Customers left in the dark by surging prices after Callide coal explosion

Last week’s “catastrophic” fire and explosion at the Callide Power Station plunged almost 500,000 Queenslanders into the dark.

For most customers, this interruption was unremarkable. The blackout was relatively brief and supply was restored in time for dinner and MasterChef.

But what are the long-term repercussions for consumers of such a mammoth outage?

At the height of the emergency, the sudden loss of 2000 megawatts of generation capacity led to an almost 300-fold increase in the spot price of electricity in Queensland from $50.31 to $15,000 per megawatt in approximately one hour.

The price was quickly reset but these types of events may have serious consequences for consumers in the near future and there is an urgent need for an “energy literacy” campaign to educate Australian consumers about what it means.

Traditionally, electricity retailers absorb changes in spot price to allow users to be billed at a flat rate per kWh.

The dominance of flat rate electricity consumption charges for residential consumers has been the status quo for Australians since the Penny Meters of the 1920’s.

Australian consumers have enjoyed an abundance of affordable electricity, flat rate and stable tariffs and quarterly billing, but that is all changing.

A mixture of smart metering, de-regulation and a transition to a more decentralised and responsive energy grid give rise to a range of new business models, which consumers will be required to navigate and possibly participate, including exposure to variable tariff offerings.

Spot pricing is already available to some consumers in Australia and Griddy Energy in the US allow users to purchase electricity at a price reflective of the spot market.

While this form of direct market participation typically results in cheaper electricity than flat-rate tariffs during normal scenarios, the spot price surges from the Texas winter storms of February 2021, saw Griddy Energy customers paying up to 100 times their usual rate.

In freezing temperatures, foregoing heating was simply not an option and customers who had power were hit with exceptionally high bills and Griddy Energy filed for bankruptcy the following month.

In a climate where businesses and governments alike are encouraging us to shop around for the best electricity deal, we need to understand what constitutes sufficient “energy literacy” for the average consumer of the implications of subscribing to any given energy deal.

To what extent should individual customers be allowed to be exposed to market risk, in a market where the spot price can increase almost 300-fold in the space of an hour and real-time feedback on energy use is not yet commonplace?

If the policy is to continue to allow this type of individual exposure and rely on customers’ judgement, what then is the necessary level of information/training/literacy that is required to ensure that users’ consent to these risks is genuinely informed?

Simple pop-ups such as cookie notifications have a negligible effect on users’ understanding (or propensity to read) terms and conditions, yet should a simple act of switching energy provider require training videos and product disclosure statements?

Similar to the Storm Financial collapse of 2009, the Texas winter storms highlight the precarious balance between sufficient regulation, delegation of risk and requirements for genuinely informed consent among consumers.

While this week’s events may have been nothing more than a convenient reason to knock off work early, with increasingly variable tariff offerings, similar events in the future may have far greater consequences for flexible tariff customers in the future.

It is time for governments and providers to educate consumers about the way electricity arrives at our homes.

Dr Stephen Snow is UQ’s Centre for Energy Data Innovation