Power cost relief on way: Origin

Energy chief Frank Calabria says it appears the nation’s runway electricity prices have “turned the corner” with households set to gain some relief on their bills.

The forecast was delivered as Origin’s core electricity business threw off record earnings as it cashed in on wholesale electricity prices which surged following the closure of the Hazelwood coal fired power station.

Mr Calabria yesterday said wholesale electricity prices — which make up more than 40 per cent of a residential bill — had started to fall as new supply from wind and solar came online.

“We think we have turned the corner,” Mr Calabria said.

“The forward price on the wholesale market is under downward pressure.

“The direction is good. Should that continue then you would expect that to flow through to customers.”

The energy giant, which generates and sells electricity and has a stake in the Australia Pacific liquefied natural gas project, posted a net profit of $218 million for the year to June.

That is a turnaround from a $2.2 billion loss in the previous year when Origin absorbed major writedowns on the Australia Pacific project.

Underlying earnings in its electricity division surged 21 per cent to a record $1.81 billion as Origin benefited from higher prices and increased output from the Eraring coal-fired power station in NSW.

Mr Calabria echoed AGL and EnergyAustralia in blaming higher electricity bills on the closures of the Hazelwood and Northern coal-fired power stations in Victoria and South Australia.

He also called for state governments to back the National Energy Guarantee in order to give companies a framework under which to make longterm investments.

“A stable regulatory environment will be key to enabling us to invest with confidence,” Mr Calabria said.

Major electricity retailers passed on residential electricity price cuts ranging from 0.3 per cent to 1.6 per cent at the start of July in NSW, Queensland and South Australia. Victoria sets its electricity tariffs each January.

The price cuts follow households absorbing double digit increases in recent years and come as the Federal Government reviews a set of recommendations from the competition watchdog which aim to crimp the power of big electricity companies.

Shares in Origin slumped by more than 6 per cent yesterday as it forecast its electricity division earnings would fall this financial year.

Shares in Origin and rival AGL have also come under pressure as investors fret the government may take a more hands on approach to running the sector.

The Australian Competition and Consumer Commission has recommended electricity retailers be forced to provide a “default offer” where the price is set by the government.

Mr Calabria said this approach was too heavy-handed.

Making companies report electricity plan offers in dollar amounts – rather than promote savings expressed as a percentage reduction – would take out the confusion around bills, he said.

“We are talking about achieving the same thing but I don’t think re-regulation is in the best interests of customers,” he said.

Mr Calabria backed the ACCC’s suggestion to axe subsidies to households with solar panels, saying they were no longer needed to encourage the uptake of household solar.