Electricity bills up 4 to 8 per cent due to Hazelwood shutting: government



This was published 4 years ago


By Adam Morton, Josh Gordon and Benjamin Preiss

Victorian's electricity bills are likely to be 4 to 8 per cent higher due the closure of the Hazelwood power station, with some of that increase likely to have already happened.

An analysis for the Andrews government based on Environment Department assumptions found the average annual hike could be up to $86 next financial year, or $1.65 a week.

Wholesale electricity prices are soaring.

Wholesale electricity prices are soaring.

A separate estimate based on the futures market for electricity contracts traded on the stock exchange - usually considered the best guide - suggests an average rise of $44.

Some of that has already being factored in after a jump in prices earlier this year, which was based on the expectation that the ageing coal plant will close completely by April 1, as reported by Fairfax Media.

Engie of France and Mitsui of Japan are set to announce the closure of the Hazelwood brown coal power station on Thursday.


The plant's owners, led by French energy giant Engie, plan to announce details of the closure in the Latrobe Valley on Thursday morning, putting at least 750 people out of work in already disadvantaged area.

Energy Minister Lily D'Ambrosio said it was a "sad fact of reality" that Hazelwood's closure would affect prices, but the analysis showed the rise may be less than $1 a week. "While that seems small, we know there are Victorian families already doing it tough," she said.

Energy economist Bruce Mountain, who did the analysis, said the impact for households and small businesses would be smaller than changes due to other recent factors.

"Changes in network and retail charges have a much greater impact for the vast bulk of customers," he said.


Shadow treasurer Michael O'Brien said people were already struggling with the cost of living and could ill-afford a large jump in energy bills "because Daniel Andrews and his green policies are trying to force the closure of Hazelwood".

The Andrews government is expected to offer an extensive support package for the valley, with immediate financial help and retraining initiatives for retrenched workers and their families, and longer term measures to encourage investment and employment.

Treasurer Tim Pallas suggested the area would need financial support for years as the energy mix shifted away from coal.

The state government is also anxious about the future of Alcoa's Portland aluminium smelter. It employs about 750 workers and uses up to 10 per cent of the state's electricity, but has come under financial pressure in recent years, buffeted by rising costs and fierce competition from low-cost foreign producers.

Although Victoria's unemployment rate has fallen from 6.8 to 5.7 per cent over the past two years, the state could soon be hit by a jobs crisis, with the combined impact of the closure of Hazelwood's, the car industry and potentially Alcoa.

Alcoa said the expiry of its electricity supply agreement with the state government meant the smelter would be exposed to higher transmission costs in addition to power prices not linked to the global aluminium price.

"With persistently low aluminium prices this adds significant pressure to the viability of the smelter," the company said in a statement.

It confirmed it was holding commercial discussions on a new power supply agreement and talking with the government about possible support.

Built between 1964 and 1971, Hazelwood supplies up to a quarter of the state's electricity when at full capacity. It is Australia's dirtiest plant, responsible for about 3 per cent of national greenhouse gas.

Mr O'Brien, a former energy minister, questioned suggestions by the government and analysts that the state had enough electricity generation to cope with the plant's closure.

"It provides 25 per cent of our electricity needs," he said. "If you are sitting on a four-legged chair and one leg falls off the chair is not going to stay upright for very long."

Modelling changes in electricity pricing is notoriously difficult. Mr Mountain, director of consultants Carbon and Energy Markets, said the price increase triggered by Hazelwood's closure would be much smaller than the savings possible by choosing the best electricity retailer.

The government estimates households can cut bills by up to $220 a year by using a price comparison website.

The wholesale price on average makes up about a fifth of a household bill. It has bounced around due to the introduction and abolition of the carbon price, the closure of other coal plants and the decline in demand for black coal.


Network costs, for electricity poles and wires, are usually a bit more than a third of a bill's total.

Retail service charges average a little less than a third. Metering costs and federal renewable energy schemes have a much smaller impact.

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