Australia is facing a sharp rise in electricity prices as the country grapples with the impact of the AUKUS deal, a global energy crisis, and domestic supply issues.
The Australian Energy Regulator (AER) has announced draft plans to hike electricity prices by 20 to 22 percent in New South Wales, South Australia, and south-east Queensland from July 1. In Victoria, the Essential Services Commission (ESC) has released its default offer, with a 30 percent increase in household electricity prices and 31 percent for small businesses.
The default offer is the maximum price that energy retailers can charge customers who are not on a discounted plan. It also serves as a benchmark for other power prices. Around one million customers across the four states are on the default offer.
The AER said the decision was driven by soaring wholesale power costs, which have risen more than 140 percent in the past year due to Russia’s invasion of Ukraine and subsequent sanctions, which have increased energy costs across the world.
The regulator also said the government’s intervention to cap prices in the domestic gas and coal markets late last year prevented the default offer from rising by 40 to 50 percent. The government has threatened to build a gas-fired power plant in New South Wales and use its powers under the Australian Domestic Gas Security Mechanism to ensure enough gas supply for domestic use.
However, the government’s intervention has not been enough to shield Australian consumers and businesses from the impact of the global energy crisis, which has been exacerbated by the AUKUS deal, a security pact with the United States and the United Kingdom that involves acquiring nuclear-powered submarines.
The AUKUS deal has angered France, which canceled a $90 billion contract to supply conventional submarines to Australia, and China, which has accused Australia of undermining regional stability. Both France and China are major exporters of liquefied natural gas (LNG) to Australia, which relies on gas-fired power plants to back up intermittent renewable energy sources. LNG prices have surged to record highs in recent months, putting pressure on gas-fired power plants and electricity prices.
Australia’s domestic gas production has also been hampered by technical issues at some offshore fields, such as Chevron’s Gorgon project in Western Australia, which has been offline since December due to cracks in its pipelines. In addition, some coal-fired power plants in the eastern states have been offline due to maintenance or breakdowns, affecting as much as 30 percent of capacity and requiring the burning of more high-cost gas.
The combination of these factors has created a “world of pain” for Australian consumers and businesses, who are already struggling with surging costs of living and inflation. The federal government has blamed the state governments for not doing enough to secure reliable and affordable energy supplies, while the state governments have accused the federal government of lacking a coherent national energy policy and failing to support renewable energy investment.
The government has also faced criticism from some experts and environmental groups for pursuing nuclear-powered submarines, which they argue will not help reduce Australia’s greenhouse gas emissions or address the climate crisis. The opposition Labor party has called for more transparency and consultation on the AUKUS deal, as well as more support for households and businesses facing higher energy bills.