By I. Hansana, Jadetimes News
Consumers in Australia will see higher energy bills after two major electricity generators used their market power to increase wholesale power prices following unplanned outages at competing coal fired plants, according to the Australian Energy Regulator (AER).
In a report published on Wednesday, the AER investigated a “significant” price event on May 8 in New South Wales, which led to a key cumulative price threshold being surpassed for the first time in the national electricity market's 26 year history. The primary cause was "mostly unplanned" outages at Origin Energy's Eraring power station, the largest coal fired plant in Australia, and Delta's Vales Point facility.
“These factors created the opportunity for some market participants to profit maximise,” stated the AER report. “While this is permissible under the National Electricity Rules, the behaviour may not have been in the best interests of energy consumers.”
AGL Energy and EnergyAustralia (EA) were highlighted for their actions, which included rebidding their generation from Bayswater and Mt Piper plants at higher prices. These actions “put upward pressure on prices,” according to the regulator.
The AER noted that this behavior by AGL and EA contrasted sharply with their offer behavior from the previous week. The resulting price cap of $600 per megawatt hour remained in effect for a week. The prolonged price spike also led to an increase in futures prices.
Wholesale power prices constitute about one third of power bills, with retail and network costs comprising the remainder. An extended period of high wholesale prices could mean recent price reductions for the 2024/25 year in some regions may be short lived.
While some consumers, such as large businesses, can protect themselves from wholesale price fluctuations, most consumers are exposed to price spikes like those seen in New South Wales during the June quarter.
Australia’s energy markets have experienced numerous incidents in recent years resulting in volatility, including an extended cold snap in early winter 2022 that led regulators to suspend wholesale trading in the national electricity market for the first time. The market serves 80% of Australia’s population, spanning Queensland to Tasmania and South Australia.
Ageing coal fired power stations have also faced more frequent unscheduled outages and prolonged repairs, as seen with Queensland's Callide C plant. AGL and Energy Australia for comment and inquired whether the AER would seek changes to energy market rules to prevent rebidding or other actions that drive up prices during supply shortages.
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