Power prices set to drop from 2020
The cost of electricity is forecast to fall over the next three years, with increasing supplies of renewable energy a primary driver.
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Australians are expected to spend an average $97 less on their annual power bills after prices start falling in 2020, the Australian Energy Market Commission (AEMC) says.
The AEMC’s annual report on electricity price trends shows an overall falling price outlook over the next few years.
Annual bills during the financial year 2018/2019 reached $1370 and have been calculated to fall to $1273 by June 2022.
This drop is not expected for Western Australia, where annual bills are estimated to be $100 more expensive.
This general decrease will only happen after a financial year 2019/2020 that will see peak prices in all states but Queensland.
The Northern Territory was not included in the report as the NT only recently opened to independent generators and their bilateral contracts with retailers was made in commercial confidence.
“While the overall national trend is down all across the supply chain there are regional differences across states and territories that will affect price outcomes,” AEMC chairman John Pierce said.
“Overall, a representative consumer will pay around $97 less than today by June 2022.”
This drop in prices will be seen more clearly in southeast Queensland, where annual residential bills are expected to be $278 less in 2022 than they were by July 2019.
The AEMC report looks at the combined price of electricity generation, transmission and distribution as well as government policy schemes to estimate the cost of the total kilowatt consumption in a year.
Wholesale costs are the main driver of this decrease because of significant increases in generation capacity, particularly wind farms, the report says.
“These results for FY19 to FY22 point to the state of the market over this specific period, which will see significant injection of around 5000 MW of new supply,” Mr Pierce said.
Another main player on the fall in prices will be the environmental cost, estimated to fall by an annual average of almost a nine per cent.
The report points out subsidies like the 20 per cent renewable energy target winding down as reasons for this decrease in green scheme costs.
Data estimates from the AEMC also shows 6-8pm is still the most expensive time to use electricity in NSW, Queensland, Victoria and South Australia.
As “no two households use energy in the same way”, AEMC encourages users to shop around to get the best deal for their circumstances through government comparison sites.
BIGGEST HOUSEHOLD COSTS IN 2020
It comes as a new report found the soaring cost of gas and electricity is the top financial concern for households in 2020.
Despite an energy pricing shake-up in many locations nationally this year including Victoria, NSW, southeast Queensland and SA – resulting in prices falling for many customers – power prices still remain a significant burden on people’s budgets.
Canstar’s 2019 Consumer Pulse report from surveying 2000 people online, found Australians’ biggest monetary concerns for the year ahead are electricity and gas costs at 14 per cent.
This was followed by grocery prices (10 per cent), fear of job security (10 per cent) and running out of retirement savings (8 per cent).
Canstar’s spokesman Simon Downes said power bills remained a “consistently high cost that is a shock to the budget”.
The report found three out of four people opt to pay power bills quarterly which Mr Downes said was a big part of the problem.
“If you are paying quarterly you are almost setting yourself up for a shock every quarter,” he said.
“Quarterly energy bills can be $600 or $700 and it triggers shock in your head leaving you cursing your energy bills.”
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He urged households to look for a provider who bills monthly to reduce price pain or set money aside each month to help cope when quarterly bills arrive.
“There’s a lot to be said for monthly energy billing because it’s more manageable in smaller amounts.”
The AEMC’s 2018 Residential Electricity Price Trends report showed the national average annual residential bill in 2017-18 was $1522.
Origin’s executive general manager Jon Briskin said the majority of their cards “still receive and pay for their bills quarterly” but there were alternatives.
“Another option that many customers find helps with managing their household budget is to set up a payment plan and make regular monthly, fortnightly or weekly payments,” he said.
“For people with a smart metre in their home, an easy way to reduce the stress of big quarterly bills is to switch to monthly billing and make smaller but more frequent payments.”
It should be noted, households with a smart metre may still be subject to an “estimated” read which does not reflect actual energy use.
Energy Australia’s head of retail Mark Brownfield said most of their customers are billed quarterly for gas and electricity.
But of those who have set up a specific payment plan, 16 per cent pay weekly, 64 per cent pay fortnightly and 20 per cent pay monthly.
“When people use the Energy Australia smart phone app, they can check their electricity usage down to the hour,” Mr Brownfield said.
“They can also see how many days are left in the current billing cycle and how much energy they’ve consumed.”
Originally published as Power prices set to drop from 2020
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