8 May 2018
Opening remarks to the NSW Legislative Council’s Select Committee on Electricity Supply, Demand and Prices in NSW
Thank you for the opportunity to appear before you this morning.
Energy markets here in Australia and around the world are undergoing unprecedented change as they grapple with the move to cleaner energy supplies, while maintaining affordability and reliability for customers.
In Australia, this transition has not been a smooth one.
Customers have been subject to reliability challenges and price rises. And as Origin is acutely aware, vulnerable members of our communities are often the least able to cope with either of these.
The main factor in electricity price increases over the past ten years has been higher regulated electricity network charges which make up around 50% of an average customer’s bill. Green schemes, retail costs and margin together make up 20% of a customer’s bill, but these represent more modest increases over that same period.
The most recent impact on rising energy prices has been the spike in wholesale costs in 2017 across the eastern states.
The closure at very short notice of Northern power station in May 2016 and Hazelwood power station in March 2017 took significant capacity out of the market and caused the wholesale electricity price to double.
Origin took – and we continue to take – action to minimise the impact of high wholesale prices on customers, particularly the more vulnerable members of our communities.
At the last price reset in July 2017, despite the fact that wholesale prices had roughly doubled, we did not pass through the full increase in our customers’ retail tariffs. We also froze prices for those in our financial hardship program and those that have subsequently entered it - they did not pay the price rise. In addition, we ensured these customers were on our best guaranteed offer and could access other advice and assistance under our hardship program.
We knew increased supply into the market was the critical action to cover the gap left by Hazelwood and put downwards pressure on prices. We significantly increased output from the Eraring Power Station and are on track to increase generation output further this financial year.
We have also been rapidly contracting low-cost renewable energy, recently committing 1,200 MW of wind and solar plants which will progressively come online by 2020. This new, low cost renewable supply is also putting downwards pressure on forward wholesale prices.
At the same time, we have been investing in our customers, making it easier for them to understand and control their energy use, access savings, and engage with us. This includes a simple to use online price comparator, that immediately tells customers what they could save with Origin. Through this alone, we’ve helped hundreds of thousands of Australians access better deals on their energy.
I’m pleased to note that the forward curve for wholesale prices has already come down significantly from its peak early last year. The market response to boost supply is working, and as the wholesale price is one of the key drivers of household electricity bills, any reduction in the forward curve is likely, over time, to flow through to lower retail prices for customers.
A final point I would like to make, is that it is critical we agree a coordinated and integrated national energy and climate policy for Australia if we are to avoid similar supply and price shocks in the future.
To that end, we support the objectives of the National Energy Guarantee in integrating emissions reduction and reliability of energy supply, and applaud the thorough, consultative process undertaken by the Energy Security Board. We believe this policy can provide a framework in which companies like Origin can invest in future energy supply with certainty.
There is more to do and Origin will play our part. We encourage governments and all of industry to stay the course and deliver the National Energy Guarantee, and other reform recommended in the Finkel review, so as we can get back to an energy system that provides affordable, reliable and cleaner energy to customers.
John Briskin, EGM Retail
Group Manager, External Affairs
Mobile: +61 428 967 166
Redemption of Capital Securities
Origin Energy Limited (Origin) today announced that it redeemed, in whole, the €500 million Capital Securities due 2071 issued by Origin Energy Finance Limited and listed on the London Stock Exchange at their first call date (16 June 2018) in accordance with the terms of those securities.