Bowen Pledges Not To Meddle With Power Price News

Federal Minister for Climate Change and Energy Chris Bowen has said that unlike the previous Morrison Government in the lead-up to the last election, he won’t be interfering with the timing of electricity Default Market Offer (DMO) announcements for 2025/26.

The Australian Energy Regulator (AER) sets Default Market Offer electricity prices for small business and residential customers for the following financial year in New South Wales, South Australia and South-East Queensland.  The DMO is designed to be a safety net of sorts, ensuring electricity customers who don’t choose a market offer (the vast majority do) aren’t gouged by retailers (too much).

While a minority of customers are on Default Market Offers, the DMO basically sets the scene for market offers. The DMO price for each region also acts as a reference price that electricity retailers must show as a comparison to their market offers.

The AER usually releases its final determination for the following financial year on May 1. But back in 2022, an election year, it didn’t. The Regulator was given more time by the then-Morrison Government.

This effectively set a trap for Labor (which should have known better) and its pledge to cut annual household electricity bills by $275 by 2025. Meanwhile, the Coalition was crowing household electricity prices in the National Electricity Market (NEM) had fallen significantly over the previous two financial years.

“We are now turning the corner on power prices,” stated a page (archived, 21 May 2022) on the Liberal website¹.

The 2022 Australian Federal election was held on Saturday 21 May. The AER didn’t release its final determination until May 26, 5 days later. And in it was bad news – residential price rises of between 7.2% and 18.3% in nominal terms depending on the region. This was much higher than what was in the draft decision released in February that year (-2.4% – +5.8%). While DMO 4 prices for small business customers were not directly comparable with DMO 3 prices due to a new usage benchmark, the increases were in the range of 5.7% and 19.7%.

The reasons given:

• reduction in thermal generation resulting from unplanned outages.
• higher coal and gas costs.
• slowing of investment in new capacity.
• increasingly ‘peaky’ demand.
• the war in Ukraine.
• extreme weather in NSW and Queensland that affected coal supplies.

Bowen Rules Out AER Interference

Yesterday, Minister Bowen ruled out pulling a Coalition-type stunt this year.  When asked what lies ahead for power prices during a press conference in Canberra , in reference to the DMO he stated:

“I can give that undertaking that the default market offer will be released in the normal course of events in the normal timeline, not changed by me. I’m not going to pre-empt what it says.”

This doesn’t mean DMO 7 (for 2025/26) will definitely be released before the Federal election, which will be held on or before 17 May 2025 – up to 102 days from now. May 1 is 86 days away. The minimum number of days between the issuing of writs and an election day is 33 days, and the maximum is 58 days.

So, there’s still a possibility DMO 7 will come out after the Federal election, depending when it is called. Whether that’s a good or bad thing or somewhere in between for Labor’s aspiration to stay in power remains to be seen. However, we should see a draft DMO 7 determination before then; possibly this month.

Dutton’s Nuclear Power Plan Fully Nuked?

But much of the press conference was focused on attacking Opposition Leader Peter Dutton’s nuclear energy plans for Australia, with the backing of a new report from the Smart Energy Council. According to the Council, power bills for millions of Australian households with solar panels will double as a result of nuclear power and it will add more than 30 per cent to the energy bills of non-solar households.

Separately, the Institute for Energy Economics and Financial Analysis (IEEFA) reported the latest cost blow-out for the UK’s proposed Sizewell C nuclear plant (~2.5 times the capital cost used in the Coalition’s modelling it says) is another indication the Coalition’s nuclear power proposal for Australia is unrealistic.

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Original Source: https://www.solarquotes.com.au/blog/bowen-electricity-dmo-mb3109/