Following the closure of the Solar Bonus Scheme to new participants on 1 July this year, the NSW Government requested the NSW energy regulator Independent Pricing and Regulatory Tribunal (IPART) to recommend a ‘fair and reasonable’ value for a feed-in tariff for customers who are not in the Solar Bonus Scheme. However, the terms of reference required IPART to ensure that its recommendations did not result in an increase in NSW electricity prices nor require funding from the NSW Government budget. In other words, any future feed-in tariff for these customers must be subsidy-free.
Today IPART released its draft report on the tariffs it thinks should be paid by electricity retailers to their customers for surplus electricity that is generated by customers’ solar photo-voltaic (PV) units and exported into to the grid. The draft report, entitled “Solar feed-in tariffs – Setting a fair and reasonable value for electricity generated by small-scale solar PV units in NSW”, recommends that NSW customers be paid between eight and ten cents per kilowatt hour (kWh) for solar power exported back to the electricity grid. IPART has used as the basis for their recommendation the direct financial gain electricity retailers are estimated to make when solar PV customers export electricity to the grid. IPART expects their recommended price to increase when the carbon tax takes effect on 1 July 2013 but at this time cannot say by how much.
According to the draft report many stakeholders suggested that the feed-in tariff be set equal to the retail price charged to customers by power companies for the electricity they consume (currently 20 to 30 c/kWh). Whilst this appears a sensible suggestion on the surface it does not take into account the fact that around half of the retail electricity price includes fixed network costs and there are additional costs to retailers in meeting green energy requirements such as the Renewable Energy Target (RET).
If you feel up to reading IPART’s Draft Report you can find a copy here. If you wish to air your views on this matter IPART is holding a Public Forum on 12 December and is accepting submissions on its draft report until 23 January 2012.
AGL Energy today reported a flat Underlying Profit of $431.1 million for the year ended 30 June 2011, up only by half a per cent over the previous financial year.
AGL said that the result was flat due to extreme hot weather events in eastern and southern Australia in February, which effectively reduced profit by $30-$35 million, as well as softer demand for electricity from its Loy Yang A power station in Victoria’s LaTrobe Valley.
AGL’s Retail Energy business seemed to perform strongly with a 17 per cent increase in EBIT to $373 million, due mainly to improvements in gross margin on mass market customers resulting from a combination of electricity and gas price (tariff) increases in all states and a net increase in customer numbers of 52,000. AGL’s total customer accounts increased by 1.6 per cent to 3.29 million.
AGL, having lost out to Origin Energy and TRUenergy in the purchase of retail energy assets as part of the NSW electricity privatisation process that completed in March this year, has had to rely on an organic growth strategy in New South Wales to grow its customer base. AGL seemed content with the start it had made in NSW adding 96,000 new electricity customers in the six months to 30 June 2011.
AGL also noted the high degree of competition in energy retail markets and that the introduction of the new Australian Consumer Law on 1 January 2011 that limited the hours of operation of door-to-door sales had appeared to have had no impact on the level of door knocking activity.
AGL claimed its churn rate of 19 per cent is below the industry average, reflecting improvements made in customer service. Origin also reported yesterday a very similar level of customer churn.
You can read AGL’s full earnings release on their website.
Origin Energy yesterday announced a 15 per cent increase in its underlying profit to $673 million and a 32 per cent increase in underlying EBITDA to $1,782 million for the year ended 30 June 2011.
The increase in underlying profit was primarily due to the inclusion of results from Origin’s newly acquired NSW energy retail businesses (Integral Energy and Country Energy), higher commodity prices and increased production in Origin’s Exploration and Production businesses and an increase in Origin’s owned and contracted generation capacity from 1,710 MW to 5,310 MW.
Origin’s retail business performed well increasing underlying EBITDA by 38 per cent to $785 million. Origin picked up 1.585 million new customers following its NSW acquisitions but seemed to suffer from significant customer churn, losing 607,000 retail customers over the year. Fortunately, Origin was able to acquire 567,000 new customers resulting in an overall net loss of 37,000 customers. Origin says that its customer churn rate has “remained stable at 18.5% despite market churn increasing from 19.1% to 20.2%”.
Origin notes that churn in the NSW market has increased from an average of 12% in the eight months prior to completion of its NSW acquisitions on 1 March 2011, to 14% in the four months post-acquisitions. The company anticipates that market churn will continue to increase to levels experienced in other competitive markets, such as Victoria and Queensland. However, Origin believes that their “incumbent position” in NSW offers them a major advantage in defending their market position.
Also of interest is Origin’s claim that it has installed 47,000 solar systems since 2009, probably making the company Australia’s largest installer of solar photo-voltaic (PV) systems.
You can read Origin Energy’s full ASX release on their website.