Energy Action Price Index

Energy Action Price Index

What happened to electricity prices last month?

 

In the Australian energy market, the forward price of electricity for medium to large users fluctuates from day-to-day. Energy Action’s Price Index (Business) (EAPI) provides clarity to the market encompassing pricing from energy retailers via the Australian Energy Exchange (AEX).

EAPI represents the average commodity price of retail electricity paid by Australian businesses based on a Standard Retail Contract (commences in 6-months and operates for 2½ years). EAPI is created from the lowest cost offers submitted by retailers via the AEX and reflects the cost of commodity electricity to commercial and industrial customers.

For more information about the Energy Action Price Index, read our Frequently Asked Questions (FAQs).

Energy Action has redefined the EAPI for South Australia. From 2 February 2016 onwards the Standard Retail Contract for South Australia commences in 2-months and operates for 1 year. This change has been made to better reflect market conditions in South Australia where contract lengths have shortened considerably since late 2015. This change to the EAPI is limited only to the index for South Australia. Standard Retail Contract definition for all other states remains unchanged.

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The retail market in August & Early September

Prices have continued to trend flattish in NSW, Victoria and Queensland, continuing the largely sideways movements that we have seen since mid July for these states.

Prices continue to come off slowly is South Australia although from a very high base and with history showing us that this can reverse very quickly.
Contracts of longer duration continue to be best value with three year contracts selling at a discount of around 0.4c/kWh to two year contracts in NSW, Queensland and South Australia and a larger discount of 0.8c/kWh in Victoria.

Most interest is for 1st January 2018 starts and for contracts of two and three years’ duration with the longest term contracts terminating in December 2020. Little interest is being shown in contracts for only one year’s duration. 
 
In early September AEMO released its ten year forecast of supply and demand conditions in the National Electricity Market. This reinforced the expectation that South Australia and Victoria may experience blackouts if the forthcoming summer is a hot one.

Beyond 2018 AEMO sees the balance of supply and demand improving slowly for South Australia and Victoria as additional renewables come on line and also as behind the meter solar and energy efficiency improvements act to reduce system maximum demand. This is consistent with the lower prices for longer term contracts that we are seeing in the market.

AEMO also flagged that the closure of AGL’s Liddell power station scheduled for 2022 will then put increased pressure on the NSW system. Although this is well beyond the current contracting horizon for electricity customers it still demonstrates that tight supply conditions are currently expected to persist into the medium term.

Regarding the possible closure of the mine supplying the  1,400MW Mt Piper power station flagged last month we have no further information on when this may happen or what steps are being taken to avoid it. Nonetheless, this threat does not appear to be having much impact on the retail price in NSW.
 
We are still awaiting a statement from the government about the LNG exporters’ increased efforts to make more gas available for domestic customers. We expect an announcement sometime in October as to whether or not the government will restrict gas exports by invoking the Domestic Gas Security Mechanism.

For advice on your electricity purchasing strategy contact your Energy Action account manager or call us on 1300 553 551. 

 

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