Australia is on the "precipice" of a UK-style energy crisis that could send many of its power retailers broke and fuel a surge of households unable to pay their bills, a leading expert has warned.
The soaring cost of wholesale energy has triggered widespread alarm among observers and there are fears a significant chunk of Australia's retail electricity market will be wiped out in the crunch.
Among those expressing their concern was new Federal Treasurer Jim Chalmers, who used a speech today to say Australia was facing a "perfect storm" of challenges in energy.
Mr Chalmers pointed to revelations yesterday that gas prices in Victoria has jumped more than 50 times higher than normal levels, prompting an intervention from the body that runs the energy market.
He said Australia was paying a price — at least partly — for almost a decade of energy policy uncertainty under the previous Coalition government.
"On energy in particular, this is an incredibly challenging set of circumstances, particularly for Australian industry, when you consider this spike in gas prices, which goes hand-in-hand with a spike in the price of liquid fuels and a spike in the price of electricity as well," Mr Chalmers said.
New Zealand-based power provider ReAmped last night became the latest casualty of the squeeze, telling its customers to go elsewhere because it was no longer able to supply an affordable service.
The firm has about 80,000 customers across Australia's east coast but chief executive Luke Blincoe said it had taken the extraordinary decision to step back from the market.
Mr Blincoe said the company was urging customers to find a new deal quickly, suggesting they had little time to act before retail prices escalated further.
"The wholesale energy market has just become so extreme that we're now seeing a situation where wholesale prices are above retail prices," Mr Blincoe said.
"So, unless you're a generator, there is simply not a sustainable position in the retail marketplace.
"And now is the opportune time to do that while there are still some deals available."
Retail pain 'a common story'
According to Mr Blincoe, customers of ReAmped who didn't find a different supplier were facing a doubling of prices from July.
Bruce Mountain from the Victoria Energy Policy Centre said ReAmped's predicament was a familiar story among smaller and start-up energy providers across the national electricity market.
Professor Mountain said many of the firms that had entered the market in recent years to compete with the incumbent providers such as AGL, Origin and Energy Australia were particularly vulnerable.
He said this was because they were effectively "resellers" who generated little – if any – of their own electricity and were therefore heavily reliant on buying from the wholesale market.
"I'm very worried about what this means for the retail market," Professor Mountain said.
"If it wasn't for them, the big retailers would face much less competition and they'd charge even more and customers would get an even worse service.
"So, I'm very worried about these smaller companies – they're facing a very tough time."
'We are on the precipice'
But Professor Mountain said the regulated tariff increase was paltry compared with the reality in the wholesale market, where prices have ballooned in recent months.
In a report in late April, the Australian Energy Market Operator noted wholesale prices had risen 141 per cent in the 12 months to March 31.
Professor Mountain said not only had prices risen alarmingly, but they were staying at extreme levels as global instability and shortages of fuels such as coal and gas pushed the market upwards.
He said Australia was at risk of sliding into a full-blown energy crisis similar to the one affecting the UK, where rocketing prices have sent half of its electricity retailers to the wall and fuelled a surge in energy poverty.
"It's too far to say it's in crisis right now, but there's reason to be very concerned," he said.
Mr Blincoe said he was "gutted" by the decision to pull back from the market but said passing on the kinds of price increase required by the wholesale market was untenable.
He said ReAmped would look to re-enter the fray once volatility and prices died down but acknowledged it could be a while before that happened.
"We've worked our butts off for three years to build a really successful business," he said.
"But the reality is if we want to be around in the future to continue to save Aussies money, we need to manage our position.
"No one wants to be sending out massive price increase letters when Aussie families are clearly already doing it tough with a big cost-of-living crunch."
Users 'will still have choice'
A spokesman for the Australian Energy Council, which represents major power providers, noted that retailers could face "huge losses" if they were exposed to price spikes in the spot market.
However, the spokesman also noted that retailers were obliged to ensure price increases were in line with changes to their production costs.
He also said the profit made by retails was typically just three per cent of a bill.
"The best thing consumers can do is shop around for the best market deals via the government's Energy Made Easy website," the spokesman said.
