Local manufacturers are feeling the pinch of spiralling energy costs, with some facing a massive price hike in the next financial year.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
And with a number of businesses currently at the negotiating table for their upcoming 12-month contracts, many fear being locked in to exorbitant rates.
Chicken processor Hazeldene’s reported a 39 per cent increase in gas prices in their current financial year, while a more modest rise of five per cent for its electricity prices.
Director John Hazeldene said he was “most concerned” about what the gas industry may include as non-negotiable components of contract costs.
“With gas, we expect this to result in further rises on top of what we have already seen in the year to date,” he said.
His company had focused on moving energy loading into off peak times over recent years, which Mr Hazeldene said had mitigated, to some extent, the impact of price rises.
Vic Feeds, a stock feeds manufacturer in Colbinabbin, has been quoted double its current peak energy rates by a number of larger providers for the next 12 months.
The company, which provides feed to a number of dairy farmers across central and northern Victoria, is facing extra charges of more than $2000 per month.
And while these charges may not be as large as other businesses – a dairy processor in Kyabram is reportedly paying $27,000 a month, up from $18,000 a few months previous – the change was indicative of what others were going through, according to Vic Feeds office manager, Carolyn Meyer.
“It certainly impacts on profitability and has a flow on effect,” she said.
“Some of the bigger employers will be wondering what to do.”
These changes don’t just impact manufacturers, they’ll impact the coffee shops and the small businesses in town
- Carolyn Meyer, Vic Feeds office manager.
Ms Meyer said non-negotiable aspects of contracts, like network charges, impacted on local businesses.
“These changes don’t just impact manufacturers, they’ll impact the coffee shops and the small businesses in town,” she said.
A local steel fabricator, Australian Turntable Company, said its bill had jumped 25 per cent over the past year.
Energy prices across Victoria have risen dramatically over the past 24 months, with figures from a prominent energy comparison service illustrating a 154 per cent rise, on average, across the state over the past two years.
Spiralling prices and the excessive profits of energy companies have caught the attention of the federal government, who late last month gave the consumer watchdog sweeping powers to conduct a major review of retail electricity prices.
Prime Minister Malcolm Turnbull directed the Australian Competition and Consumer Commission to conduct an inquiry into electricity retailer behaviour as well as contracts offered to residential and business customers.
"Competition in retail electricity markets should mean lower prices for residential and business consumers. However, retail electricity markets don't appear to be operating as effectively as they could," Mr Turnbull said at the time.
"A better deal in electricity is vital to keeping the lights on, delivering cheaper prices to families and businesses and sustaining jobs, particularly the thousands of jobs in our energy intensive industries."
The government has issued the directive under a special section of competition law that gives the ACCC the power to demand information.
That will make it easier to find out what's going on in the market and to assess whether there is a case for further intervention, the Prime Minister said.
It will also assess other impediments to consumer choice including the "transparency and clarity" of contracts.
Mr Turnbull said recent work by a number of organisations had highlighted significant concern about recent price increases on the east coast, as had some submissions to Chief Scientist Alan Finkel's review of the energy market.
In a December report the Australian Energy Market Commission said residential electricity prices would rise over the next two years driven largely by significant wholesale cost increases following the closure of the Hazelwood coal-fired power station.
However, the commission said it could not separately report on the retail component of residential electricity prices because of the difficulty in quantifying retail costs.
The ACCC inquiry will be given until June 2018 to issue its final report but will be expected to deliver preliminary findings within the next six months.
The recent closure of Hazelwood power station, which supplied one quarter of Victoria's electricity, prompted fears of power security and price surges across Victoria.
Estimates on how the closure will affect prices have varied wildly, however Fairfax Media reported annual domestic bills may increase $99 each year.
Parts of central and western Victoria were put at risk of a blackout in early February, in order to support NSW’s power grid, which was wilting under the pressure of an extended February heatwave.
And while the system scraped through, with potential blackouts avoided, questions remained over why Victoria’s energy supply was compromised.
Energy Minister Lily D'Ambrosio said at the time: “I made it very clear that our government would not tolerate AEMO (Australian Energy Market Operator) prioritising NSW over Victorian customers.”