A report published today in an Australian newspaper forecasts 20 per cent increases in electricity prices, which it blames on generating capacity shortages – stemming from the country’s deregulation programme.
The report says that an emergency meeting of state energy ministers will be held tomorrow in a bid to head off the crisis. It says that the shortages are most acute in Victoria and South Australia.
The threat of sharp price increases reverses the trend of falling prices since the electricity industry was privatized in 1996.
Previous to 1996, electric utilities were owned by individual states, but under the reforms many state-owned utilities were split up and privatized. Victoria and South Australia have already sold and long-term leased (respectively) all of their state-owned electricity utilities.
Key to this reform was the creation of the National Electricity Market (NEM). The NEM is a wholesale “pool” operated by the National Electricity Market Management Company (NEMCO) to which all generators above a certain size are obliged to sell their output at prices determined by the last and highest bid for distribution through regulated transmission networks.
The meeting of state energy ministers in Melbourne is expected to call for greater central control of the NEM