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Australia threatened with blackouts as profiteering generating companies withhold supply

Events this week highlighted the potentially catastrophic failure of Australia’s energy “market,” dominated by profit-driven power generation, distribution and retail companies. People in several states were threatened with blackouts because electricity-generating companies withdrew supply.

Eraring Power Station [Source: Wikimedia]

The crisis could still leave tens of thousands of households without power in the midst of a severe cold snap. In the states of Queensland and New South Wales (NSW) the supply shortfall last week was projected to be 1,454 megawatts and 1,726 megawatts respectively.

Blackouts were only narrowly averted after the Australian Energy Market Operator (AEMO) initially intervened under its Reliability and Emergency Reserve Trader (RERT) scheme to pay some corporate energy consumers to reduce their demand.

This bandaid solution alone will result in millions of dollars of public money being handed over in compensation to the affected consumers.

So acute was the energy supply problem, that not just households but public hospitals were asked to cut down on usage, including not using appliances and turning off potentially vital equipment not in continuous use.

Significantly, the supply shortfalls rapidly emerged after AEMO initially imposed temporary price control caps of $300 per megawatt-hour (MWh) as wholesale electricity prices continued to soar, averaging more than $675 per megawatt-hour.

That measure was supposed to exercise some meagre control over the giant companies that own the country’s major power generators, such as Origin Energy, AGL and EnergyAustralia, whose overriding concern is making profits and enhancing “shareholder value.”

Power companies began withholding available capacity from the electricity market, claiming that the cap was too low to cover their costs because of the soaring global prices of coal and gas, largely produced by the US-NATO proxy war against Russia in Ukraine.

The generators clearly intended to force AEMO to instruct them to make capacity available to the grid, entitling them to millions of dollars in compensation under the National Electricity Rules.

Such compensation is much higher than that for losses occurred or operating under the $300 MWh cap, which requires an application to the Australian Energy Market Commission (AMEC).

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