'Bonkers' energy prices set to worsen

Energy prices are expected to surge in the near future, with some energy retailers already warning their customers of increasing bills.

25 May 2022 

Consumer price comparison website Canstar Blue said that some power companies have been informing customers of this incoming spike including Discover Energy, Mojo Power and ReAmped Energy. Canstar also reported that Energy Australia will be announcing price changes for customers over the coming months.

On its website, Queensland-based LPE said it was “no longer in a position to provide competitive rates to our (on the market) residential and business customers in the Queensland region” and that the usage rate will increase by over 123%.

“The rolling average cost of wholesale electricity for the month of May is trading at $380 MWh compared to the end of April last year when it was sitting at $53 MWh. This is an increase of 611%,” the retailer said.

Discover Energy said it had closed sales due to upcoming rate increases.

The news comes on the back of surging wholesale power prices – the Australian Energy Market Operator (AEMO) announced last month that wholesale spot prices at the end of the first quarter of 2022 were up 141% on the same period in 2021, and up 67% over the preceding quarter (Q4 2021). 

Wholesale prices comprise about a third of SME energy bills and most retailers will have hedging strategies that will have protected them against the recent price hikes.

The Australian Energy Regulator (AER), is due to release its Default Market Offers on Thursday, which is the amount electricity retailers can charge customers on default plans.

Anthony Cooper, executive manager, energy programs at My Business, said the volatility in the wholesale energy market was having a profound impact on retail suppliers. 

“We’re starting to see the canary in the coalmine. The wholesale energy market has just gone bonkers,” Mr Cooper said. 

Some of the smaller energy companies have gone into receivership while others are actively turning customers away. 

“From a business perspective, the first thing business customers should be doing is negotiating for a better deal. The huge spike anticipated in prices also supports the business case for seriously considering energy efficiency and renewable options.”

Mr Cooper said that while My Business supports a net-zero target, "Australia needs to do so in a way that keeps energy affordable for business”.

“We want to see an orderly transition to decarbonisation,” he added.  

Rising energy bills will be another expense for Australian businesses at a time when they can least afford them.

“Having survived the pandemic, small business owners are now confronted with rising input and labour costs, forcing businesses to raise prices or absorb higher costs within already thin margins,” said Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry (ACCI) in a statement earlier this month.

“Congested supply chains, exacerbated by the conflict in Europe and lockdowns in China, are continuing to drive up the cost of everything from washing machines to microchips, with small businesses bearing the brunt of these disruptions.”

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