NSW retailers have until mid-June to report the increases they will push through on July 1.

It’s not Hazelwood, it’s the gas price:

Use the bloody gas reservation mechanism. That’s what it’s for. If export net back is supposed to be the benchmark price then based on regional oil-linked contracts it should around $8Gj ($9.80 in Japan minus liquifaction and shipping). Based upon regional spot prices it should be more like $5.20Gj ($7 minus liquifaction and shipping).

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Take your bloody pick but either way it’s a lot cheaper than the $9.80Gj we’re paying today.

The mind boggles that the decision will in the hands of the Minister for Alien Abductions Matt Canavan.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.