Supply disruptions from Centennial Coal forced our hand, says Origin Energy CEO Frank Calabria
Origin Energy was forced to look elsewhere for resources to power Australia’s largest coal power station after disruptions to supplies in 2022.
Origin Energy was forced to diversify where it sourced resources to power Australia’s largest coal power station after disruptions to supplies in 2022, the company’s chief executive Frank Calabria has said.
It was his first public commentary since The Australian revealed how Origin’s then dominant supplier Centennial Coal quietly sold shipments offshore that could have gone to Origin’s Eraring coal power station in NSW.
Centennial Coal, owned by listed Thai company Banpu, in 2022 sold shipments of the commodity in lucrative export markets rather than meet supply agreements with Origin, as a global energy crunch meant prices soared so much that even after paying compensation to Australia’s largest electricity and gas company it was still in the money.
Centennial Coal denied elements of The Australian’s reporting but declined to specify which elements were incorrect.
Mr Calabria did not confirm the reporting but confirmed disruptions to supplies in 2022 were behind the decision of the company to diversify away from Centennial Coal,
“We certainly have very material amounts of coal coming from Centennial at that time. We did have supply disruptions at that time. We needed to diversify our supply risk,” said Mr Calabria.
In 2022, Centennial was the then near sole provider of coal to Eraring, which provides about 25 per cent of NSW’s electricity, but generation was curtailed in 2022 when Origin did not have sufficient quantities of coal to burn.
Centennial Coal’s move was not illegal, and it is believed the company paid compensation in line with its contract. However, it became a major driver of Origin’s earnings slump and exacerbated the upheaval in Australia’s energy market that eventually saw households stung with price increases of up to 25 per cent.
The dwindling capacity from Eraring was a major driver behind a surge in Australia’s wholesale electricity price, and pressure was heightened by Origin’s need to buy capacity to meet demand from its customers.
The default market offer is calculated annually as the Australian Energy Regulator considers the wholesale cost of electricity, and the costs of transmitting electricity and complying with government rules and regulations. Wholesale energy costs incurred by retailers are the largest component of the calculations.
The surge in electricity prices and soaring inflation were the major drivers of Australia’s cost of living crisis.
A record number of households remain unable to pay their electricity bills, and some industry figures have now called for a power inquiry into the causes of the 2022 energy crisis.
“I do believe there should now be a federal government inquiry into the broader events with commercial disclosure powers,” said one industry figure.
The Australian Energy Market Operator did its own review into the operations of the market during the time, while the Australian Energy Regulator – which has investigative powers – elected to review generators for their behaviour in the lead up to an unprecedented market suspension.
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