What happened at the COVID-19 Webinar?
Here's a recording of the webinar just for you!
Your questions, Our answers...
1) Is there a role for brokers in facilitating and negotiating contract break process and fees?
Yes - there is. Early communication is the key. We are approaching retailers on behalf of our clients to seek hardship relief. At the moment there are payment plans, cost deferral and concessions on some network fees.
2) What is the scope for network charges becoming variable month to month not fixed based on max KVA etc.?
There is currently limited scope to reduce the fixed components of network charges such as demand or capacity charges. The only way to avoid them would be by disconnection which is not an option for most businesses. We are approaching network operators to seek relief for our customers.
3) In light of these market changes; what's your take on NSW network charges coming into effect from 1st July?
We've seen health care companies defer increases and this is an area we would seek to lobby the AER to defer network cost indexation.
4) Take or pay - would current situation not be deemed force majeur and therefore not enforceable?
Force Majeure is a contract remedy. While it is unclear contractually without testing the impact of COVID-19 FM in court, there is an argument that if the Government has forced businesses to close, that this is beyond the control of the business owner.
5) How has this virus impacted energy consultants/brokers activities in the industry?
Energy is an essential service. The industry is impacted by a decline in usage and many renewable projects are likely to be deferred but demand for advisory and customer assistance has increased significantly.
6) My contract finished in January 2020, do we have better deal in NSW for now?
Yes, prices are approximately 25% lower than they were in late last year. You should call us to arrange a competitive offer immediately because without a contract you will be paying default tariffs which are considerably higher.
7) Do you think that Retailers would be open to reducing the minimum usage amounts for a period of time within the term of an agreement? Especially If signing up to new agreements of 2 year terms?
Some retailers still offer unlimited load flex. This means regardless of your usage, you have what's referred to as a load following agreement. Others offer 10-20% over or under usage without shortfall or excess charges. You should talk to us before making this decision to consider how much load flex you require. Unlimited load flex agreements charge a premium and it may be cheaper to incur shortfall charges than the premium under this type of contract.
8) Are retailers considering credit risk on a client by client basis? eg are timely payers being rewarded with lower rates by their current provider during tender?
We are just starting to see credit risk premiums emerge. They are assessed on a case-by-case basis. We are concerned that some business will find it difficult to obtain a contract or pay significantly higher rates. Some smaller retailers are being selective with contract offerings.
9) Is this a good time to seek renewable generation from a wind or Solar farm with a PPA?
No, you should avoid PPA agreement which lock you into a 5-7 year agreement at rates up to double the current cost of electricity and the equivalent purchase of renewable certificates (LGCs).
10) How is the current market likely to be impacting on retailers hedge positions - i.e are they profiting from the decrease?
Some retailers hedged forward when the market was in down trend and took a higher priced position compared to current market prices. These retailers will incur losses. Other retailer hedge when a retail contract is signed. Neither profit from this situation. Most retailers are at a significant disadvantage because the hedges they purchase were based on pre-COVID-19 customer usage levels. They will be over hedged at higher prices electricity costs due to the decline is customer consumption. There are very few winners from this crisis.
11) Will NSW, VIC and Commonwealth (STC/LGC) governments reduce the % on their environmentla schemes for cal 20?
The scheme compliance percentage for renewable certificates increased slightly for 2020. While this increases the number of certificates required for compliance, the price of LGC's has dropped dramatically which more than offsets the compliance increase. However, this could be an area where the government could step in to defer liabilities. I suspect a deferral of renewable cost compliance would destroy the scheme and many renewable projects would become un-viable. This is likely to be a case where the cure could be worse than the cause.
12) Are we going to get the recorded webinar?
Yes - please watch the above recording of the webinar on Youtube.
13) What is the market outlook for the next 12-24 months?
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