What’s the latest on the Australian energy market?

At a glance:

• Australian power company AGL reported a 58 per cent decline in benchmark profits
• The electricity and gas retailers of Origin Energy and Energy Australia experienced similar slumps
• As a result of the energy crisis, power utilities will suffer more, but fossil fuel exporters are set to reap more benefits

Energy Australia, Australia’s third-largest power provider, suffered a $1.6 billion loss, in the first six months of 2022. For the average consumer who is accustomed to sky-high wholesale power prices, the results came as a shock. AGL and Origin Energy, two of Australia’s biggest electricity companies, reported declining profits last week.

According to Climate Energy Finance founder Tim Buckley, the results can be explained quite simply – skyrocketing coal and gas prices are indeed a blessing for exporters but a curse for the rest of us. Put differently, consumers are getting screwed, whether that’s through soaring gas prices or doubling or tripling electricity prices. On the other hand, domestic energy companies are also subject to the same unpredictable factors.

Are utilities benefiting from the crisis?

Utilities often find themselves short of capacity to meet demand due to the deteriorating performance of coal-fired power plants. During Russia’s invasion of Ukraine, coal and gas prices reached record highs, leaving those same electricity companies exposed to record fuel costs.

Furthermore, the continued uncertainty over energy policy had led to underinvestment in renewable energy, which was needed to replace ageing fossil fuel generators at a national level for more than a decade.

The upshot was painful for companies like AGL and Origin. As opposed to the electricity industry, Mr Buckley said that fossil fuel exports are now very profitable. Many of the country’s largest commodities producers have reaped massive gains from their fossil fuel operations in the last year, including Santos and Whitehaven.

Without an energy plan, there can be no relief.

According to Dale Koenders, head of energy and utilities research at investment bank Barrenjoey, global energy markets are undergoing upheaval, which threatens domestic power providers.

He adds that neither households nor businesses gained from the volatility affecting the east coast energy market. According to Koenders, gas and electricity prices on the east coast have only seen a fraction of the price pain expected from the crisis. However, he did warn that bills would eventually catch up with escalating wholesale prices.

Over the next year, how much will energy bills rise?

There was a hint last month that the default market offer would increase. It may increase by 18% at most, but it usually goes up by less than that. For example, it will probably add from $119 or up to $227 more per household in New South Wales. However, when it comes to South Australia, for example, there is only an average increase of $124, and Queensland is somewhere in the middle. A regular household in some states would have to pay an extra 18% or about $200 over the next year. Probably, others will have closer to 8%. An energy plan comparison can help you gain a better deal during this crisis.

Are companies able to charge more than the market default offer?

The default market offers anchor prices besides providing a benchmark. Retailers generally offer similar prices to their competitors, if not slightly lower.

Switching companies by comparing energy plans can allow you to obtain a better deal if you are paying more than the default market rate. The Australian Energy Regulator encourages people to shop around, as a bit of work will help you find a better deal. Select and Switch can help you find a better deal for energy plans for your home or business.