Structural market changes were announced by Federal and State Governments. More prominent Government ownership and the acceleration of expanded transmission all featured. Forward market prices were extremely volatile during the month but appear to have peaked.
October was been a month where Federal and State Government announcements featured heavily. State governments in Qld, Vic and SA have made significant announcements that will potentially change the market landscape and lead to more influential Government involvement in setting prices. Transmission projects like Marinus Link, northern Victoria and southern NSW projects also received support.
The Federal Budget announcement that electricity prices are set to rise by 56 per cent by June 2024 may have come as a shock to many residential and small consumers. The budget assumed a 20% increase by Christmas and then a 30% increase in the next financial year. Our tracking of the energy input costs to the Default Market Offers and Victorian Default Offers show such a prediction is easily on track.
Wholesale electricity spot prices remained stubbornly high in Qld and NSW, while a higher portion of negative prices caused average prices to soften in Vic and SA. Foward electricity contract prices peaked during the middle of October, and have been trending downwards in recent weeks. However, the volatility of the forward market prices has been unprecedented causing cash stresses on organisations trading in ASX Energy futures.
The Federal Government is considering options to address energy prices and the potential inflationary impact on the economy. A decision by the end of November is expected, and the Government has announced a favouring of a Regulatory solution. Not all market participants are excited about the prospect of price caps and wonder how in practice it would work so that parties that have already taken action are not disadvantaged.