Consumers Face Rise In Power Prices As Companies Exploit Outages To Boost Profit, AER Report Says

Electricity generators' recent push in the market to hike wholesale prices following outages at Australia's two largest coal-fired power stations will lead to consumers being charged with high energy bills, the country's energy regulator said in a report.

In its report published Wednesday, the Australian Energy Regulator (AER) singled out AGL Energy and EnergyAustralia (EA) for their actions, such as rebidding at higher costs that put pressure on the prices, The Guardian reported.

Their behavior was "quite a contrast with offer behavior of the previous week," AER stated.

Based on AER's report, from April to June, electricity prices exceeded AU$5,000 per MWh 19 times compared to the 16 times during the same period last year. The spike occurred in New South Wales on May 7-8. The same days also witnessed 15 high frequency control ancillary service prices in Queensland.

The extreme high energy prices on May 8 pushed the total energy price above a specific limit for the first time in the 26 years history of the national electricity market. It led to a price cap at AU$600 per MWh, electricity in NSW. As the extended price cap remained for a week, it impacted the future prices.

The AER report stated the most common reason for the high pricing was multiple scheduled network outages in addition to the unplanned outages at Origin Energy's Eraring power station -- the country's largest coal-fired plant -- and Delta's Vales Point facility. Following the outages, NSW failed to access low-priced electricity from southern NSW and neighboring regions.

These factors enabled some of the market participants to boost their profits.

"While this is permissible under the National Electricity Rules, the behavior may not have been in the best interests of energy consumers," the report stated.

As wholesale power prices account for a third of power bills, an extended period of high wholesale price could impact the price cut announced for 2023-24. Consumers have to bear the brunt of price fluctuations as they end up paying higher energy bills.