Market madness

What's going on?

Wholesale energy prices are up…

Sanctions and shunning of Russian energy exports continues to drive up global prices for the coal and gas that our generation fleet largely relies on.

Thermal coal prices are now at an unprecedented $A500 per tonne, increasing coal-fired generation wholesale prices to over $150 per megawatt hour.

Many units in Australia’s coal generation fleet are out of action for scheduled and unscheduled maintenance and repair. This pushes more demand onto our gas generators.

Gas prices have risen from $6-12 per GJ in Q1 2022, to $50 per GJ at the end of May. Government intervened to cap prices at $40 per gigajoule. Gas generation now costs around $300 per megawatt hour.

… and the retailers are nervous

Retailers perform the crucial role to collect payments from energy consumers on behalf of all other players in the energy economy, and must manage the risks and absorb the costs of late or default payers.

This is tricky terrain to navigate when wholesale prices are escalating wildly. There is a lot of regulatory constraint on retailers that governs when and by how much they can change their prices for existing customers, but they are 100% required to meet their obligations to pay their wholesale providers for the energy those customers consume.

Some larger and better established retailers are less exposed to this risk since they own their own generation assets, and are less reliant on the spot market to procure the energy their customers consume.

In principle, retailers can adopt a variety of hedging strategies to insulate them from wholesale market risk, but in practice, especially for smaller retailers, it’s impossible to avoid. At the end of the day, if they cannot charge their customers more than their wholesales costs, they will go out of business.

This is why we’ve recently seen dramatic announcements from several of the smaller and more competitively priced retailers recommending that their own customers should immediately find a new retailer.

These retailers are actively working to shed as many customers as possible, as quickly as possible, to minimise their exposure to the wholesale price increases.

This is not a growth strategy, it’s a survival strategy.

How to respond

Here’s what to do if you’ve received a message like this, or otherwise know your retailer is about to dramatically increase pricing.

First of all, don’t panic. While it’s true that wholesale price increases will inevitably wind up in your retail bills, remember that it’s in the retailers’ interest to try to whip up a frenzy in order to minimise their own risk.

Bill Hero will continue to monitor and analyse every bill for you, and if you wait until your next bill arrives, our system will show you exactly where it ranks and will recommend a switch if warranted, dependent on the savings available and your own Bothered Threshold.

However, there’s no need to wait until the next bill. You can interpret your most recent results to find the best priced alternative plan right now.

Your most recent result may well indicate that ‘everything’s sweet’ or even that you’re already on the ‘best priced plan’. Which is technically correct because the comparison was made on the pricing in your most recent bill, not on the new, or soon to be announced price change rates.

All the relevant price calculations for all those alternative plans are already present in your results, and Bill Hero regenerates the results for you every time the link is clicked.

This means that no matter how dramatically the prices and plans in the market might change, you’ll always be shown results that reflect the latest pricing data at the moment that you open your link.

One caveat: Retailers have always been able to refuse new customers at any time. With the recent price uncertainty, some retailers are becoming more selective about taking on new customers.

Even the best-hedged retailers rely on arrangements designed for the expected consumption from their existing customers. A rapid increase in customer numbers also means rapid increase to the aggregate consumption to be hedged, which brings new cost challenges, and may result in some short-term caution in accepting new customers.

Our advice for this situation has not changed – if your best-ranked retailer will not take you on, you should move to the next-ranked plan and retailer in your results.

Just find the best priced alternative plan in your results, and this will be the best priced option for you going forward, even if it’s displayed as ‘more expensive’ than ‘Your Bill’.

If your ‘Best Price’ templated results email did not include the link to your full ranked results, try resubmitting your most recent bill by forwarding it to Uploads@billhero.com.au. Your results will be regenerated and re-sent, including the link to your full results

We recommend that if your retailer has sent you a warning to switch to a new retailer, then you should proceed with a switch even before waiting for your next bill to be analysed.

When you do switch, be sure to use your Bill Hero email forwarding address to ensure continuity in bill monitoring. In a rapidly changing market like this, it’s more important than ever to monitor every bill.

Bill Hero's future plans

It’s great that you can interpret a ‘best price’ or ‘below Bothered Threshold’ bill comparison result to find a new plan, but wouldn’t it be nice to also be able to do this on the price change notice itself?

We think so, and we are hard at work to deliver a fully automated price change notice comparison, equivalent to what we already do for automated bill comparisons.

Here’s how it will work:

1. Bill Hero receives a price change notice, either through our email forwarding system, or manually forwarded by you.
2. Bill Hero system will automatically parse the price change notice to extract all the new rates.
3. Bill Hero finds the most recent bill that’s been analysed for you, and retrieves the consumption and time span data from this bill.
4. Bill Hero uses this data to construct a new ‘theoretical bill’ made up of the actual consumption data from your most recent bill, priced at the new rates from the price change notice. This is the best way to gain a personalised understanding of the real-world impact of a price change.

Generating new comparison results from a theoretical bill like this allows us to eliminate any potential confusion on which plan will really deliver the ‘best price’. Every alternative plan will be presented as being either less expensive, or more expensive than the newly calculated theoretical bill price, and if we find annualised savings for you greater than your Bothered Threshold, we’ll recommend that you should switch.

We can’t wait to roll out this new feature to help you always stay on the best priced plan, even when faced with the kind of unprecedented market turmoil that has emerged in recent weeks.