Origin denies driving price rise

Origin Energy has denied accusations that NSW black coal power generators are driving electricity prices higher.

Origin Energy has denied accusations that power generators are driving electricity prices higher

Origin Energy has denied accusations that NSW black coal power generators are driving electricity prices higher by aggressive and opportunistic bidding, saying the claims are inaccurate and misleading.

The real story, Origin says, is that the closure of the Hazelwood brown coal power station in Victoria this year meant a bigger-than-expected call on NSW coal stockpiles, including at Eraring, the nation’s biggest power station.

The stockpiles have needed replenishing, resulting in higher spot power prices, Origin says.

The Australian reported on Wednesday that Schneider Electric had sent a report to clients saying aggressive bidding by black coal generators was adding $30-$35 per megawatt hour to the spot prices.

Schneider, a $60 billion French firm, says it is the biggest adviser to the east coast’s commercial and industrial electricity users on power procurement and use.

Origin’s head of energy supply and operations, Greg Jarvis, said NSW coal generators had been running hard to meet demand over winter.

“The report by Schneider is both inaccurate and misleading and does not reflect how we are operating Eraring (in the Hunter Valley), where we are boosting output to meet the supply gap created by the closure of Hazelwood,” Mr Jarvis said.

AGL, the nation’s biggest power generator, has already responded to the Schneider report. It said the higher prices at which power is being offered in NSW is due to the complexities of quickly sourcing coal, even in the Hunter Valley, as the March closure of the Hazelwood brown coal power station in Victoria increased demand.

“NSW coal generators, including Eraring, ran very hard to meet demand over winter, and this used up substantial coal supplies, creating an issue with coal stockpiles that now need to be managed,” Mr Jarvis said.

Quickly getting hold of new coal supplies in the Hunter Valley is not as easy as it sounds, with much of the coal committed to export under contract. There are also transport constraints on the Hunter Valley railway system, with Eraring itself sitting on the main Newcastle-to-Sydney commuter line.

In its submission to the Finkel review, Energy-Australia, which runs the Mt Piper power station near Lithgow, called for generators to submit fuel positions to the Australian Energy Market Operator to be included in market reports and forecasts so it could be seen if the system was tight.

Origin boosted output at Eraring in 2016-17 by 2.4 per cent and last month said it would boost it again this financial year by 5-10 per cent, to 14.6-15.3 terawatt hours.

Origin last month said it expected to make an extra $208 million-$310m of underlying earnings before interest, tax, depreciation and amortisation this year because of higher wholesale power prices.