Pain keeps coming with gas price projections

Some will need to find an extra $400 by 2019, says report.

Expect more pain on gas prices

It seems the only way is up – despite long, loud and ongoing protests from the Australian Competition and Consumer Commission (ACCC) and energy users. We’re talking power costs, again.

The Cost of Inaction, commissioned by the Australian Workers’ Union (AWU) and released this week, paints a grim picture for energy prices for at least the next 18 months.

It finds that, on average, households in NSW could be paying $434 more for electricity by the end of 2019. Households in Queensland are likely to be hit with a $313 price rise and Victorians with a $254 jump.

Why? The culprit is the wholesale price of gas.

The report explains that wholesale gas prices play a central role in shaping overall household power prices.

“Unlike coal plants that take weeks to fire up or shut down, gas turbines can be turned on and off at short notice, making them ideal to fill the breech when renewables are offline. As the last player to enter the market, during power shortages, gas becomes the overall price-setter.”

Australia is a world leader in gas exports, yet we have some of the highest gas prices. Clearly, something is not working.

The AWU report lays the blame squarely on the Federal Government for a ‘piecemeal’ approach in its attempt to contain inflated wholesale gas prices and poor policy making. It wants the major political parties to adopt a gas reservation policy to guarantee domestic supply at a certain level and keep prices down as a result.

Average wholesale gas prices in eastern Australia should be between $6.30 and $7.80 per gigajoule, according to the ACCC. Instead, the price is more than $9 per gigajoule.

“In 2017, households in New South Wales, Queensland and Victoria paid approximately $151, $175 and $134 more respectively (for energy) than they would have if wholesale gas prices were at levels the ACCC had argued would be reasonable,” the report says.

“Using ACCC advised figures of where the wholesale gas price should have been at in 2017, and with the Government’s current policy settings, by 2019 households in New South Wales, Queensland and Victoria could be paying on average more than $434.08, $312.92, and $254.09 respectively.”

This means the pain is ongoing for the more than three million Australian retirees living on a fixed income. A proportion was already finding it difficult to make ends meet, as shown by research conducted by YourLifeChoices and The Australia Institute (TAI) and published in the latest Retirement Affordability Index™ (December 2017). That pain shows no sign of abating.

In the December quarter, fuel and power were the main drivers of the increase in the cost of living for all tribes except one (Affluent Couples). For the other five tribes identified by YLC – Constrained Couples, Cash-Strapped Couples, Affluent Singles, Constrained Singles and Cash-Strapped Singles – domestic fuel and power accounted for between four and six per cent. Making ends meet on a fixed income was putting most pressure on Cash-Strapped Singles, that is, renters on an Age Pension. 

Senior TAI economist Matt Grudnoff writes in the Retirement Affordability Index™ that one in four retirees are already living in poverty – twice the OECD average of 12.5 per cent – and that soaring energy bills can only exacerbate their plight.

A partial solution? The report says it is “incumbent upon the Australian government to ensure that a domestic supply of gas is guaranteed to meet increasing national electricity demand to provide long-term certainty for producers and consumers.

Stay tuned.

Are you budgeting for the projected increases?

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    COMMENTS

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    johnp
    9th Feb 2018
    12:03pm
    Of course these days with all the many retailers (100s?), intermediaries etc from the top at board and CEO level down to sales, marketing, advertising, call centres. CBD plush offices, admins, IT support etc etc there are lots of unnecessary costs multiplied many times over. When all the householder should need to pay for is the actual generation, control and network distribution to the door.

    9th Feb 2018
    12:19pm
    It's a bit rich for a union to start laying blame on this government when the sale of gas and the prices were fixed by a Labor government. There are contracts in place that cannot be broken without damaging Australia's integrity in the world market. There is a way around all of this and it's to build coal fired power stations or nuclear power stations starting today. As I have written here before,Wran as NSW Premier commissioned power stations that were not needed immediately but certainly kept the lights on when the older power stations were decommissioned. The result of his foresight was to almost lose the next election and politicians since then, either party, have been gun-shy.

    Add to that the negativity of the Greens and the dependence on their preferences at elections and we are left with governments, state and federal, who won't take a chance on doing the right thing by voters. We are continually being fed lies about what China is doing. We are told that they are closing coal fired power stations every week but we are not being told that China is also building new coal fired power stations to replace the decommissioned ones.
    Rae
    9th Feb 2018
    1:04pm
    I'm more interested in what China is doing here with the electricity assets it owns.

