Gas supplier Weston Energy shuts down amid price surge
Weston Energy, which supplies gas to more than 400 companies and government agencies, has ceased trading with immediate effect.
Surging gas prices have claimed another victim with a major NSW wholesaler forced to shut its doors, saying thousands of jobs were being put at risk due to an “unprecedented rapid rise” in gas and coal costs.
Weston Energy, which provides gas to more than 400 companies and government agencies, has ceased trading with immediate effect meaning 7 per cent of the east coast’s commercial and industrial market will be forced to find a new supplier.
The company said it could no longer finance cash flow requirements of its trading portfolio “on a timely basis” with prices rising over 180 per cent since April, and almost three times higher than at the start of the year.
“Rapidly rising energy prices have put hundreds of Australian businesses, and thousands of jobs at risk,” Weston managing director Garbis Simonian said.
“The fact that Australia is the world’s largest exporter of coal and gas and yet our domestic prices are at unprecedented high levels, highlights real policy failure.”
“The circumstances now buffeting Australian energy markets have been foreseen for some time, but little has been done to prepare Australia’s energy producers and users for this impact.”
Market bodies have been called in to address the crisis with the Australian Energy Market Operator, the Australian Energy Regulator and Essential Services Commission working with Weston to make sure gas keeps flowing to businesses.
Gas and coal prices on Australia‘s spot market are trading at or near record levels amid fallout from Russia’s invasion of Ukraine, tight supply levels on the east coast and the unavailability of major coal generators in the power grid.
Gas prices on the spot market are trading at $35 a gigajoule, more than triple normal levels, while thermal coal has hit fresh records as Japan and other major importers wind down contracts from Russian sources, with a single shipment of Australian coal said to have fetched a record $US442.50 a tonne on Thursday.
Most big energy users can manage their exposure to wholesale power price spikes by entering hedge contracts that lock in firm prices or signing up to contracts that lock in a specified rate.
However, Weston purchased most of its gas on the spot market which has swung from just $8GJ at the start of 2021 to around four times that level currently.
The move follows just days after thousands of households were slugged with a doubling of power prices as retailers passed on surging costs, sparking fears of small operators collapsing from volatile market conditions and fuelling predictions annual bills may jump by hundreds of dollars this year.
Several second-tier electricity retailers have set price increases exceeding 100 per cent with one Queensland operator telling customers to find an alternative supplier so they can dodge the unprecedented cost inflation.
A NSW magnesium producer, Causmag International, said it was unable to secure contracted gas and is now paying over the odds for both gas and electricity with the risk it will have to shut its doors if current conditions continue.
The Morrison government had a target for wholesale power prices of below $70MWh in 2022 but a trio of market forces have dramatically lifted pressure on the market from a year ago when prices averaged just $36 MWh marking some of the cheapest levels in several years.
Mr Simonian has been a high profile advocate for developing new sources of gas including Santos’ Narrabri project in NSW, concerned the state has to import 95 per cent of its supplies.
The wholesaler started in 2016 in NSW and expanded to the ACT, South Australia, Victoria, and Queensland the following year.
It’s understood bigger utilities across the national electricity market were contacted on Monday morning to act as a retailer of last resort in response to Weston’s impending shutdown. The scheme is designed to ensure customers can keep receiving gas and electricity in the event a retailer collapses.
Mr Simonian is also one of the backers of a $1bn-plus Hunter Gas pipeline, a 833-km project that aims to send supplies from Queensland’s Wallumbilla hub near Roma to Newcastle.
Wholesale electricity prices jumped by 141 per cent in the March quarter from the same period a year earlier. A series of coal outages spanning Victoria, NSW and Queensland have contributed to pressures with electricity stations including AGL’s Loy Yang A, NSW’s Vales Point and Queensland’s Callide all running below capacity.
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