Australian fuel businesses, like all Australian businesses, have experienced dramatic increases in their electricity bills over the past 12 months because of higher average wholesale prices in the Australian electricity market.
These increases have been substantial, with members reporting that their 2017 electricity bills are between 80% and 120% higher than last year.
In a market characterised by relatively low margins and fierce competition, these increases are not just bad news for fuel businesses – they are also bad news for motorists, given that these costs cannot be reasonably absorbed by fuel retailers and must therefore be passed onto motorists in the form of higher fuel prices.
What is most worrying is that Australian fuel businesses are required to operate with some of the most expensive electricity prices in the world.
This despite Australia having an abundance of natural energy resources and has occurred despite successive governments having developed (though not implemented) two prior national energy plans.
“As a country, we have kicked a massive own goal on electricity prices and it is essential that we balance the national score card as soon as possible”, said ACAPMA CEO Mark McKenzie.
The release of the Finkel Report earlier this year provided reason for optimism, with the much lauded “Engineering and Economic” review setting out a comprehensive strategy for addressing rising wholesale prices – and ensuring a smooth transition from conventional power generation to alternative forms of power generation that will deliver national greenhouse emissions benefit.
“Unfortunately, the adoption of the Finkel Report by Government was delayed because of an ideological debate about the pace of transition to renewable sources of electricity generation”, said Mark.
“As a result, Federal and State politicians argued and fiddled around while business and industry struggled with ever increasing electricity prices”, said Mark.
But in a very welcome move this week, the Australian Government released a national energy plan to ensure that Australian households and businesses will benefit from more affordable and more reliable electricity supply in the future.
The plan called Powering Forward – A better energy future for Australia seeks to address the dilemma associated with delivering reliable and affordable energy , while simultaneously reducing GHG emissions in line with Australia’s international GHG reduction obligations.
The new Plan requires that fuel retailers provide a two-part guarantee to all Australians.
The first part of the guarantee requires that electricity retailers guarantee the reliable delivery of electricity in the future to prevent further occurrences of the South Australian black-outs that occurred earlier this year.
At a practical level, this guarantee will require that electricity retailers have access to sufficient ‘spare capacity’ (or dispatchable supply) to ensure that they are able to service the electricity needs of all their customers despite any movements in the supply-demand balance.
The second part of the guarantee requires that retailers purchase wholesale electricity from a mix of generation sources (i.e. coal, hydro, gas, wind and solar) in a manner that progressively lowers GHG emissions.
The difference with this strategy, relative to past plans, is that it is a market-based plan that puts the onus on the electricity retailers to determine the best way to achieve the Australian Community’s objectives of reliable, affordable and GHG friendly electricity at the least possible cost to Australian households and businesses – as opposed to leaving it up to Federal and State/Territory politicans.
At a meeting in Canberra this week, ACAPMA together with a number of other stakeholders and businesses groups, was given the opportunity to ask questions of the Prime Minister and the Federal Member for Energy and Environment about the new Energy Plan.
“We left this meeting with the confidence that the Australian Government’s plan was sound and would likely deliver lower electricity prices over time – provided it was implemented well”, said Mark.
“It is this latter point that remains the key risk to delivery of reduced electricity prices in the future under the new Plan”, said Mark
If the opposition and State/Territory Governments do not get on board with this strategy, then Australian businesses and households will continue to be plagued by an uncertain future, where continued substantial rises in electricity prices will become the norm.
“Put simply, we need lower electricity prices for Australian businesses now”, said Mark.
“While this may not be a ‘perfect plan’ in some politicians’ minds, it is a workable one and the delivery of lower energy prices musty not be delayed by further political bickering”, said Mark
“We call on politicians of all colours across all Australian States and Territories to put aside their ideological differences and get behind the new Federal Plan for the benefit of Australian businesses and households”, concluded Mark
Further information about the Federal Government’s new plan can be found at: https://www.energy.gov.au/publications/powering-forward