Power bills tipped to rise across Australia as coal prices soar amid Ukraine war, east-coast floods

Power prices have fallen to an eight-year low, but two major factors mean household bills will rise drastically over the coming months.

Australian households and businesses are warned power bills will likely rise over the second half of the year, as coal prices soar in the wake of Russia’s war in Ukraine and floods on home soil.

As Prime Minister Scott Morrison hinges his re-election pitch on a platform of economic management and easing cost of living pressures, Australia is facing mounting costs.

Mr Morrison as recently as Tuesday morning spruiked that electricity prices were down nationally eight per cent over the past two years.

While that is true, those costs are expected to rise within months.

Coal prices – the major contributor to wholesale electricity prices – are soaring as European countries scramble to find an alternative to Russian energy.

Recent floods on the east coast have hampered the ability for coal to reach the coal-fired power stations that supply more than two-thirds of the country’s electricity.

Recent analysis has shown all states – bar South Australia – have recorded a rise in wholesale prices of more than 100 per cent compared to a year ago.

Queensland, the most dependent on coal for electricity generation, has experienced an almost 300 per cent increase.

The key issues in the Upper Hunter By-Election are coal and jobs. Picture: David Swift

Australian Energy Council chief executive Sarah McNamara said since electricity prices hit an eight-year low at the end of last year, things had changed significantly.

“Wholesale energy prices have been increasing, driven largely by higher fuel costs, particularly in Queensland and New South Wales,” she said.

“The impact on household bills won’t be immediate, but it is likely to emerge starting in the second half of the year.”

At the start of the year, the future wholesale price for 2022 was $81 a megawatt hour for NSW and $70 in Queensland. Comparatively, the current price is $132 and $114.

In the lead-up to the pre-election budget, Treasurer Josh Frydenberg had celebrated the average $70/MWh.

Australian Energy Council chief executive Sarah McNamara said retailers would need to raise prices to keep up with soaring coal costs. Picture: Supplied

Ms McNamara said retailers would be backed into a corner, given the evolving situation.

“The challenge for retailers is that the wholesale prices they pay are getting more expensive,” Ms McNamara said.

“When higher wholesale prices feed through, and by how much, depends on how retailers are hedged and the contracts they have in place.

“Wholesale prices make up around 32 per cent of your power bill. Wholesale power prices in specific regions of the National Electricity Market will impact the prices customers pay over time.”

While soaring energy prices are likely to stoke debate about the country’s energy transition, in the meantime the Australian Energy Council said consumers should shop around for the best deals.

Originally published as Power bills tipped to rise across Australia as coal prices soar amid Ukraine war, east-coast floods