Collapse of Weston hits gas market
More suppliers ‘may go bust’
HUNDREDS of Australian businesses face fresh volatility after the collapse of a major national gas retailer, with the Ai Group warning more energy suppliers face the prospect of going bust.
Weston Energy, which provides gas to more than 400 companies and government agencies, ceased trading with immediate effect on Monday, creating uncertainty for major manufacturers with 7 per cent of the east coast’s commercial and industrial market forced to find a new supplier.
The company said it could no longer finance cash flow requirements of its trading portfolio “on a timely basis” with prices rising more than 180 per cent since April, and almost three times higher than at the start of the year.
The Ai Group, which represents Australian industry, said Weston’s collapse was a warning sign on energy costs.
“The cessation of gas trading by Weston Energy plunges hundreds of businesses across Eastern Australia into uncertainty around their energy bills and is a warning of more pressures to come on business and households from high energy prices,” Ai Group chief executive Innes Willox said.
With spot gas prices up to four times higher than normal levels and wholesale electricity prices in NSW on track to finish the June quarter twice as high as the previous record, Mr Willox called on the new Albanese government to respond.
“These dramatic market movements create the risk that more energy retailers are caught out in the months ahead. Energy users face risks in turn,” Mr Willox said.
“The wider issue is that the underlying energy price rises will have a huge impact on businesses and households. The Federal Government needs to respond. The next few years look very difficult for energy users. It is urgent that the new government bring together energy users, the states, energy regulators, energy suppliers, and other stakeholders to find a way through.”
Most big energy users can manage their exposure to wholesale power price spikes by entering hedge contracts that lock in firm prices or signing up to contracts that lock in a specified rate.
However, Weston purchased most of its gas on the spot market which has swung from just $8GJ at the start of 2021 to around four times that level currently.
The move comes just days after thousands of households were slugged with a doubling of power prices as retailers passed on surging costs, sparking fears of small operators collapsing from volatile market conditions and fuelling predictions annual bills may jump by hundreds of dollars this year.
Wholesale prices have soared across the power market, although Victoria has seen a smaller jump than Queensland and NSW which have been harder hit by a lack of transmission and coal outages. The Australian Energy Regulator will publish its default market offer for NSW, Southeast Queensland and South Australia on Thursday.