Large business expresses concern as electricity futures jump 40% in 4 months

02 Apr 2007Archived News Energetics in the News

Energetics is calling for a centralised approach from government to address the electricity price shock.


This approach should include measures to evaluate the causes and impacts, ensure that there is no price gouging and, in parallel, immediately initiate a demand management program to reduce electricity demand to help constrain prices.

Tony Cooper, Managing Director for Energetics states that "this is essential in order to mitigate the rapid series of contract price increases that business has experienced in the National Electricity Market (NEM) over a short period". If this continues, many organisations contracting for power will experience electricity price increases of over 30%.

High spot and contract prices have largely been driven by concerns over the adequacy of generating capacity. A key contributing factor is the drought. Current water shortages are impacting on the generation capacity available across the NEM.

Water storage levels at Snowy and Tasmania hydro systems are critically low and generation has been reduced as a result. Last week, Snowy Hydro announced that they had reached 10% of capacity. Queensland is also significantly affected by the drought. There are now compulsory restrictions on water consumption at Tarong and Swanbank power stations, which has necessitated a reduction in generation output. Tarong power station announced that from 30 March electricity output has been reduced to 30% of capacity and is expected to remain constrained until around June 2008.

Energetics has received calls from several large clients to determine how they can combat the price increases. "A few customers are becoming concerned about the viability and competitiveness of their business due to the rapid price increases" says Cooper.

In 2001-2003, the Californian government responded to a severe short term shortage in generating capacity with an emergency program focused on improving energy efficiency and reducing demand. This program succeeded in significantly reducing electricity demand, avoiding expected rolling blackouts, and helping to constrain escalating electricity prices.

Jonathan Jutsen, Executive Director of Energetics commented that "swift government action is required to plan and initiate a coordinated demand management program to address this crisis and to ultimately protect jobs. While we hope that this is a short term situation, continued severe drought conditions could require a multi-year response to mitigate the impacts on the economy".

Energetics is watching this situation daily and developing strategies to help energy users manage increasing energy costs from both contracting and demand management perspectives. More information will be provided in the near future about these developments, however if you require urgent assistance please contact your Energetics account manager.

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