Millions of Australian households will be affected by rising electricity costs after the energy industry’s controlling body raised key prices by hundreds of dollars a year.
Key points:
- Electricity reference prices will rise by 18.3% according to a decision by the Australian energy regulator
- Increases in so-called default market bids will amount to hundreds of dollars a year in some cases
- The EAR has cited rising wholesale energy costs, which rose more than 140 percent last year.
In a new blow to households facing rising cost of living, the Australian Energy Regulator (AER) has decided to move strong increases to a reference energy price.
Tariffs, known as default market bids, will increase by 8.5% to 18.3% in New South Wales, to 12.6% in South East Queensland and 9.5% % a South Australia.
Small business customers will also be affected by the changes, with the so-called permanent supply rising to 13.5 percent.
The increases, which will take effect in July, amount to more than $ 250 a year in some cases, according to figures from the Australian Consumer and Competition Commission, which put the average residential electricity bill at $ 1,434. .
They also follow a similar, albeit smaller, increase announced by the Victoria Essential Services Commission on Tuesday.
Clare Savage, president of the AER, described the decision to raise prices as substantially “particularly difficult”, but said the cost pressures facing electricity suppliers were real.
Savage also noted that the reference price was not supposed to be the lowest available and urged consumers to buy for a better deal.
“When setting these new DMOs [default market offer] prices, we understand the significant impact they will have on some consumers who are already struggling with the pressures of the cost of living, ”Savage said.
“If a large number of retailers cannot recover their costs and are forced out of the market, as we have seen recently in the UK, this will mean more cost for consumers.”
The climb costs the backdrop
The decision comes just weeks after the agency that manages the National Electricity Market said wholesale prices had skyrocketed more than 140 percent in the 12 months to March 31.
This increase was largely driven by rising coal and gas prices, which are linked to international markets that have been trading at record highs amid war in Ukraine and global instability.
Under their jurisdiction, the AER and the Victoria Essential Services Commission set benchmark electricity prices that act as support for consumers who do not want or cannot bargain with their suppliers.
Prices have remained relatively stable in recent times, as the influx of renewable energy and lower demand for coal and gas weigh on the wholesale market.
Multi-plant outages and rising coal prices have put a rocket below wholesale prices. (ABC Gippsland: Kellie Lazzaro)
But energy retailers have pushed for a sharp rise in tariffs this year as costs rise in the face of measures to speed up coal-fired power outages, unexpected power outages and international unrest.
The Australian Energy Council, which represents electricity and gas suppliers, says the proportion of households above the default price is relatively small.
He noted that about 10 percent of users would be directly affected by the changes, while the rest are negotiating “competitive” contracts with their provider.
The lobby also noted that wholesale costs typically accounted for about a third of the $ 1,434 residential electricity bill, with poles and cables accounting for a larger share.
The watchdog faces a “balancing act”
Tony Wood of the Grattan Institute said the default price could only be applied to a small percentage of the market, but it was the key benchmark used by all retailers to establish their other offerings.
According to Wood, the EAR’s decision would have significantly greater implications than usual due to the volatility of the wholesale market.
He said there was little doubt that costs were rising sharply, but noted that some vendors were more exposed than others.
For example, he said larger retailers, such as companies listed on ASX, AGL and Origin, were better able to manage wholesale market risks through stable, long-term supply contracts.
Solar panels on a large solar farm near Broken Hill. (Four Corners: Louie Eroglu ACS)
On the other hand, he said smaller retailers were often highly exposed to the spot market and short-term supply contacts, which means they could tighten a lot in a growing market.
“A Queensland retailer with about 20,000 customers basically told their customers to leave,” he said.
“They said, ‘We can’t supply you with a product that we think you can afford, so we suggest you look for another retailer.’
“So it’s all a little messy.”
Wood said the AER should strike a balance between ensuring a competitive electricity market and ensuring that any tariff increase is fair and reasonable.
He said that while some suppliers were pushing for disproportionate increases, raising the reference price by 20% would be “provocative”.
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Don’t feel helpless: lobby
Lynne Gallagher, executive director of the Energy Consumers Council, said the price increase would come “at the worst possible time”.
However, Ms Gallagher said “consumers should not feel helpless in the face of rising bills”, saying there were ways to minimize the effects on their budgets.
Among them were pressuring their retailer for better treatment, asking for help if they were having difficulty paying, using less and being more efficient, switching suppliers if necessary and using low-cost measures such as “door snakes, ground mats and waterproof tape “. to add insulation.
The ECC also suggested that retailers should actively seek to protect their most vulnerable customers “by getting them … and offering them a better deal”.
“Winter is almost here and with it, the need for many Australian homes and small businesses to increase their energy use at certain times to stay warm, comfortable and healthy,” Gallagher said.
“There are things they can do to reduce their bill and there are resources available to guide them.”
Posted 51 minutes ago 51 minutes ago Wednesday, May 25, 2022 at 11:01 PM, updated 31 minutes ago 31 minutes ago Wednesday, May 25, 2022 at 11:22 PM