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Enova hits out at “greed” of fossil fuel generators as prices jump

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Enova Energy, Australia’s first community-owned electricity retailer, has hit out at the greed of some of the country’s fossil fuel generators, which it blames for the big increases in wholesale prices and consumer bills that will come into effect from this weekend.

The Byron-Bay retailer, now into its second full year of operations, announced on Wednesday that, like other retailers, it would have to lift its consumer bills by around 20 per cent because of the impact of wholesale prices, which have more than doubled over the past year.

But founding CEO Steve Harris, who steps down this week to resume the retirement he had been enjoying before getting involved with Enova, hit out at the actions of fossil fuel generators and the gaming of prices.

“We are deeply disturbed by the greed of a few fossil fuel generators,” he said in a letter to customers this week. “This, together with a lack of government policy around future renewable energy targets has resulted in a major market failure for which electricity consumers are having to pay a heavy price.”

The company has written a blog post that highlights the bidding practices of generators and their gaming of the markets – all perfectly legal – but which has caused wholesale prices to soar.

“It’s been widely known in the industry for a long time that a certain amount of ‘gaming’ goes on which drives prices up – which under current market rules is completely legal, even though it’s not in the best interests of the consumer,” the company says.

enova pricesIt is not the only party to believe this. Major network operators have also complained about the actions of fossil fuel generators, accusing them of deliberately manipulating markets and availability to push prices up.

The weekly reports of the Australian Energy Regulator also regularly make note of rampant “rebidding” of capacity from low to high prices, for no other reason than to increase profits.

Enova hopes that the arrival of Audrey Zibelman as CEO of the Australian Energy Market Operator may help change those practises, particularly her focus on demand management and energy efficiency and other programs that the fossil fuel industry had fiercely resisted in recent years.

Harris also pointed to an ACCC review of energy costs, commissioned by the Coalition government, which he said may look at the wholesale market too, although there must be some doubt what it is the ACCC will choose to do, given it has previously noted that the actions in the wholesale market are simply “market forces at work.”

Enova also took a swipe at the lack of policy from federal governments.

“Australia is reaching a pivotal point in the transition from old outdated fossil fuels to cleaner, greener energy sources, which poses some issues because over many years Governments have lacked clarity, foresight and strong leadership on this issue.

“It’s a complex area and the process of transition and lack of policy has undoubtedly contributed to issues we’re now facing regarding wholesale pricing, retail pricing and the future of our power supply.”

Enova has so far built up more than 3,000 customers in its Northern Rivers base, with plans to add customers elsewhere in the Essential Energy Network and then in other networks. It is also aims to be 100 per cent renewable, and has a strong community education program and focus on energy efficiency.

It says that as a small community energy retailer” we are unable to absorb rising wholesale energy prices of this magnitude. As a result, it has also had to increase retail prices in line with rising wholesale costs.

Its prices will rise on July 1 from 24.2c/kWh to 29c/kWh, or 26.6c to 31.9c/kWh including GST. Enova also has a state-leading feed in tariff of 12c/kWh but it yet to announce its new tariff for 2017/18, where IPART recommends a benchmark range of 11.9c-15c/kWh.

   

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  • David Hurburgh

    A bunch of hippie free-loaders who have zero’understanding of how the grid works.

    • John Saint-Smith

      I tested you hypothesis by checking the credentials of the Enova Board of Directors.
      I find you conclusion ill founded, if indeed it was based on any real knowledge of the company or the industry on your part. Please feel free to enlighten us about your justification, or are you just trolling along?

    • Melissa Mac Court

      Hello David, there are a few hippies around for sure.. but definitely no free loaders here;) And as for the grid.. our CEO and Directors have already had over 60 years electricity industry between them at very senior levels…. not including the years adding up for the current team from 1- 3 years each .. but who’s counting! Rest of board and managers bring enormous experience in other areas. Sure, we’re still young but hopefully you will see how we are making some disruptions – and all the better for customers.. we’ve led industry on offering fairer deal for FIT. Give us a call sometime – you might like us – we real locals and real friendly 🙂 thanks to other posters and supporters

  • George Parry

    Enova enjoyed an arbitrage advantage for a few years, paying 50% over the most generous FIT from the likes of Diamond and 110% over Energy Australia. This gave them a strong trading advantage and attracted 3,000 customers in the Essential Energy catchment. IPART’s July 1 recommendation to double the FIT in line with the level of the roughly 13c wholesale price removed Enova’s wriggle room. The perils of operating in a regulated environment. Previously they gave their customers a 7c FIT advantage which still gave Enova 14c gross profit. Today any FIT advantage to the customer has to come out of their 14c gross margin.
    The platform, however, is not the product and it remains for Enova to endeavour to leverage their way out of this impasse, perhaps by differentiating themselves from one-way gentailers to bring in such innovations as blockchain enabled trading. A space worth watching.

    • Jonathan Prendergast

      Enova has only been retailing for months rather than years, and have many points of differentiation from typical retailers. For 1, they are a community owned retailer. Secondly they have supported solar with strong FiT’s before high wholesale prices and IPART recommendations came along, and support solar in other ways. They are not perfect, and as you say it is a challenging environment to please everyone.

      Do Enova actually see any return for the FiT rates paid to their customers? Does it relieve them from energy they have to purchase?

      • Melissa Mac Court

        Thanks Jonathan, Enova officially one year old 2 weeks ago, and began to set up in Jan 2015. On target with customer numbers and yes a challenging year for energy costs for sure. But we’re still confident a small community owned player, offering local choice with other community returns has a place – and so far customers agreeing. Watch this space for new renewable plans soon which may shed some light on your questions, plus you may have seen by now our new 16c FIT plan released 8/9 July. – Shareholder/ employee

    • Melissa Mac Court

      thanks George.. agreeing with you – Enova certainly has a few strategies to support platform of community owned renewable energy – steady as she goes on growth.. small but confident – exciting year ahead. Join in if not already:)