Electricity price rises locked in from July 1, 2017

POWER prices are set to rocket after retailers announced increases of up to 20 per cent and $600 a year for average consumers.

Power prices set to rise.

POWER prices are set to rocket after three major retailers announced increases of up to 20 per cent and $600 a year for the average customer in some states.

Origin, EnergyAustralia and AGL have all announced price increases for electricity and gas starting from July 1.

Small businesses may be the hardest hit, especially Origin customers in South Australia, which will see prices rise by a whopping $1453 a year when increases to gas and electricity bills are combined.

The biggest increase for residential customers will be for AGL customers in ACT, who will pay an extra $579 a year for a combined electricity and gas rise.

In NSW, residential EnergyAustralia customers will see electricity prices increase by up to 19.6 per cent. Origin Energy customers will get a 16.1 per cent rise.

The price hikes will take effect from July 1.

In its announcement today, EnergyAustralia blamed recent rises in wholesale prices following the closure of large coal-fired power stations, as well as increased demand for gas for export.

“This is bad news for families and businesses and absolutely not what they wanted to hear,” EnergyAustralia Chief Customer Officer Kim Clarke said in a statement.

But Santos chief executive Kevin Gallagher rejected suggestions that increased demand for gas by LNG projects in Queensland was causing price rises.

“Gas prices have increased because all the cheap gas has been developed, so it is costing more to get gas out of the ground,” Mr Gallagher told the American Chamber of Commerce lunch in Sydney. “This therefore is a pricing problem, not a gas shortage problem.”

He said politicians had been reluctant to challenge the negative perception of coal seam gas and fracking.

“We are being asked to believe that high prices and shortages in supply are the fault of the LNG exporters while at the same time state and territory governments have either banned or restricted gas exploration and production,” Mr Gallagher said.

“Unfortunately the politics of the situation have now taken over.”

Mr Gallagher blamed “the failure by previous governments at all levels” to encourage the development of a steady gas supply.

RELATED: How Australia is being screwed over its gas

It comes as the Australian Energy Market Operator released a report showing South Australia and Victoria were still at risk of power supply shortfalls over the next two years during peak periods.

HOW DID WE GET INTO THIS SITUATION?

Director of the Grattan Institute’s Energy Program, Tony Wood, said he believed the situation was the result of a significant failure of energy policy is both the state and federal level.

“Labor, The Greens and the Coalition all have a level of capability and consumers should feel very angry,” he said.

“We wanted lower prices, increased reliability and a reduction in emissions and we’ve got exactly the opposite of all three,” he said.

Mr Wood said wholesale prices had been driven up by rising gas prices.

This is partly because Australia’s gas prices are linked to global prices in a way they weren’t five or six years ago, because there were no exports from the east coast.

But Mr Wood said the entire energy system was going through enormous change and this had also put supply and demand out of whack.

He said this should improve if state governments relaxed restrictions on gas development and if the federal government’s threat to restrict gas exports began to have an impact.

But he said the federal government could also give the regulator greater power to bring prices down and this may also help.

WE CAN’T GO BACK

Even if Australia decided not to bother with meeting its commitments to reduce carbon emissions as part of the Paris Agreement, Mr Wood said the world had moved on.

“Power stations would still shut down, and industry would still be facing uncertainty and be factoring in carbon emissions regardless of the policy,” he said.

“But rather than say, we got this wrong and we’re going to fix it together, we’re seeing what Kevin Rudd used to call — the blame game.

“It’s a nasty problem and has led to very bad outcomes, and Labor, the Greens and the Coalition have all got their fingerprints on it.”

The lack of government policy has seen energy reliability decrease because businesses are reluctant to invest in new solar, wind or even coal.

“Price increases are nasty and a price increase of 20 per cent is really nasty but I think consumers and businesses should be more concerned that these price increases are also accompanied by concerns about the security of supply,” Mr Wood said.

He said consumers, taxpayers and environmentalists all had a reason to be angry, as Australians were dealing with blackouts and price rises — while carbon emissions continue to rise.

While the Finkel review doesn’t satisfy everyone, Mr Wood said it had put forward good suggestions on how to move forward, get prices lower and improve reliability.

“Ultimately it is a very workable model, it’s a comprehensive view and it can, and should be, supported,” he said.

He also dismissed debate about the merits of “clean coal” and whether a clean energy target recommended by the Finkel review should be set at a level that would give incentives to this industry.

RELATED: Can Australia afford to ignore the Finkel review?

Finkel recommendations will bring down the cost of electricity, according to the author.

Mr Wood said setting a higher emissions target to allow coal to get some incentives would be fine as the goal was to reduce carbon emissions, not get rid of coal.

“The threshold doesn’t drive emissions reduction,” he said. “What drives emissions reduction is our commitment to the Paris Agreement.

“We shouldn’t be worried about the mix of energy sources, we should worry about the lowest cost to achieve the target.”

THE NEW NORMAL

Mr Wood said politicians should be more honest with the public about future energy prices.

Historically coal has been a very cheap way of producing electricity, costing about $40 per megawatt hour. But Mr Wood said new efficient coal-fired power stations would cost double that, about $80-90Mwh.

Gas is even more expensive, hovering about $110Mwh and even if this dropped due to policy changes, would still likely be about $90Mwh.

While wind and solar are cheaper, their prices don’t include the cost of battery storage and pumped hydro to ensure stability of their supply.

“So the only obvious conclusion is we’re not going back to $40Mwh any time soon,” Mr Wood said.

“In some ways the negligence of the government is to seek to blame somebody else and not the recognise and communicate to consumers that this is where we are, and we can’t turn back to the good old days.

“We have no choice but to move forward as affordably and reliably as we can.”

— With AAP