Victorian households to be hit with power bill hike from July 1

Prices set by the state regulator are set to soar based on a variety of factors such as soaring wholesale markets in the gas and electricity sectors.

Hundreds of thousands of Victorian households and businesses are set to be slugged with higher power bills from July, as the cost of last year’s energy crisis is passed on to consumers.

The Essential Services Commission (ESC) is expected to this week release the draft Victorian Default Offer, which is a regulated “no frills” contract that safeguards consumers who aren’t engaged in the market.

Prices set by the state regulator are this year set to soar based on a variety of factors such as soaring wholesale markets in the gas and electricity sectors, and costs associated with the national market operator’s extraordinary intervention last year to keep the lights on.

That intervention was deemed necessary after winter outages at coal-fired power stations, a cold snap, and soaring coal and gas prices created the perfect storm for the energy industry.

The cost of last year’s energy crisis is being passed on to consumers.

In a bid to reduce volatility, AEMO suspended the wholesale market, introduced a price cap and told generators to supply as required – promising they would be compensated.

That compensation cost is now set to be passed on to 330,000 households and almost 50,000 small businesses on the ESC default offers in Victoria, with at least $2.3m already locked in on top of the costs incurred by retailers.

A second blow to customers is also on the way, with the total cost of a second compensation payment yet to be confirmed.

The looming bill hike has increased pressure on the Albanese Government to provide some cost-of-living relief for families in its May budget.

The draft Victorian Default Offer is expected to be released this week. Picture: Aaron Francis

Some energy retailers are urging the ESC not to wait until 2024-25 to pass on the generator compensation costs, which is an option available.

In a submission, Alinta Energy said: “Timely and reasonable recovery of these costs is important to support retailer viability and competitive choice for consumers”.

But the Consumer Action Law Centre has slammed the move to directly pass on the costs to consumers as “unfair”, saying retailers should absorb some of it.

Grattan Institute energy program director Tony Wood said a big driver of the hike would be the wholesale price of electricity, which skyrocketed by around 250 per cent between May and July 2022 compared with the previous year.

He urged people to shop around and called on the federal government to ensure its energy bill relief was targeted at those who need it.

The Commonwealth and states are continuing to negotiate how much money they are willing to commit to co-fund lower power bills from mid-year.

The Australian Energy Regulator will on Wednesday release its draft default market offer for South Australia, Queensland and New South Wales.

Energy Minister Chris Bowen last week told the parliament that the power bill increases would “be tough”.

But Mr Bowen said the prices would have been higher if the government hadn’t in December moved to cap coal and gas prices.

Since then, he said the wholesale price of electricity had fallen by 34 per cent in Victoria.

The final decision on the Victorian Default Offer will be made in May before coming into effect from July 1.