Businesses are closing, customers are cutting back spending, company bosses are all suddenly spot trading experts in the energy market, or planning to become their own electricity supplier. Meanwhile scouts from the US have arrived to poach companies who want cheaper energy (and tax cuts).
Happy New Year Australia. These are all headlines and stories in The Australian from yesterday and today.
Cut power bills or lose more jobs: ACCC chief’s warning on energy costs
Glenda Korporaal writes:
Australia’s competition regulator, Rod Sims, who has been tasked with finding ways to cut power bills, has warned that high energy costs will force more plant closures and job losses as prices continue to increase.
“Energy affordability is Australia’s largest economic challenge,” the chief executive of the Australian Competition & Consumer Commission told The Weekend Australian.
“We have already seen jobs lost, investment reduced, plant closures (because of high energy prices). Unfortunately, we are going to see quite a bit more.”
Some businesses will be OK – like those that are not involved with fertilizer, paper, glass, steel, bricks, telecommunications or refrigeration:
He said the biggest pressure would be on manufacturing companies that used gas, including those involved in making fertiliser, paper, glass, steel and bricks. High energy prices were affecting sectors such as telecommunications companies, services that used refrigeration and farmers using irrigation.
They were also affecting retailers, whose customers’ budgets were hit by rising electricity costs.
Other businesses that will be OK are those that don’t need customers:
The executive director of the Australian Retailers Association, Russell Zimmerman, this week blamed the high cost of energy as a factor in holding consumers back from spending in the post-Christmas sales period.
2017 was one of the worst years in Australian retail:
Eli Greenblatt writes:
As 2017 closes it will be remembered as one of the worst years for the $300 billion retail sector, which was hammered by a long line of high-profile collapses — including Topshop, Rhodes & Beckett, David Lawrence and Oroton — driven by the lowest growth in household income for decades, mortgage stress and rising energy bills.
“Weak wages, flat house prices and a smaller fall of the household savings rate suggests weak consumption ahead,’’ warns UBS economist George Tharenou. [He] said household cash flow collapsed to a record low in 2017, with discretionary retail spending “taking the hit”.
…the country’s biggest department store, Myer, issued a profit warning on the back of worsening sales ahead of Christmas.
A funny thing happened to the growth of consumption spending as the RET percentage rose.
…
It appears the RET (Renewables Energy Target) takes money from customers and gives it to solar and wind power investors instead.
Qenos lay-offs start as energy costs hit
Just another company mentioned in the news today:
Manufacturing company Qenos is being forced to lay off 15 per cent of its 700-strong workforce as it battles to cope with higher energy prices, chief executive Stephen Bell said yesterday.
Mr Bell said Qenos, which has polyethylene plants in Altona in Melbourne and Port Botany in Sydney, had been battling hard to boost productivity following increases of up to $60 million a year in its gas and electricity expenses, but was now being forced to lay off staff.
It’s so bad, Australian companies want to spot trade or generate their own electricity
Years ago, [Rod] Sims says, most chief executives did not know much about energy. “Now you find when you are talking to company executives, all of a sudden you are talking to energy experts.” Some of them are now buying electricity and gas off the spot market,” he said… “You will be chatting with them and they have half an eye to their phone, looking at what the price is doing.”
And we all know how live spot-trading-in-a-volatile-market helps soothe, relax, and hone the focus and creativity of our business leaders. Why didn’t we ask CEOs to do this before? Will Australian companies lead the world or what! And the answer is or what, or maybe watts.
The rising prices of electricity and gas have become such a worry for some of Australia’s major companies they are having to take the situation in their own hands. An increasing number, Sims says, are looking at ways to generate some of their own electricity or “self-supply” as he calls it. “I have spoken to at least 50 companies recently on the subject of electricity and I can’t remember one which didn’t talk about self-supply,” he says. “It’s quite extraordinary.”
Too bad Australian companies don’t have many choices. They can take the subsidies and go solar, buy a diesel, or build a nuclear plant (as if). But they can’t band together and build a coal station to supply themselves without also paying the RET.
US state of Pennsylvania spruiks power to entice Aussie firms
The state of Pennsylvania has sought to poach Australian companies with a promise of “abundant’’ energy, sparking renewed warnings from Australian business leaders that the nation risks losing jobs to offshore rivals unless it tackles its energy problems. A high-powered delegation from the Pennsylvanian government, headed by Dennis Davin, the state’s Secretary for Community and Economic Development, visited Australia seeking out large and medium Australian businesses and plugging his state’s energy advantages.
The week-long trip early this month, with stops in Sydney, Melbourne and Perth,…
The Pennsylvanian delegation has fanned fears that Australian firms are considered “ripe for targeting’’ by offshore rivals with offers of low-cost, reliable power.
The actual price of electricity in Pennsylvania isn’t cheap. Presumably they are expecting ours to go higher, or theirs lower, or both.
The average price of electricity per megawatt ranged from $76 to $123 in 2016-17 in Australia while the average commercial electricity rate in Pennsylvania was advertised at about $121.90 a megawatt ($US94.40).
However, I bet gas is a lot cheaper in the US. Still, some companies might prefer to pay high gas prices, and feel good because they live in a state that bans gas exploration.