Electricity retailers face collapse, Origin Energy warns

Origin Energy sounds a warning that smaller electricity retailers face collapse and has called on governments to help ease a growing energy crisis.

Origin Energy wants coal supplies for power stations prioritised amid an energy squeeze.

Origin Energy has predicted smaller electricity retailers face collapse due to soaring wholesale energy prices and has called on governments to prioritise coal supply for power stations to ease a growing energy crisis.

Ahead of a meeting between Energy Minister Chris Bowen and the states on Wednesday to address energy shortages and high prices, Australia’s largest electricity operator said smaller retailers face having to shut down.

“The risk is very high that small, exposed retailers will go under as they grapple with the significant increase in wholesale prices this year, just as we saw in the UK,” Origin chief executive Frank Calabria told the Australian Energy Week conference.

“More than a dozen retailers have stopped selling discounted market offers in the market and are only offering the mandated, regulated default tariffs. You would have also heard about several smaller retailers writing to their customers encouraging them to seek alternative providers to avoid near triple digit percentage price rises.”

The wholesale price of electricity is regularly topping $400 a megawatt hour across the main states in the national electricity market, more than five times last year’s prices, while spot gas on the east coast has jumped up to $50 a gigajoule from less than $10 GJ at the start of this year.

The huge price jumps have triggered broader concerns that smaller Australian electricity operators could follow the fate of UK retailers where nearly 30 energy companies have collapsed after failing to hedge against rising wholesale costs.

Weston Energy, which provides gas to more than 400 companies and government agencies, ceased trading with immediate effect in late May while thousands of households were slugged with a doubling of power prices as retailers passed on surging costs.

The hit to households is also now becoming clearer after with power bills rising by up to hundreds of dollars for some customers after the national regulator announced increases of up to 18 per cent on standing offers from July 1, sparked by surging fuel costs and coal plant breakdowns hiking wholesale prices.

Origin also repeated a call for both government and industry action to help resuscitate the ailing coal sector with a string of major generators broken down or under maintenance resulting in coal output operating at five-year lows.

“Recent coal plant outages, and coal supply and price challenges, have been the main driver of the very high wholesale prices we’re seeing. We must act swiftly, with industry and government working in concert, to bring as much coal supply back into the system as soon as possible, in order to put downwards pressure on the wholesale electricity price,” Mr Calabria said.

Origin Energy boss Frank Calabria has predicted smaller electricity retailers face collapse due to soaring wholesale energy prices. Picture: James Gourley/AAP Image

Gas producers say they are stepping up output to compensate for the lack of coal in the grid and the Origin chief said bringing coal plants back into the system would ease a squeeze on gas markets which has seen a price cap imposed for multiple east coast states including NSW and Victoria.

“To do this, we also need to look at addressing some of the coal supply issues affecting the sector, including for example, acting with urgency to prioritise rail deliveries to coal fired power stations needing supply,” Mr Calabria said.

“Getting coal plants back in the market, will also reduce the draw on gas-fired generation, alleviating some of the supply and price pressures in the gas market.”

The power giant last week slashed its energy markets earnings forecast for 2022 by a quarter on Wednesday and withdrew earnings guidance for the 2023 financial year amid huge volatility in electricity markets and coal supply problems at its Eraring plant in NSW.

Originally published as Electricity retailers face collapse, Origin Energy warns