Power prices set to surge but SA householders protected by locked-in contracts

While national power prices are soaring, South Australians will be shielded for a time by long-term gas and electricity price contracts.

Pre-set gas and electricity prices will protect South Australian householders from a looming gas shortage, an expert predicts.

The federal government is considering emergency measures to ensure Australians can keep more of the nation’s gas, to ease the pain of shortages caused mainly by the Russian invasion of Ukraine.

SA Energy Minister Tom Koutsantonis will be part of a heads of government summit next week to find solutions to the problem which will first affect electricity generators.

Chief executive of EnergyQuest and former South Australian government economic expert Graeme Bethune, said SA householders were protected by long-term gas and electricity price contracts which had already been set for the coming year.

“Unlike petrol prices which fluctuate at the bowser, there will be no immediate impact,’’ he said.

“With electricity prices it takes time to work its way through the system and the authorities have already established the default prices for the coming financial year.

“The same is likely to apply to gas prices. The big utility companies also buy their gas under contracts rather than the spot-price basis.

“Short-term spot prices have gone up.

“Prices could increase in future years and a lot of the companies are going around slashing their earnings forecasts. ”

Other price pressures causes are coal outages, and relatively low levels of renewable power generation due to adverse weather.

Prices were already under strain because of flooded coal mines in eastern states.

Minister Tom Koutsantonis . Picture: NCA NewsWire / Brenton Edwards

Dr Graeme Bethune, chief executive of EnergyQuest. Supplied

COAL POWER

Meanwhile, the Albanese government has not ruled out increasing Australia’s coal fired power output to cover a critical gas shortfall which is driving up power prices on the east coast.

An escalating energy crisis is gripping the nation, with Australia Industry Group estimating it would cost $5bn just to financially support the 10 per cent most vulnerable businesses and households to get through this winter.

New Energy Minister Chris Bowen on Thursday declared no solution had been ruled “in or out,” including working with industry to increase coal power production.

“If there is advice to me about sensible and measure actions that can be taken, I will take them,” he said.

An estimated 30 per cent of coal fired power connected the National Energy Market was offline last month, with significant work required to re-establish output.

During the election Labor ruled out building new coal-fired power stations being and committed to a 43 per cent 2030 emissions reduction target.

Climate Change and Energy Minister Chris Bowen. Picture: NCA NewsWire / Martin Ollman

Senator Matt Canavan. Picture: NCA NewsWire / Gary Ramage

Origin Energy chief executive Frank Calabria has called for government and industry to work together to increase coal power to cover the gas shortfall impacting east coast states.

A “perfect storm” of coal-fired power outages, flooded coal mines and the war in Ukraine has caused wholesale prices to soar.

Meanwhile, Victoria faces an extended gas crunch because of a “frightening” lack of new supply projects, according to an industry leader who blames a decade-long failure of energy policy.

The Australian Energy Market Operator was able to stave off a shortfall on Thursday after tapping a supply guarantee for the first time to ensure households could keep their heating on and businesses could continue operating.

Santos boss Kevin Gallagher said situation was the result of a decade of “moratoriums, shutdowns and lockouts in resource-rich states and territories”.

Speaking in Melbourne, Mr Gallagher pushed back against calls for the federal government to pull the handbrake on gas exports, saying shortages and price shocks had “nothing to do with the behaviour of gas producers or exports”.

“This is the consequence of more than a decade of energy policy failure that has stopped the industry developing more gas supply in a timely manner,” he said.