Households across the country are being shocked after the energy regulator clears suppliers to pass on rising generation costs.
As of July 1, bills for some customers in NSW could rise as much as 18.3 percent, while people in South Australia and Queensland are also in the firing line as energy suppliers move to protect their profits.
The Australian Energy Regulator released its so-called default market offer (DMO) price on Thursday, which outlines the maximum electricity retailers can charge retail customers and small businesses that haven’t shopped for a better deal.
On top of decades-long inflationary pressures, rising wholesale costs mean the news isn’t a pleasant read for those on firm contract offers.
This includes 550,000 homes and 93,000 small businesses in the three affected states.
Camera IconPower prices are rising due to global market disruptions and unplanned outages. NCA NewsWire/Andrew Henshaw Credit: News Corp Australia
As of July 1, residential customers with fixed contract offers in NSW will face the prospect of a price increase of 12.1 percent above inflation or a nominal 18.3 percent – depending on whether they have a controlled tax.
Energy bills for South Australians with SAPN will rise at least 1.7 percent above inflation and could increase as much as 3.8 percent above inflation.
Southeast Queensland – which Energex serves – could handle prices as much as 6.8 percent higher than inflation.
The regulator said the higher DMO followed global disruptions from the war in Ukraine and associated supply chain disruptions pushing coal and gas prices to soar.
It also said extreme weather in NSW and Queensland had impacted coal supplies and electricity demand, while “multiple generators” had been hit by unplanned outages.
Regulator chair Clare Savage said setting the DMO wasn’t about putting the lowest price.
“In setting these new DMO prices, we understand the significant impact they will have on some consumers who may already be struggling with the cost of living pressures,” said Ms. Savage.
“We are committed to setting a price that allows retailers to recoup their costs, earn a reasonable margin, and support retailers to compete and offer better deals and products in a competitive retail environment.
“If a large number of retailers cannot recoup their costs and are forced to exit the market – as we have seen recently in the UK – it will increase the cost to consumers.”
Relief comes for Queenslanders.
However, Queensland residents got some relief on Thursday when Prime Minister Annastacia Palaszczuk revealed that the state would give citizens a $175 cost-of-living discount on their next utility bill.
“With wholesale prices rising due to global instability, we have moved to increase it to $175 as we know the pressures Queensland residents are facing,” said Ms Palaszczuk.
“Electricity providers will automatically apply for the credit, so Queensland residents do not need to apply.”
Victoria has already released its pricing proposal, which will increase costs by 5 percent.
Camera Icon Both major parties campaigned hard on the cost of living during the federal election. NCA NewsWire/Brenton Edwards Credit: News Corp Australia
Meanwhile, small businesses in the three affected states faced a similar shock on Thursday.
Electricity prices for those customers are expected to rise 6.9 percent above inflation in South East Queensland, 0.2 percent above inflation in South Africa, and possibly 13.5 percent above inflation in NSW.
‘Wholesale prices to blame’
The rise comes after new treasurer Jim Chalmers Wednesday recognized the likelihood of rising power prices, despite both major parties campaigning heavily to lower the cost of living during the federal election campaign.
Camera IconDMO 2022–23 final fix prices, including changes from DMO 3 in nominal and real terms Credit: Delivered
The regulator said rising wholesale costs were the main driver of the rise in DMO prices.
Since DMO 2021, wholesale costs for retailers have increased by 41.4 percent in New South Wales, 49.5 percent in Queensland,, and 11.8 percent in South Australia.
This is due to the reduction in thermal generation due to unplanned outages and higher coal and gas prices, slowing investments in new capacity, increasing peak demand, and driving up the cost of wholesale electricity contracts for retailers.
“These wholesale market conditions have persisted since the draft provision of the AER in February and have been exacerbated by the ongoing war in Ukraine, which has put significant pressure on coal and gas prices worldwide,” the regulator said.
“Extreme weather in NSW and Queensland affecting coal supply and electricity demand; and further unplanned outages at multiple generators.
Network costs have decreased slightly for the Ausgrid region in NSW and more strongly for the Energex region in Queensland.
Both regions’ return on excess revenues was a key factor, while lower transmission costs and the Queensland Government’s Solar Bonus Scheme contributed to Energex’s greater reductions.
Cost pass-throughs, efficiency incentive fees, and higher transmission costs are some factors leading to higher network costs in the Essential, Endeavor, and SAPN regions.
In South Australia, the retail fee will be higher than the low level of previous years, which the regulator justified because it feared it would not allow retailers to ‘make a reasonable profit margin’.
The regulator did say that shoppers will continue to save on their bills.
Based on the offers available this month, retail customers moving from the DMO 4 price to the mid-market offering can save between $294 and $443 depending on their network region. In comparison, small business customers can save between $733 and $1,308. Can save.
