By Nick Toscano
Homes and businesses will start to feel some relief from soaring electricity bills within weeks as authorities move to cut prices for hundreds of thousands of customers on the eastern seaboard by as much as 9 per cent for the first time in two years.
In welcome news for households battling mounting cost-of-living stresses, the Australian Energy Regulator on Thursday locked in the main consumer price caps, known as default market offers, to begin from July 1, determining it would not raise prices in most regions for the coming financial year.
Two years of sharp increases in power bills across Australia have intensified cost-of-living pressures.Credit: Paul Rovere
Instead, it intends to modestly reduce most default offers – the maximum that retailers can charge customers on standard retail plans – by between 1 and 9 per cent.
Households in NSW will receive a reduction of about 1 per cent, or about $28, compared with last year, while prices for businesses in the state will fall by up to 8 per cent, or $402.
Prices in South Australia will be 2.8 per cent, or $63, lower for residential customers, and 8.8 per cent lower, or $512, for businesses, while prices in south-east Queensland will rise by 4.2 per cent ($83) for homes and 1 per cent ($44) for businesses.
Victoria’s Essential Services Commission, which determines its own default offer, will reduce prices 6 per cent ($100) for residential customers and about 7 per cent ($260) for small businesses.
Changes to this year’s regulated prices will directly affect hundreds of thousands of consumers who do not take up special deals, but will also act as a reference point for electricity retailers, such as AGL, Origin and EnergyAustralia, as they assess their next pricing cycles across their wider customer bases.
Clare Savage, chair of the Australian Energy Regulator, said the regulator understood that cost of living pressures were “front of mind� for many homes and businesses.
“We will continue to protect customers from unjustifiably high prices,� Savage said.
Australian energy suppliers on Thursday expressed disappointment that the regulator had changed the methodology by trimming the headroom in default market offer calculations that were meant to ensure sufficient competition among retailers.
The Australian Energy Council, which represents major retailers including AGL, Origin and EnergyAustralia, warned that the reduction in default offers was “coming at a cost to retail competition� because it would force retailers to cut back their most competitive market offers.
“The decision to remove an allowance designed to drive competition will likely mean the vast majority of customers who shop around will pay more,� interim chief executive Ben Barnes said.
Wholesale electricity prices, which typically account for one-third of retail electricity bills, rose sharply in 2022 due to a spate of breakdowns at ageing coal-fired power stations, which forced utilities to buy additional coal and gas to fill shortfalls just as prices were trading at record highs as a result of the war in Ukraine.
Since then, the continuing influx of cheaper renewable energy into the grid has cut the use of more expensive coal-fired power, while milder weather has generally kept a lid on power demand. In the final three months of 2023, the price of wholesale power fell 24 per cent.
With lower wholesale costs, the Australian Energy Council said, the major upward pressure on prices was now coming from higher network costs – the cost of the poles and wires.
“As the energy grid continues to transition, we would expect to see wholesale and retail costs decline, whilst network costs will increase,� Barnes said.
“How the Australian Energy Regulator sets the default market offer in future years will be critical to building confidence in industry and allow them to set cheaper market offers.�
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