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

The crisis that has wracked the East Coast gas market over the past several weeks – and has worsened since the failure of Weston – is adding to the deteriorating situation for energy prices across Australia, with wholesale electricity prices soaring and They feed on homes and industry.

Maximum gas prices would be out of reach for many manufacturers who depended on spot prices for their gas supply because they could not fix contract prices at prices they thought were affordable at the time.

They come as hundreds of Weston’s customers along the East Coast have been relocated to “retailers of last resort” such as AGL Energy, many of whom have been placed on default tariffs tied to wholesale rates, but with an additional increase.

Textile makers et al They cannot continue to operate with high tariffs and will have to consider whether to close factories because they are demanding government action to curb prices.

Mr Willox said short-term responses would be needed to help the industry and households at risk, as well as long-term steps to adjust demand and increase the fuel supply.

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

“Families will feel the blow from the virtual electricity price hike from July, and more pain is coming for everyone.”

No luck with replacement supplies

Causmag International, the NSW manufacturer of magnesium products that was a Weston customer but is now required to pay more than $40/GJ for gas, was unable to find alternative supplies.

Our broker is still exploring the market,” said Managing Director Aditya Jhunjhunwala. “No luck yet.”

The high prices are similar to the sudden rise in gas and energy prices in Britain last northern autumn that shut down energy-intensive factories and drove dozens of small energy retailers out of the market.

Josh Stabler, managing director of energy advisor Energy Edge, noted that three of the four local East Coast gas markets are now managed by AEMO under imposed price limits.

Energy Edge said prices began to control in the Sydney and Brisbane markets last week, at around $28 a gigajoule in Sydney and $40 a gigajoule in Brisbane, based on rules enacted when Weston customers were moved to “retailers of last resort”.

Then on Monday, the Melbourne market breached the cumulative maximum price allowed over seven days under energy market rules, causing the market price to also be set at $40/GJ.

Stabler said ministerial guidance issued in NSW on Monday would raise Sydney’s price cap to $40/GJ as in other states.

Victoria’s situation was exacerbated by very cold weather expected to hit the so-called “polar rise” over the next few days, resulting in projected gas demand in the retail market of 1,247 TJ/day, surpassing last year’s peak, according to Stabler. . He said gas demand in Victoria on Wednesday is expected to be 92 percent higher than on the same day last week.

Stabler said the AEMO’s intervention meant prices that were due to hit $85/GJ in Melbourne on Tuesday and $800/GJ on Wednesday — “luckily for beleaguered energy markets” — would be $40/GJ.

LNG exports from Queensland do not appear to be causing pressure, with LNG exports from the east coast declining this month. Energy Quest consultant Graeme Bethune said Gladstone’s LNG exports for May were 1.784 million tons through May 30, down from 2.068 million tons in April.

But Dr. Bethune said, citing preliminary figures for May, that more gas is being used in the domestic power generation market this month, to help offset a 26.9 percent decline in solar production.

He said gas use increased 34.6 percent this month, accounting for 9.5 percent of generation, up from 7.2 percent last month. Hydropower generation also rose strongly, by 58.6 percent, while coal and wind both decreased by 1.9 percent.