Sparks fly over energy guarantee as power costs soar

The Australian, April 20, 2018

Major Australian companies and small businesses are struggling to cope with record electricity price hikes that have forced them to seek alternative power sources, consider cutting thousands of jobs and pass costs on to consumers.

As the Turnbull government today hopes to secure support for its signature energy policy in Melbourne, some small to medium-sized businesses have questioned how the national energy guarantee will reduce soaring power bills.

Independent supermarket owners have experienced price rises of hundreds of thousands of dollars in the past 12 months, warning that it could push up ­grocery prices and benefit Coles and Woolworths, which they argue have the ability to absorb the increases and strike better power deals.

Master Grocers Australia chief executive Jos De Bruin, who represents independent supermarkets, said: “I don’t think anyone knows what it (the NEG) means.

“What does it mean? What can the federal government actually do to influence electricity prices.


“We have been exploring what we can do at a federal level. We went to see (Energy Minister) Josh Frydenberg last October/November. We gave him a document to say that between February and October last year our electricity went up $110 million as an industry sector. That’s independent supermarkets. Our members were ­coming off old contracts and going on to new contracts.

“We needed to show him these examples. Because margins are so slim in supermarkets we’ve got nowhere to go. That could cost us 2500 jobs. … The only lever in variable costs we have to pull is in employment.”

Len Morabito, general manager of four SUPA IGAs and a freestanding liquor store, said he was $215,000 worse off than at this time last year because of electricity price increases. He said this was a 31 per cent rise from the 2016-17 financial year.

Mr Morabito said the four ­supermarkets were scatted across regional Victoria in Leongatha, Korumburra, Shepparton and Bendigo.

The business runs a warehouse and its headquarters out of Moorabbin, in southeast Melbourne, and employs more than 500 people.

“I can’t believe the lack of uproar,” he said. “It’s just ridiculous … I don’t think we’ve seen it come through in grocery prices, but sooner or later it’s going to hit.”

Mr Frydenberg will use today’s Council of Australian Governments meeting of state and ­territory energy ministers to push through final design work on the NEG, with the aim of securing a deal on the policy by August.

Mr Frydenberg says the guarantee represents an “opportunity which cannot be missed” with key manufacturing companies backing the overhaul including BlueScope — which says its electricity costs are likely to rise 93 per cent to $113m by the end of financial year 2018 when compared with ­financial year 2016.

“It is time for all governments — federal, state and territory — to put the national interest first and deliver a more affordable and ­reliable energy system through the national energy guarantee,” Mr Frydenberg said.

The minister has also put pressure on energy retailers to pass on reductions in wholesale prices, ­arguing that wholesale ­prices are down 35 per cent across the ­National Electricity Market over the past month compared with the same period last year.

The NEG is aimed at guaranteeing energy reliability, while lowering costs for consumers and delivering on Australia’s Paris Agreement commitment to reducing carbon emissions by 26 per cent on 2005 levels.

It will put an obligation on electricity ­retailers to buy power at a set level of emissions intensity each year to meet a 2030 reduction target while also forcing retailers to meet a percentage of demand from reliable power generation.

Rheem, the ­nation’s largest producer of water heaters and a supporter of the NEG, said its power costs were more than 50 per cent higher than last year.

The National Farmers Federation yesterday appealed to state and federal energy ministers to end the “policy stalemate”, warning that farmers and those in the agriculture supply chain were “suffering from spiralling upward electricity prices”.