    Too late for us I'm afraid. Pity we don't own our mines, gas or uranium anymore.
    MICK
    9th Feb 2018
    5:31pm
    Also a bit rich blaming Labor. As I have written previously the 3rd largest LNG deposit (Gorgon) was let go by THE HOWARD GOVERNMENT. This was betrayal of the worst kind but I acknowledge both sides of politics are guilty and our wonderful country is now almost entirely owned by foreigners so Australians have to 'starve' in a land of plenty.
    I am hoping Shorten ignores the contracts and rolls out existing legislation to force multinationals to provide for Australian needs. If they refuse I hope that Shorten nationalises the energy industry. That'll get the feathers ruffled and the American government demanding ours backs off. Guess who runs the planet? Not citizens!

    On the point of electricity costs high prices will force people into renewable energy. Whilst there is significant pain and profiteering happening this will result in Australia becoming coal free in time. Of course WE PRODUCE NOTHING in this area as in others so we will have to enrich other countrie to get into renewables.

    Did somebody say Australia was 'the lucky country'?
    Rae
    9th Feb 2018
    5:49pm
    Yes MICK. Selling all our resources including coal, iron ore, lithium etc to foreigners was really a LNP treasonous act.

    We could be making the world's solar panels and storage devices right here if our government hadn't been so hell bent of destroying the unions and the workers. Turning us into a service nation.

    German fascists learnt the hard lesson last time and pay their production workers quite well though not over generously as they do have falling wages too. Nothing like our stagnation though.

    Funny how destroying the incomes of the masses always ends in tears isn"t it?

    Meanwhile China pulls our resources up, ships them out on Serco lines through Darwin Port they own for 98 years and build solar panels to sell all over. Good on China is all I can say.
    Not a Bludger
    9th Feb 2018
    1:42pm
    I wouldn’t believe anything that the AWU puts it’s name to.

    However, Old Man & Rae, you are both absolutely correct.

    And, I would add build a couple of dams where the rain is in north QLD and throw in a couple of hydro generators - and, incidentally, why not another one inTassie?
    arbee
    9th Feb 2018
    3:45pm
    In regards to Tasmania, best of luck getting that past the rabid greens, It would require some of their precious rain forest being destroyed. Look what happened last time it was tried.
    Tib
    9th Feb 2018
    4:51pm
    Arbee from what I've read the greens in Tasmania are the supporting renewables. Looks like Tasmania is going to have some of the cheapest power in the country. I believe it's all government owned.
    MICK
    9th Feb 2018
    5:34pm
    Katter has a project going using old mining pits. The plan is to use solar generated energy to pump water into the pits during the day and then run it back downstream through turbines during peak evening times. Wonderful idea. Not sure of the scale though but this is thinking, something the current coal owned government is incapable of doing because it is a puppet government run by industry and multinationals.
    Old Geezer
    9th Feb 2018
    1:42pm
    In the old days before privatisation we had electricity generators and supply authorities. The generators charge the supply authorities prices just enough for their books to break even. Supply authorities charged their customers enough for their books to break even. I remember on supply authority made a few million profit one year in forex trading (they imported transformers and other goods form overseas and used hedging to keep the price they paid as low as the could). State government saw this and then wanted dividends from all the supply authorities. This is where electricity privatisation started. A couple of employees in a supply authority did too well hedging currencies.
    floss
    9th Feb 2018
    2:02pm
    Your comments prove you have no idea as to rising power prices . Privatisation and the gas give away must share most of the blame and it is up to the Federal Government to fix the problem NO ONE ELSE and we know that will never happen.Answer buy more P.V. panels while you still have the money.
    Old Geezer
    9th Feb 2018
    2:09pm
    Privatisation and pricing of gas at a export prices was a result of the state government wanting dividends from the supply authorities. Once state governments got their dividends they could then sell it at a much higher price as it was seen to make money.
    MICK
    9th Feb 2018
    5:38pm
    You are 100% on the money floss. Howard kick started this sell off and effectively gave away the world's 3rd largest LNG deposit. All the gas from that project now goes to Asia where the retail cost of the product (after transport costs etc. added in) is much cheaper than the cost of gas in the local market.
    Shorten needs to end this arrangement when he becomes PM no matter how the business owned American government tries to pressure him. He'll have my backing on that one.
    Rae
    9th Feb 2018
    5:51pm
    Yes the Feds bribed the States to sell. Some did. Don't think the Feds ever paid up though. You can't trust them.
    froggy
    9th Feb 2018
    2:15pm
    Utility companies (gas,electricity and water) must be government owned and run as self sustaining and not for profit organisations..currently, the hefty CEO salaries and overseas ownership put the priority on shareholder returns instead of delivering a service. Government must also encourage alternative energy targets and subsidise R and D costs in the private enterprise.
    musicveg
    10th Feb 2018
    8:21pm
    I agree, electricity should not be a luxury for the rich only. We never had any issues when the electricity was government owned, no one ever complained about rising costs.
    Tib
    9th Feb 2018
    4:01pm
    Selling all our assets . Privatisation is the problem here.
    MICK
    9th Feb 2018
    5:41pm
    It is and the culprits who did the deed are now getting generous pensions.....from us.

