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posted on:
November
13
2012

Origin predicts efforts to reduce electricity prices will ha

 

Speaking at Origin’s AGM yesterday Managing Director, Grant King has stated that efforts by the Queensland and South Australia government to intervene on electricity prices will cause less investment in generation and bring about ‘less reliability’ in the NEM and ‘higher costs’.


The South Australian Government has told participants in their part of the NEM that the pass-through cost of wholesale electricity must be lowered to reflect a depressed wholesale market, and the Queensland Government has put a freeze on any rises in network tariffs that are also passed through to consumers. While the measures are very different: the former is an effort for prices to reflect changes in the marketplace and the latter is a short-term manipulation of the market, neither is favoured by Origin.


AGL also voiced dissent by calling a moratorium on investment in power generation in SA, including renewable energy. AGL, like Origin, linked this to what is deemed an ‘adverse’ decision of the South Australian Government’s Essential Service Commission of South Australia (ESCOSA) to reduce the wholesale price of electricity by $27.20 a MWh.


The truth about higher prices and less reliability lies somewhere in between; renewable energy will continue to be built because unlike coal and gas generators, they don’t make their money from wholesale prices. They see a return on investment in the form of Large Renewable Energy Certificates (LREC) which are awarded to the generator and then sold. This is important because wind energy often sells their power at very low or negative prices. Although moves by Origin and AGL must be watched closely because the cross-market presence of both companies whose assets lie in generation, networks and retail.