This cannot stand:
Energy companies have won a critical battle with the country’s market regulator over household and business bills as authorities move to prop-up a national reference price, a move that will bolster corporate margins.
The Australian earlier this year revealed how a spate of energy companies had urged the Australian Energy Regulator (AER) to change how it calculates the default market offer, the annual prices households and businesses pay, to reflect the surge in rooftop solar that is distorting the market.
…The default market offer is calculated annually; the AER considers the wholesale cost of electricity, the toll of transporting electricity and the cost of compliance with government rules and regulations.
The wholesale electricity price, however, is the biggest component. But a rapid rise in the number of households with rooftop solar means the wholesale price is often below zero. Retailers will pay households a so-called feed-in rate for solar exported back to the grid, which they say is exacerbating their financial strain.
“They had to change it. If you look at South Australia, some parts of the day – there is more rooftop solar than there is demand. If a company owns a coal power station, they are losing money and they have to pay these households a feed-in tariff,” said one industry executive.
…Market sources said the draft ruling is likely to show a small increase at most and could be in fact little changed as wholesale prices tumble amid an end to a global energy crunch and government measures to curtail rampant electricity prices.
Correction: said one “industry parasite”.
Look at the argument. SA does not have any coal power stations. Yes, there are interconnectors with other states, but so what? The argument as structured is nonsense.
Why would the AER raise prices when wholesale prices have cratered? In the past year, the average wholesale price has been $90MW/h versus the year before’s $200MW/h:
This 55% price fall alone should drop the AER DMO offering by 16%.
Suppose we calculate the wholesale price quarterly or bi-annually, which we should, given that the $90MW/h still has some temporary Ukraine War price shock price in it. In that case, the wholesale price for recent periods falls even further.
The AER has hiked the DMO by 40% in the past two years to cover rising wholesale power costs due to the Ukraine War shock.
Second, why are the margins of energy retailers a problem for consumers? If their coal clunkers are unprofitable, shut them and build profitable generators that can cope with intermittency.
Isn’t that the whole point of the energy transition?
Assuming this report is correct, power company interests have hijacked the AER, and the DMO, which was only installed to ensure affordable power bills, has transformed into a profit-padding mechanism.
Consumers are now in the absurd position of subsidising companies to stop decarbonising, and if you can’t afford to get off the grid, then you are toast.
Treasurer Jim “Chicken” Chalmers must immediately act to reverse the AER decision. It must be scrapped if the so-called “regulator” won’t budge.
It will require cooperation with the states so he must call a summit of energy ministers and get it done.
While he is at it, he can negotiate a new gas reservation policy to restore enough supply to lower wholesale electricity prices much further and allow the energy generators to use gas peakers not obsolete coal clunkers.
Yeh, nah.
Instead, the coward will extend his energy bill subsidies, which are only taxpayer gifts to gas cartels and power retailers.
Australia has transformed from an energy superpower into an energy superidiot, and the last laugh is on you.