    9th Feb 2018
    5:18pm
    It's a scandal. There needs to be a Royal Commission into the power sector.
    MICK
    9th Feb 2018
    5:44pm
    There needs to be a solution which centres around the citizens of this nation rather than the demands of multinationals who want their gravy train to continue.
    This is why Turnbull and his cronies want the Free Trade Agreement to go ahead. What they refuse to divulge is that this agreement has a clause which allows multinationals to sue our government. Just imagine what would happen if any government after that tried to fix a contract which was fraudulently made by a previous government? Yep. Into the courts and skin us again.
    Rae
    10th Feb 2018
    7:59am
    Yes MIck. The fact that certain bankers and deal brokers were manipulated into a political seat and position to sell us out in those trade agreements and asset privatisations needs examining.

    What on earth are the LNP supporters thinking to let this sort of deal making go on when it is public taxpayer owned revenue raisers being flogged and very nasty agreements that lock us into paying our earnings to support foreign governments and entities.

    We are subsidising Chinese power consumption through excessive prices here. The LNP supporters are quick to decry the unions wanting that little family man to get a bit more than the $18.80 he's paid but totally ignore their own deal makers selling out the whole country to foreign ownership.

    Damned if I can understand why they think this will end well.
    John
    9th Feb 2018
    7:24pm
    It would help if influential blogs such as this one started to be even handed about power.
    On every subject you have a left leaning socialist bias. Start to really support cheap power by giving coal and nuclear generated power a fair go. The renewables are fine and I love having a 5kw system on my roof which was mostly paid for by an over generous government.
    There is certainly a place for wind and solar farms in the mix but it's not the whole answer.
    Questions are now being asked about the total cost to the environment of these farms over their lifetimes. It's time we stepped away from left and right and started to focus on what is best for us retirees whom you purport to support.
    It's not often I agree with the greens but their suggestion that the power should be owned by the people is a sensible one. However it may be too late to change direction. The real reason the various state governments sold the power was to get their hands on a bucket load of money and avoid having to constantly fight the Unions who they couldn't control. The unions should be on side with a return to power generation as this will increase the size of the union workforce and membership. It seems like a win win for everyone including the poor old pensioners and retirees.
    musicveg
    10th Feb 2018
    8:23pm
    I agree with what you said except the nuclear part, no nukes for Australia, who is going to store the waste and where, until they come up with a no waste nuclear system forget it.
    Lookfar
    11th Feb 2018
    7:25pm
    John, Coal and Nuclear power have been given an extremely fair go, with billions of dollars of subsidies, esp in the US, but despite that the retailers are buying Renewables, particularly Wind, because they are a fraction of the price of Coal, - Nuclear, lets not go there, financers nightmare.
    The Australian Energy Regulator (hardly Greenies by any stretch of the imagination) has very grudgingly admitted that more renewables will reduce electricity prices, please take that on board.
    Wind Turbines used to repay their entire energy budget of manufacture, transport, operation and dismantling in 3 months, now they have become so efficient and cheap it is probably more like 3 weeks, what are your figures on coal and nuclear?
    YLC is not leftist, it tries to stick to the middle, depite a small minority of frothing extreme right Hierarchical males trying to force us all to believe that they know everything, as that is what their identity is dependant upon.
    Those fools will spend eternity believing that unless the rest of us wake them up to the real world, and I let you decide what you believe that is, but it doesn't include 'coal and nuclear are cheap,' people with money to invest are stearing far away from them, - even oil companies are now investing big time in wind, (eg StatOil)
    musicveg
    11th Feb 2018
    7:33pm
    Exactly Lookfar, some people don't want to know the REAL facts, not the spin that is being said by coal shareholders and the like. Just like they blamed the S.A blackouts on renewable's when it was nothing to do with energy supply and again in Victoria blaming closing the ancient Hazelwood power station.
    musicveg
    10th Feb 2018
    8:25pm
    I have been budgeting for all the increases of everything, my rent just went up, food costs keep going up and I try to use less electricity everyday, no air con for me this summer.
    johnp
    11th Feb 2018
    3:09pm
    And they say privatisation is the most efficient. If thats the case then how about this and its a communist regime !!
    Chinese workers build railway for a new train station in just NINE HOURS
    Read more: http://www.dailymail.co.uk/news/article-5297201/1-500-Chinese-workers-build-railway-nine-hours.html#ixzz56lkdDVhZ