Two more retailers collapse under the weight of inflated coal and gas prices

Australia’s fossil fuel driven energy market turmoil has claimed another two small retailer scalps, including trail-blazing smart solar and renewables-focused Mojo Power, and affected another nearly 17,000 customers.

Mojo Power and Brisbane-based retailer QEnergy were both suspended from all trading on the National Electricity Market (NEM) starting Saturday, June 17, according to notices published by AEMO.

According to the Australian Energy Regulator, Mojo Power and QEnergy – both owned by Ion Holdings Ltd – were subject to wind-up orders in the Supreme Court of Queensland on June 15, leading to their suspension on the Friday night and the implementation of the Retailer of Last Resort customer safeguard process.

Under the Retailer of Last Resort, the two companies’ roughly 12,000 customers across Queensland, New South Wales, and South Australia are transferred elsewhere, usually to one of the Big Three gen-tailers like Origin Energy and EnergyAustralia.

In Victoria, QEnergy has around 4,880 customers, including 3,970 residential, 800 small business and 110 larger business customers. For those customers, Victoria’s Essential Services Commission has likewise initiated the retailer of last resort process.

Customers are not required to take any immediate action, but are also under no obligation to stay with the retailer they are automatically transferred to, the regulators say.

The failure of Mojo Power and QEnergy follows a close call for the two retailers at the end of last year, when they were suspended from trading due to defaults on credit requirements in the NEM. Both suspensions were later lifted by AEMO after the default events were “remedied.”

This time around it appears no such remedy has been found. At the time of publication, neither retailer had yet issued an official statement on the suspension orders, although both have notices on their websites advising that all market offers and standing offers are on hold to new customers.

“Significant movement and volatility in the wholesale electricity market… is impacting our ability to offer competitive pricing at this time,” says Mojo Power’s site.

As RenewEconomy has reported, Australia’s fossil fuel driven energy market crisis has claimed around 10 small retailer scalps over the course of past two years, many of them solar, battery and renewable energy focused.

These include Elysian Energy, solar and battery virtual power plant focused retailer Social Energy and, this time last year, Australia’s first community-owned energy retailer, Byron Bay-based Enova, which went into voluntary administration blaming a market whose design protects fossil fuel-backed incumbents.

Mojo Power was founded in 2015 – one of its co-founders is the current Arena chief Darren Miller – with a similar mission to many of its peers: to challenge the market incumbents and to offer customers a more solar and green energy aligned approach to home energy.

Targeting customers in NSW, South Australia and south-east Queensland, Mojo promised to help customers reduce their dependence on grid energy using smart meters, an energy monitoring platform, and competitive solar feed-in tariffs.

It is likely that for both companies, the most recent hike to wholesale electricity prices – confirmed at up to 25% in two out of three of the above states – proved too much to absorb.

In its final determination for the 2023–24 Default Market Offer (DMO) the AER last month forecast price increases for households of between 19.6% and 24.9% depending on the region and the type of load. Small business customers were warned to brace for increases of 14.7% to 28.9%.

On flagging the further price rises in March, AER chair Clare Savage expressed confidence that the plight of small energy retailers had stabilised in 2023, compared to the roller coaster of the year before.

“We continue to monitor the resilience of retailers,” Savage said at the time. “We’re confident that [our final decision on prices] will give them sufficient room to compete and innovate. That doesn’t mean every retailer is fine because they have different business models.”

Australian Energy Council CEO Sarah McNamara was less confident, however, warning that retailers still faced “extremely tough market conditions.”

“Unfortunately, higher wholesale prices have left no room for retailers to absorb costs,” she told the AFR in March.

“As flagged by the Australian Competition and Consumer Commission, retail businesses are already dealing with razor-thin margins, and it is critical that the regulated price is set at a level that allows them to recover their costs. Failing retailers would be a worst-case scenario for everyone.”

Back in April 2020, Ion Holdings managing director Warren Murphy wrote to the AER to warn about the impact the DMO mechanism was having on its retailers’ already “thin margins” and delayed cashflows.

“Our working capital requirements are increasing, and we have no way to recover this with the DMO capping our usual reflective pricing recovery mechanism,” Murphy wrote.

“If small/medium retailers have rising costs and capped revenue; the DMO will eventually crowd them out and they will exit.”

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