Australian Government Says Energy Bills Will Drop Despite Sharp Price Rises from Retailers

Minister for Climate Change and Energy Chris Bowen speaks to media during a press conference in the Mural Hall at Parliament House in Canberra, Australia, on June 23, 2021. Sam Mooy/Getty Images

The Australian Labor government has said consumers would see energy bills eventually decrease as its gas and coal price caps take effect. This is despite reports indicating that many households will face steep price hikes in February.

As gas companies and energy experts are speaking up about the negative impact of the $12 (US$8.27) per gigajoule price cap on gas supply, Energy Minister Chris Bowen said the federal government interventions were working in markets that look at future prices.

“They have come down substantially, and that will flow through to the price increases we would have seen otherwise,” he told ABC radio.

At the same time, he said Australian households could expect more energy price relief when state governments worked out the energy rebates.

“The price rises will be a lot less than what they would have been without the intervention.”

However, Opposition Leader Peter Dutton said the gas price cap was not delivering the outcome Labor wanted.

“We warned it would be a disaster, and we said it shouldn’t be done,” Dutton told reporters.

“They did it, and what are we seeing now? An increase in prices.”

Sharp Gas Price Increases

Bowen’s remarks came as reports emerged that households on the east coast of Australia would face a sharp increase in their gas bills from February.

Specifically, major retailers will raise prices by 20 percent on average, or even higher, depending on the regions and gas distribution zones.

A pile of bills in Brisbane, Australia, on Oct. 30, 2013. AAP Image/Dan Peled

In the state of Victoria, gas companies had told their customers to expect a price surge of up to $1,100 in 2023, reported The Herald Sun.

Three major retailers, Energy Australia, Origin, and AGL, will lift their prices by $480, $370 and $326 per year for Victorian customers, respectively, starting from Feb. 1.

Chris Ford from the financial comparison website Compare the Market said while the price cap had come into effect, it only applied to new gas contracts between producers and retailers.

He elaborated that the prices retailers were charging were from existing contracts and that the changes brought by the price cap would flow into the market in the next few months.

However, he noted that the changes might not be the cost relief people were thinking about and that prices would still go up under the price cap.

“It is definitely going to be a rise. Let’s just hope it'll be on the smaller end,” he said.

Since the federal government implemented the price cap on Dec. 23 last year, a number of gas retailers have been unable to secure new supply with producers, forcing them to refuse new industrial and commercial customers.

New Guidelines For the Gas Industry

On Jan. 17, the Australian Competition and Consumer Commission published interim guidelines (pdf) to help the gas industry have a better understanding of the government’s policy and how to comply with new laws.

According to the guidelines, the price cap is applied to gas producers who transact primarily in wholesale markets and does not include Western Australia, which has a separate gas market.

Companies that fail to comply with the price cap will face a fine of $50 million (US$35 million), three times the value of benefits obtained, or 30 percent of turnover during its period of misconduct.

Energy's Australia Pacific liquefied natural gas facility at Curtis Island in north Queensland, Australia, on Oct. 10, 2016. AAP Image/Origin Energy

Following the guidelines’ release, Industry Minister Ed Husic said the government was determined to get the gas price balance right for businesses and consumers.

“There might be some that are addicted to the Putin profits that they were making, and they’re going through withdrawal symptoms,” he told Sky News.

“But they should be under no illusion about the determination of the government to get the balance right in terms of pricing.”

Meanwhile, Liberal MP Dan Tehan said the price cap had left the gas industry in a state of uncertainty.

“There are still uncertainties in the policy. They left the sector in a state of flux,” he said.

“No one knows what a reasonable price looks like or is. Therefore, they can’t negotiate contracts.”

Rebecca Zhu contributed to this article.