Australians to Face New Wave of Electricity Bill Surges

A general view of the shoreline is seen in Gold Coast, Australia, on April 3, 2018. François-Xavier Marit/AFP via Getty Images

Hundreds of thousands of Australian households will see their electricity bills surge by up to $600 (US$390) this July 1 in the latest wave of price increases.

The Australian Energy Regulator (AER) has released the new default market offer, which caps the maximum rate energy retailers can charge residential and small business customers in three regions that are part of the National Electricity Market: New South Wales (NSW), South Australia and Southeast Queensland.

While only nine percent of customers are charged the default market rate, it serves as a benchmark for energy companies when they advertise their prices to customers.

Under the changes, the prices for residential customers with controlled load will rise between 20.8 and 23.9 percent. In comparison, those without controlled load will experience price increases of 19.6 to 24.9 percent, depending on their region.

Controlled load is a special metered tariff used for appliances consuming a lot of energy, such as hot water storage systems, pool pumps or underfloor heating.

The tariff rate is lower than the regular energy usage rate. However, customers have to set up a separate meter for the nominated appliance.

The new default offer rates will result in an extra annual cost of around $440-$594 for NSW customers, $402 for Queensland and $512 for South Australian residents, respectively.

Meanwhile, small business customers will be hit with a price surge of between 14.7 to 28.9 percent.

What Drove Up Prices

The AER cited high wholesale energy costs as the main driver for the rise in retail electricity prices.

The agency said more expensive electricity futures contracts signed between energy companies before October 2022 had pushed up wholesale prices.

The price hikes were also caused by higher costs of coal and gas used for electricity generation, reliability issues with aging coal-fired generation assets, as well as the closure of Liddell Power Station–a major power station in NSW.

In handing down the latest default offer, AER chair Clare Savage said the energy authority considered living cost pressures experienced by households and businesses and the need for retailers to recover their costs.

“That’s why it’s important the (default offer) provides a safety net for those who might not have shopped around for a better power deal,” she said in a statement.

“No one wants to see rising prices, and we recognise this is a difficult time. That’s why it’s important for consumers to shop around for a better deal.”

She also urged struggling consumers to contact their retailers as they were required to provide assistance under current energy laws.

Government Says Prices Would Go Up Further Without Interventions

Following the AER’s announcement, the federal government clarified that its interventions in the energy market, including price caps on wholesale coal and gas, were shielding Australian consumers from “the worst of global energy price crisis” despite the latest wave of price increases.

Specifically, it said the default offer rates would soar by an additional $492 for households and $1,310 for small businesses if the government did not take action.

Citing an AER’s 2022 forecast, Energy Minister Chris Bowen said Australians would have faced price increases of 40-50 percent without the government’s intervention.

Australian Climate Change and Energy Minister Chris Bowen launches the National Electric Vehicle Strategy at a press conference outside Parliament House in Canberra, Australia, on April 19, 2023. AAP Image/Lukas Coch

“These are big increases, but as the regulator made clear, without the intervention of the Albanese government, they would have been much bigger,” he said in a statement.

“That’s why the Government acted in December to cap coal and gas prices and why we worked with states and territories to deliver up to $3 billion in direct relief for the most vulnerable households and small businesses.”

The minister also believed Australians would face less price pressure when more renewable energy entered the system.

“In the longer term, we are getting more renewables in the grid through Rewiring the Nation and the Capacity Investment Scheme because the cheapest form of energy is firmed renewable energy,” he said.

“And this will take pressure off bills and help shield Australians from volatile international energy prices.

However, Opposition energy spokesman Ted O'Brien criticised the government, saying the lower-than-forecast price increase was not a win for the Labor Party as it had promised to provide people with cheaper electricity bills.

“When the government says it could have been worse, it’s the government comparing its set of dumb policies now to its really dumb policies only a few months ago,” O'Brien said.