Electricity bills for hundreds of thousands of Australian households are set to soar by up to 31 per cent this year, even after the federal government’s emergency intervention brought down wholesale prices and avoided larger possible rises.
The Australian Energy Regulator on Wednesday released its draft decision on increases to the main caps on consumer energy bills from July 1, which will lift standard power bills by between $300 and $564 a year.
The regulator’s so-called “default market offers” – price caps on what retailers can charge households and businesses that do not take up special deals or bundle utilities bills – would rise in all states across the east-coast electricity grid.
From July, default offers will increase by up to 19 per cent in Queensland, 21 per cent in South Australia and 23 per cent in NSW.
In Victoria, where the state’s Essential Services Commission determines its own default offer, the price cap for households will rise by 31 per cent, or $426. Victorian default offers are presently lower than other east-coast states that faced double-digit increases last year.
“Energy prices are not immune from the significant challenges in the global economy right now,” Australian Energy Regulator chair Clare Savage said. “That’s why it’s more important than ever that we strike a balance in setting the default market offer to protect consumers as well as allowing retailers to continue to recover their costs and innovate.”
The looming retail power bill hikes are being driven by sharp rises in the cost of wholesale electricity across the east-coast grid. Last year’s wholesale increases – from an average of $85 a megawatt-hour to a high as $264 a megawatt-hour – were caused by a spate of coal-fired power stations breaking down during peak demand periods, as well as sharply higher costs of the coal and gas needed to generate power due to the war in Ukraine driving up global demand and prices.
In December, the Albanese government introduced emergency laws capping the price of domestic gas at $12 a gigajoule for 12 months and domestic coal at $125 a tonne.
Federal Climate Change and Energy Minister Chris Bowen said the draft default market offer announced on Wednesday was 13 per cent lower than the regulator had originally projected for NSW late last year, 29 per cent lower for South Australia and 21 per cent lower for South East Queensland.
He said the government’s intervention to cap wholesale coal and gas prices, paid by power generators and passed through to retail customers, had saved households between $268 and $530 of potential bill increases and had avoided up to $1,243 in additional increases for small business customers.
“The government, faced with large increases in the default market offer, urgently acted to curb spiralling prices of gas and coal and shield Australian families and businesses from the worst of these energy price spikes,” Bowen said.
Social services groups on Wednesday said the looming price hikes would be devastating for low-income Australians and worsen the cost-of-living crisis.
“People on the lowest incomes do not have anything left in their budgets to cut back on and are at breaking point,” Australian Council of Social Services chief Cassandra Goldie said.
“While the projected increase of between 20 and 22 per cent to the default market offer by the Australian Energy Regulator could have been an even higher increase if not for the Albanese government energy price cap at the end of 2022, it is still far too high for people on low incomes already struggling.”
The Australian Council of Social Services called on the federal government to update the regulator’s guidelines to lower retail margins, lift Jobseeker payments to at least $76 a day and provide an emergency energy relief payment of up to $2000 for customers in hardship.
Opposition climate change and energy spokesman Ted O’Brien said the rise in power bills showed the government was failing on its election commitment to lower prices by $275 by 2025.
“It’s disgusting to see Labor patting itself on the back while telling Australians that the energy price shocks will continue to hurt, but it could have been much worse,” O’Brien said.
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