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Energy companies accused of technical crisis for profit

by Anthony L. Gonzalez

Billion-dollar energy companies are accused by regulators of driving the power shortages that hit the country to receive bigger payouts from taxpayers.

Power companies withdrew more than 6.5 gigawatts of electricity from national markets before the grid experienced acute stress on Tuesday, sparking warnings that millions of Australian homes could face potential shortages.

The withdrawals removed as much electricity from the market as was added to Australia’s renewable energy capacity in 2021.

The market regulator said Tuesday’s “blackout” warnings were caused by a total shortage of 4 gigawatts in Queensland and New South Wales.

Energy companies accused of technical crisis for profit

Australia’s highly regulated markets have created infinite possibilities for manipulation, and even the state-owned company Snowy Hydro has been accused of abusing the system. Energy companies say their hands have been forced by perverse incentives.

On Tuesday, the country’s chief energy regulator wrote to power generators to remind them of their legal obligations and to suggest that they have created recent shortages to access the compensation payments companies receive for emergency shortages when the government can force them to do business.

“This behavior may be motivated by generators seeking to avoid the managed price compensation process in favor of the AEMO directions compensation process,” wrote Clare Savage, chair of the Australian Energy Regulator.

Compo claim

Power companies say measures to curb rising electricity prices in five states this week have made producing and selling power uneconomical.

More than 1.5 gigawatts of power produced on behalf of authorities helped avoid power outages in Queensland and NSW this week. But under such schemes, companies can charge taxpayers for their fees.

Power producers like AGL and Origin have protested that they are struggling to compete amid uncertainty in global energy markets. In six months, including the Russian invasion of Ukraine and a global energy crisis, their stock prices have risen 42 percent and nearly 18 percent, respectively.

Energy regulator AEMO said it could use its power to order that 2 gigawatts of capacity be diverted in Queensland and NSW to avoid impending blackouts, suggesting the power shortages were as great as the power supplied by companies from the markets. Was taken.

In a statement on Tuesday, the regulator said manipulations by power companies had led to increased scarcity: “These electricity shortages are related to generators revising their market availability in response to regulated wholesale electricity price caps.”

Energy Secretary Chris Bowen said that if energy companies’ profit-seeking had exacerbated energy shortages, they should know that regulators are “watching very, very closely” their actions.

Generators have argued that AEMO’s price caps could make power generation unprofitable, but a rule allows them to claim compensation when the government orders them to continue generating power.

“Generators wait for the market participant to send them, instead of taking a loss in the market, [because] they are eligible for compensation from the Australian energy regulator,” said NSW Energy Secretary Matt Kean.

AEMO said on Tuesday that forcing power production had saved two states from power outages, as collapsing capacity caused by unstable coal-fired power generators promises to maintain price pressures in the near term.

“AEMO will take further steps to improve electricity reserves, including the commercialization of generators, which yesterday helped address electricity shortages in Queensland and New South Wales,” it said in a statement.

But Dylan McConnell, a climate change researcher at the University of Melbourne, said the national energy market now seemed “artificial”, with a regulator forcing generator production to cover their shortfall.

“If generators keep waiting to be sent, [we are] will probably be trapped in this situation,” he said.

Craig Emery of the Public Interest Advocacy Center added: “It’s particularly bad when you consider that they’ve already had huge windfalls, and more will follow.”

It was suspected that the Australian electricity market was a rigged game for a long time.

In 2015, Sun Metals’ zinc refinery in North Queensland requested a change in market rules so that prices would be settled every five minutes rather than 30 minutes, claiming it made them less easy to manipulate. The law went into effect last year.

In 2021, the Australian Energy Market Commission introduced rules that explicitly prohibit companies from making false or misleading bids to drive prices up, tightening existing rules that only require companies to act in good faith.

Harriet Kater, head of the climate program at the Australasian Center for Corporate Responsibility, said complex and conflicting regulations were the legacy of years of ceasing to drive policy.

“There are commercial incentCommercialenergy markets that cause generators to matrices that conflict with the interests of ordinary Australians and businesses.”

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