Australia threatened with blackouts as profiteering production companies withhold supply

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Events this week have highlighted the potentially catastrophic failure of Australia’s energy ‘market’, dominated by profit-driven power generation, distribution and retail companies. Residents in several states have been threatened with blackouts as power generation companies pull out of supply.

Erase power plant [Source: Wikimedia]

The crisis could still leave tens of thousands of homes without electricity in the midst of a cold snap. In the states of Queensland and New South Wales (NSW), the supply shortfall last week was estimated at 1,454 megawatts and 1,726 megawatts respectively.

Blackouts were only narrowly averted after Australia’s Energy Market Operator (AEMO) initially stepped in under its Reliability and Emergency Reserve Trader (RERT) scheme to pay some consumer companies energy to reduce their demand.

This band-aid solution alone will result in millions of public dollars being returned in compensation to affected consumers.

The problem of energy supply was so acute that not only households, but also public hospitals, were asked to reduce their consumption, in particular by not using appliances and switching off potentially life-saving equipment that is not not used continuously.

Significantly, supply shortages emerged quickly after the 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.

The measure was meant to exert a meager control over the giant corporations that own the country’s major electricity generators, such as Origin Energy, AGL and EnergyAustralia, whose overriding concern is to make profits and improve “value for consumers”. shareholders”.

Utilities began to hold back available capacity in the power market, saying the cap was too low to cover their costs due to soaring global coal and gas prices, much of it generated by the US-NATO proxy war against Russia in Ukraine.

The generators clearly intended to force the AEMO to ask them to make capacity available to the grid, entitling them to millions of dollars in compensation under national electricity rules.

This compensation is far greater than that for losses incurred or operating below the 300 MWh cap, which requires an application to the Australian Energy Market Commission (AMEC).

Backed by the Labor government, the AEMO finally suspended the wholesale electricity spot market for the first time since 1998. Energy Minister Chris Bowen said the federal government would support any move by the ‘AEMO, supposed to have a reliable supply in the network.

According to Australian Financial Reviewthis would result in the AEMO compensating companies to the tune of “hundreds of millions” of dollars in the current quarter alone, on top of the nearly $100 million it paid generators in 2021 after ordering them to bring more supply to market.

CHHA President Anna Collyer said companies seeking compensation would be “protected from loss”. Unsurprisingly, the chief executive of the Australian Energy Council, Sarah McNamara, which represents 20 electricity and gas companies, said she supported the AEMO decision.

There are now three compensation schemes for producers: one for those who had to enter the market before the market suspension, one for those who operated at a loss before the market suspension and, now, one for those who operated on the suspended market. On top of that, there’s the RERT program, where companies are paid to reduce their energy consumption or provide alternative supplies, such as emergency diesel, to the grid.

As multibillion-dollar power companies laugh to the bank, the cost of the massive compensation they’ve conspired to seize will be passed on by power retailers to working-class households and small users, who are already struggling to meet soaring electricity bills.

AEMO chief executive Daniel Westerman said it was “impossible to operate the system under current conditions while ensuring a reliable and secure supply of electricity”.

“Right now,” Westerman said, “we see the market not being able to cope with all of the factors that are being thrust upon it. Frankly, those factors are quite extreme, ranging from planned and unplanned generator outages planned for very high demand.”

What are these “factors”? Above all, rapacious generation companies are withholding market capacity to drive up the price of electricity in the spot market and then extort millions of dollars in compensation.

A guaranteed supply of electricity – an essential requirement for life in a modern society, especially in increasingly harsh weather conditions – has been further compromised by failing electricity infrastructure. This is due to the lack of investment in maintenance by power companies, especially in the aging coal-fired generators they acquired through the privatization of these former state assets.

Several key generators were out of order or operating at reduced capacity. There were several outages at Liddell and Bayswater power stations in New South Wales and problems with three units at Callide and three at Gladstone in Queensland. Although the latter remain state-owned, they operate under pressure from the privatized electricity market.

Prime Minister Anthony Albanese tried to blame the previous Liberal-National government. “You can’t fix a decade of inaction in 10 days,” he said. “It’s the direct result of a failure to invest, a failure to have an energy policy.”

However, the decades-long profit spree that has again been revealed in the crisis is the result of a process set in motion in the 1990s by Keating’s Labor government. He initiated the privatization of electricity generation, distribution and retailing to lay the foundations of the National Electricity Market, which became operational in 1998.

This momentum was accelerated under the Labor government’s Gillard Energy White Paper of 2012, which required state governments to privatize remaining power assets, then estimated at over $100 billion.

Labor’s claim that privatization would create competition and incentivize power producers to be efficient, leading to lower electricity prices, turned out to be a monumental fraud.

Moreover, while offering boons to the financial markets and associated companies, this process has been accompanied by the destruction of thousands of jobs and the reduction of working conditions throughout the sector to increase the profits and dividends of the investors.

This offensive was facilitated at every stage by the unions. Again and again they have worked to divert the widespread popular opposition that has erupted, including among power workers, into limited protest activity and bankrupt calls for governments to change course.

In 2008, for example, the previous Labor government in NSW announced that it would sell Energy Australia’s state-owned retail companies, Integral Energy and Country Energy, and lease the generation companies, Delta Electricity, Eraring Energy and Macquarie Generation.

While calling for limited protests and work stoppages, the unions participated in a bogus ‘consultation’ process embedded in the New South Wales and Federal Labor Party platforms, designed to stifle the workers’ opposition and ultimately endorse the ongoing privatization of public services.

Today, many former and current union officials sit on the boards of investors in the electricity sector, such as Australian pension consortium Super and IFM Investors, which owns 50.4% of Ausgrid, a NSW electricity distributor.

The threat of power shortages and blackouts that directly impact the lives and well-being of tens of millions of people can only be answered by the working class in a conscious struggle to reorganize society to meet needs, not profits.

This requires building a network of rank-and-file workplace and community committees, completely independent of the unions, to organize the struggle for a workers’ government that will place the electricity industry, along with all essential public services and the banks, under public ownership and democratic workers’ control.

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