What the hell is going on with energy prices?

If you’ve been keeping an eye on the news, you’ll have seen that energy prices are out of control. It’s so extreme that in my 20+ years in the industry I have never seen anything like this. 

Why? Because a perfect storm, created by global and domestic events, has seen wholesale energy prices skyrocket to more than double what they were this time last year.  

As a result, several small retailers have already gone into crisis mode and have jacked up their prices dramatically – and by dramatically, I mean by well over 100% in some cases – after taking on the house with the spot market. Others are begging customers to leave them. 

There’s one reason why you won’t find me putting money into pokies or throwing chips on a casino table: eventually, the house always wins. It’s the same with the energy market. If you think you’re cleverer than the market, eventually it will prove you wrong.  

We’ve always taken a prudent approach to secure the best prices we can for our members. This has meant we can provide you fair rates without exposing you and our business to major volatility. 

That may not mean we’re always the cheapest around, but as we’ve seen recently – sometimes being the cheapest provider gives customers a sugar hit that ends badly, with mind-numbing price increases. 

We’ve been progressively buying our wholesale energy for the next financial year for some time, and we’ve already secured all the energy that our customers will need next year.

Why energy costs are going up

There are many reasons contributing to the craziness, but here are three that are causing the most significant impact:  

The war in Ukraine 
What does a war in mainland Europe have to do with power prices here?  Due to the restrictions placed on Russia the global supply of gas, oil, and coal has significantly reduced. 

We’re not going to get political on this but it’s being used by the big power generators as one of the major reasons why coal prices have gone up 300%-400%. However, this is still nonsense. Most of the big coal power stations don’t rely on international coal to operate. They buy coal from local mines and in most cases have no transport route to sell it internationally anyway. We therefore hear the big fossil fuel power producers claim it’s all about a war but we find that to be simply a convenient excuse for them to make money from a very high-priced wholesale power market.   

Australia’s fossil fuel power stations 
As more renewable energy enters the grid, it’s squeezing out the levels of coal required. This is a good thing. But because dirty power stations are producing less electricity, the incumbents have closed some plants early and have neglected others as they become less valuable. A number of these stations are now experiencing unplanned outages due to reliability issues. Conveniently for the companies that run them, operating five units at $300 per megawatt-hour prices is better than running six units at $100.  

That sucks, but is it going to be over soon? 

Sadly, there’s not an easy answer for when prices may settle again, so they may remain high for a while yet. However, bear in mind that wholesale power makes up an average of about one-third of your total energy bill, depending on your region and amount of usage, not the whole bill.  

Globally we can only hope for a peaceful end to the conflict in Eastern Europe, for more reasons than just energy prices. 

Locally we hope this is another wake-up call for the big energy players and Government. A larger focus needs to be placed on renewable energy to move away from a reliance on coal which accounts for about two-thirds of the electricity used by Australians and is proving to be increasingly unreliable.  

What does this mean if you’re thinking of joining Energy Locals or if you’re already a member? 

Every July we update our prices to reflect market conditions. Unfortunately, this year our prices will be going up, as will the rest of the markets. 

The regulators that govern the market have updated the default offer prices with increases ranging between about 5% and 18%, depending on your State and network area. In most regions these increases incorporate the majority of the wholesale cost increases for a retailer that didn’t gamble on the market (like us). We’re now using this and our own data to update prices for members who joined before 1 July 2022 and we’ll communicate new rates to them from August.  

We don’t profit from your usage 

Because we don’t earn money when you use more power, we will pass on the cheapest rates we can to you.  

What about these retailers that are asking customers to leave them?  

We understand ReAmped, Discover, LPE, Energyinabox, and others have asked customers to leave them. For this to happen I can only imagine that some of these retailers were exposed to short-term wholesale energy prices, which is like chucking your customers’ money on a roulette table and hoping for the best.  

Be assured that we’re not going anywhere and we won’t be asking our members to find someone new. Our prices will remain fair and stable, thanks to our cautious approach to buying power, and our devotion to building a better energy experience and sustainable future for Australians is as strong as ever.  

We will continue to carbon offset all the energy our members use as standard in our plans. 

Notes to keep us on the right side of the law

• Nothing we’ve said in this article risks the supply of your energy
• All customers are entitled to the default offer in your State (VDO in Vic and DMO outside Vic)
• We’ll provide at least the minimum notice period required under the regulations prior to any price change taking effect
• All customers are entitled to payment assistance if required

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