Electricity bills to jump as much as 9pc in cost-of-living blow: energy regulator
The energy regulator’s price ruling will intensify pressure on cash-strapped households and the Albanese government as the federal election edges closer. But Chris Bowen blames the coal industry for the rises.
Electricity bills will rise by as much as 9 per cent from July 1, the Australian Energy Regulator has declared, a draft ruling that will intensify pressure on struggling households and threaten the re-election prospects of the Albanese government.
The AER said increases will vary across the National Electricity Market, but the largest jump will be seen in NSW. Australia’s most populous states will see prices rise by up to 9 per cent. Increases are smaller in Queensland and South Australia, but prices will rise by between 3 per cent and 6 per cent. Prices in Victoria are governed by a separate regulator, which earlier ruled prices will largely remain unchanged.
Small business customers face prices increases of between 4.2 per cent and 8.2 per cent.
The annual default market offer, which is calculated annually as the AER considers the wholesale cost of electricity, the toll of transporting electricity, and the cost of compliance with government rules and regulations. Retailers will typically apply discounts against the default market offer. Only a minority of households pay the market offer, but it acts a benchmark on which bills are set.
The energy regulator said the increases were driven by higher costs incurred by retailers in procuring electricity and running their businesses and network costs, which the AER said had jumped by between 2 per cent and 12 per cent.
Bowen blames coal for price hikes
The ruling, which while a draft decision is unlikely to change, intensifies pressure on the Albanese government.
Energy Minister Chris Bowen defended the government’s energy policy, insisting that the unreliability of coal was responsible for the rise.
“Not a day in the last two years have we had a coal-fired power station not break down somewhere in Australia,” he said.
“Not talking about planned maintenance, I’m talking about unexpected breakdowns which then see energy prices spike.
The government wants to replace that power with “more reliable, cleaner, cheaper renewable energy”, he said.
Mr Bowen urged Australians to shop around for different energy providers, but with just weeks until an election – the increases will do little to quell voter unrest about the government’s plan.
Labor has set the ambitious target of having renewables generate 82 per cent of the country’s electricity by 2030.
Doubling down, Mr Bowen said the increases to the default market offer underscores the need to increase renewables.
“It’s clear energy bills for Australians remain too high, and we’re providing help for people doing it tough as we deliver longer term reform,” Mr Bowen said.
The Coalition seized on the increase as evidence that Labor energy plan was failing. The Coalition has proposed scrapping the renewable dominated approach in favour of building seven nuclear power stations – a plan that will require coal power stations to run for longer – often beyond their technical lifespan.
Labor in 2022 campaigned on a platform of reducing energy bills by $275 and opposition energy spokesman Ted O’Brien said Australian families and businesses are being “crushed” by recent increases – a toll that will get worse.
“Three years ago, Anthony Albanese and Chris Bowen promised cheaper power bills. Instead, they’ve delivered among some of the highest electricity prices in the world,” said Mr O’Brien.
“Ask yourself one simple question: are you better off today than you were three years ago? If you’re sick of paying more and getting less, it’s time to vote this government out.”
While the increase is a hammer blow to Labor – which was desperate for a second year of price falls, the ruling marks the AER’s attempt to protect the profitability of the likes of Origin Energy, AGL Energy and EnergyAustralia – which will all need to invest in new forms of electricity generation – against adding too high a toll of households.
Shares in Australia’s largest two energy companies were largely unchanged after the announcement.
AER chair Clare Savage said the regulator weighed the need for energy companies to recoup their costs against the need to ensure affordability for households, and she believed it struck the right balance.
Ms Savage said that while costs of producing electricity and distribution costs had risen, retailer costs were the biggest driver – hinting that the regulator would sharpen its focus on the sector.
When you look at the increases from the last DMO, retail costs have been between 40-80 per cent the share of that increase. Those are their billing systems, their marketing activities, acquiring and maintaining customers, managing debts and the rolling out of smart meters. Those retail costs are the majority of the increases we are seeing today,” Ms Savage told The Australian.
“We do get those costs to us and the ACCC, and we scrutinise them, and we will have another look at them between the draft and final ruling.”
Those comments are likely to draw the ire of retailers, which privately highlight that their retail margins are at the lowest on record.
But amid the squabbles around who beares the responsibility, the scale of the increases from July 1 will be a bitter pill for households.
A record number of households are already struggling to pay their electricity bills, recent data from the AER shows. In an attempt to repair its standing with voters, Labor last year moved to offer all households a $300 energy bill relief, and there is widespread speculation it could opt to extend those despite a weakening economy.
But with inflation remaining elevated and interest rate relief expected to be modest throughout 2025 – there is widespread concern about the capacity of households to wear more increases.
Gavin Duffy, policy manager at St Vincent de Paul, said households now have to shop around to ease pressure.
“Energy costs are on the march. If you are a household, doing nothing is not possible any more. You have to shop around, that may be with your existing retailer, or it may mean moving, but those households feeling the pinch have to seek the best offer possible,” he told The Australian.
Noah Yim contributed to this article.
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