Discover Energy Electricity and Gas Rate Change Update – May 2022
Due to an unprecedented increase in the cost of wholesale electricity, we will be increasing our electricity and gas rates as of 21st May, 2022. Wholesale electricity and gas prices have been increasing throughout 2022 in all states, culminating in prices that are now more than double what they were this time last year, with the highest increases in Queensland and NSW. These increases are largely due to the rising prices of coal, oil, and gas in international markets in response to global disruptions; this has then driven higher bids from coal, gas, and hydro generators in the wholesale markets, especially at times of high usage (weekday mornings and evenings).
This affects us adversely as a small retailer as we do not own any generation sources and we do not benefit when the wholesale price increases. As such, while we understand that this comes at a time when cost of living pressures are mounting, we need to pass these costs onto our customers to maintain a sustainable business.
We have not made this difficult decision lightly, and as soon as prices are reduced, Discover Energy will share those reductions with our customers.
Why increasing electricity and gas rates?
Wholesale prices are increasing – Australian Energy Market Operator (AEMO)* recently reported a 141% increase year on year and the wholesale prices have continued to increase in April and May averaging nearly $200 National Energy Market (NEM) wide.
"Figure 9 NEM prices rise sharply" from AEMO dynamics report linked below
So far in 2022 there have been unprecedented conditions in the wholesale market – prices of oil, gas, and coal have seen significant increases because of world events such as the war in Ukraine and the after-effects of Covid-19 on energy supply chains. These have conspired to increase prices up to 500% in the case of spot gas.
Coal and gas generators have passed on these increases in their wholesale costs by pushing up the price at which they dispatch generation into the electricity market, with the bid prices for black coal and gas either tripling or doubling in the market. Bid prices for hydro generators have also risen, reflecting the bidding trends of other generators in the wholesale market. All of this has then raised the cost of the energy that small retailers like Discover Energy must purchase to supply our customers. And as we don’t make money when the wholesale market price increases, unlike retailers who do own generators, we have no choice but to pass these increases onto our customers.
"Figure 21 Strong increases in average NEM spot prices set by black coal, gas and hydro offers" from AEMO dynamics report linked below
As a small retailer who doesn’t own large coal or gas generators, the only energy we do dispatch into the electricity network is the excess solar energy we buy from our customers via feed-in-tariffs. Unfortunately, the value of solar in the market has been declining at the same time as the price for peak energy has been increasing.
*See AEMO quarterly dynamics report https://aemo.com.au/-/media/files/major-publications/qed/2022/qed-q1-report.pdf?la=en&hash=981BA7016C0C9A25947F0F05198EDB96
What’s does the future look like for electricity and gas prices and Discover Energy customers?
In the short-term, the outlook for electricity and gas prices suggests that the prices will likely remain elevated. In the medium term, it is difficult to imagine that coal and gas prices will remain as high as they have been so far in 2022, and so the market expectation is for prices to fall in coming years. As soon as prices are reduced, Discover Energy will share any reductions with our customers. However, the energy industry is going through a major transition and we expect some further price volatility as incumbent generators seek to extract as much value from their old generators as they can, and as the market adjusts to a high renewable and high storage grid.
What can customers do now?
Unfortunately, all electricity and gas retailers will be forced by the current circumstances to change their prices. At Discover Energy, we will proactively contact customers who recently joined or who have high peak or annual usage to let them know a change to their rates is coming and discuss what options they have to best manage their bills. This may be to check the government websites such as Energy Made Easy to find a better plan, or to move onto a Time Of Use tariff if the customer can lower their consumption during peak periods (generally weekdays – morning and evening).
What about VPP and Solar?
Discover Energy will continue to support the uptake of solar and battery installations in Australia. In fact, we expect that the current electricity market will drive more customers to want to install solar and battery and we will be able to facilitate these installations by our extensive installation partner network thanks to our partner organisation, One Stop Warehouse.
We will continue to operate our VPP platform and innovate via new smart EV charging and other new technologies that will support our customers and help insulate them against future price rises.
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