Electricity price July 1 surge nears, and here are some reasons why

Electricity bills will rise between 20 and 30 per cent for many people from July 1. It’s horrible for households and for Labor.

As far as broken election promises go, this one was a whopper.

In the lead-up to the 2022 federal election, Labor promised that if elected it would reduce Australians’ electricity bills.

This promise is still online at alp.org.au, where Labor declares its Powering Australia policy will “cut power bills for families and businesses by $275 a year for homes by 2025, compared to today”.

Then Opposition Leader and now Prime Minister Anthony Albanese doubled down on the promise in late 2021 when questioned by journalist how it could be achieved.

“I don’t think, I know. I know because we have done the modelling,” the PM said. “That is the average reduction in power prices from today as a result of the suite of policies which we have announced.”

Fast forward about 18 months, and Aussie households are facing electricity bill price rises of 20-30 per cent from July 1 – costing most homes several hundred dollars more each year.

A letter from AGL arrived at my house the other day informing me that my electricity rates are changing from July 1.

While the quarterly supply charge would rise about 9 per cent or $38 a year, the real kick in the guts came in the form of AGL’s electricity usage charge rising from 43.5c per kilowatt hour to 56.7c per kilowatt hour. That’s a 30 per cent increase in one hit – costing more than $500 extra a year for a family home.

Australians will have to watch their energy use this winter. Picture: iStock

The big questions on many people’s minds are why is this happening, and how can we shield ourselves from power price pain?

Question one is relatively easy to answer. The July increase was effectively set by the Australian Energy Regulator, which controls the default market offer price of power in several states that is used as an industry benchmark.

In its explanation for the DMO price rise of 20-25 per cent this year, the AER said factors driving it included higher wholesale electricity costs related to the government’s temporary price caps on coal and gas, higher coal and gas prices, reliability with coal-fired generation, volatile customer demand and the recent closure of the Liddell Power Station in NSW.

Inflation also had an impact on network costs while an increase in bad debts for small businesses were causing higher costs for all, the AER said.

Not a lot of that list is directly caused by the federal government – Russia’s Ukraine invasion sent the entire global energy industry haywire last year – so why the initial Labor promise?

Shielding yourself from the price pain is tough in some ways but simple in others.

Unless you stop using electricity completely, you’ll be paying more – another nail in the cost-of-living coffin.

However, there are ways to lessen the impact, starting with checking how your electricity provider compares with others. This can be done for free on either the energymadeeasy.gov.au website or similar state government websites.

These websites and many others also share tips on how to reduce energy usage at home. There are hundreds of tips – each probably saving a small amount but adding up to significant savings.

Labor’s broken pre-election promise about power prices is not as infamous as those words from the late Bob Hawke back in 1987 when he said: “By 1990, no Australian child will be living in poverty”.

But it’s bitter for many. And if power bills keep climbing at this rate, many more children – and their parents – will be living in poverty.