AEMO steps in after East Coast gas price jumps 50-fold

The crisis that has gripped the east coast gas market over the past few weeks – intensifying since Weston’s failure – has exacerbated the deterioration in Australian energy prices, with wholesale electricity prices surging, are being delivered to homes and industries.

Extreme gas prices would be beyond the reach of many manufacturers who rely on spot prices to source gas because they cannot lock in contract rates at what they thought they could afford at the time.

Hundreds of Weston customers on the east coast were moved to “retailers of last resort” such as AGL Energy, many of whom were slapped with default tariffs tied to wholesale prices, but with markups added.

textile manufacturers and others say They cannot continue to operate with high tariffs and will have to consider whether to close factories as they plead for government action to control prices.

Mr Willox said short-term measures were needed to help vulnerable industries and households, in addition to long-term measures to change demand and increase fuel supply.

“The price pain is already severe for businesses that find themselves suddenly in need of new energy contracts amid local and global turmoil,” he said.

“From July onwards, households will feel the brunt of higher default electricity prices and more pain for all.”

no luck with alternatives

NSW magnesium products manufacturer Causmag International is a Weston customer but is now being asked to pay more than $40/GJ for gas but has been unable to find an alternative supply.

“Our brokers are still finding the market,” said managing director Aditya Jhunjhunwala. “No luck so far.”

The price hike is similar to last year’s shocking surge in gas and electricity prices in northern England in the autumn, which shut down energy-intensive factories and squeezed dozens of small energy retailers out of the market.

Josh Stabler, managing director of energy consultancy Energy Edge, noted that three of the four domestic gas markets on the east coast are now managed by AEMO under a mandated price cap.

Energy Edge said prices in the Sydney and Brisbane markets started to come under control last week, around $28/GJ in Sydney and $40/GJ in Brisbane, based on Weston customers being moved to “last retail” The rule that is triggered when the “quote”.

Then on Monday, Melbourne’s market broke the high threshold for price accumulation allowed by energy market rules within seven days, resulting in its market price also being capped at $40/GJ.

Mr Stabler said a ministerial directive issued by NSW on Monday would lead to Sydney’s house price cap rising to $40/GJ, as in other states.

Mr Stabler added that conditions in Victoria were exacerbated by very cold weather expected in the coming days due to a so-called “polar surge”, leading to a forecast of gas demand in the retail market of 1247 terajoules per day, more than last year’s peak. He said , Victoria’s gas demand on Wednesday is expected to be 92 per cent higher than on the same day last week.

Mr Stabler said AEMO’s intervention meant prices in Melbourne would hit $85/GJ on Tuesday and $800/GJ on Wednesday – “thanks to the troubled energy market” – capped at $40/GJ.

Queensland’s LNG exports did not appear to be under pressure, with LNG exports from the east coast falling this month. EnergyQuest consultant Graeme Bethune said Glaeston’s LNG exports in May were 1.784 million tonnes as of May 30, down from 2.068 million tonnes in April.

But Dr Bethune, citing preliminary data for May, said the domestic market used more natural gas to generate electricity this month to help make up for a 26.9% drop in solar power generation.

Natural gas use rose 34.6% this month to account for 9.5% of electricity generation, up from 7.2% the previous month, he said. Hydropower also grew strongly, up 58.6%, while coal and wind both fell 1.9%.