‘This is looking like a new normal’: Why power prices aren’t coming down anytime soon
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Rising costs are nothing new for Australian households, but few expenses hit as hard—or as often—as power bills.
After a period of relative stability, energy prices are once again on the move, and the latest developments suggest many consumers could be in for an unwelcome surprise.
So, what’s driving the increases, and what can households do to stay ahead of the curve?
Australian households already struggling with the rising cost of living were bracing for another hit, with electricity prices set to climb again.
The Australian Energy Regulator (AER) released a draft decision recommending an increase to the default market offer (DMO), which would see benchmark electricity prices rise between 5.1 and 8.9 per cent in some states.
New South Wales faced the highest increase, with prices expected to jump by up to 8.9 per cent.
South-east Queensland was set to see a 5.8 per cent rise, while South Australians could expect an increase of 5.1 per cent.
These hikes, though lower than the massive 20 per cent surges of previous years, still outpaced inflation and added pressure to household budgets.
AER chair Claire Savage acknowledged the strain on consumers, stating: ‘We know that cost-of-living pressures are front of mind for many households and small businesses.’
She said the regulator had scrutinised every aspect of the DMO to ensure prices reflected the actual costs retailers faced in supplying electricity.
The DMO acted as a price cap for consumers in south-east Queensland, New South Wales, the ACT, and South Australia who were not on a competitive market offer.
While only about 10 per cent of customers were directly affected, the DMO also served as a benchmark for other retail tariffs.
For the current financial year, the DMO ranged from $1,800 in New South Wales to over $2,200 in South Australia for a typical household.
Victoria had a separate system, with the Essential Services Commission setting its own default offer.
A draft decision for Victoria, released on the same day as the AER’s, proposed a much smaller increase—less than 1 per cent for households and under 3 per cent for businesses.
Other states and territories operated under different arrangements, with Western Australia, the Northern Territory, and Tasmania following separate pricing models.
Gavin Dufty, national director of energy at St Vincent de Paul, urged consumers to seek better deals rather than relying on the DMO.
‘You’ve got to get off your seat and shop around,’ he said.
‘And I know that sounds really boring and passé, but that’s where you have to go.’
He warned that failing to compare offers could leave households paying significantly more than necessary.
The looming electricity price hikes came at a politically sensitive time, coinciding with an upcoming federal election where energy policy and cost-of-living concerns were key issues.
Energy Minister Chris Bowen defended the government’s approach, stating: ‘The Albanese government’s plan is the only one which is providing bill relief now and supported by experts to deliver a clean, cheap, reliable and resilient energy system into the future.’
There was speculation that the government might extend $300 energy rebates for another year as part of election promises.
Last year, electricity prices had remained relatively stable, with some even seeing slight reductions.
However, this followed two years of steep hikes—some as high as 40 per cent—driven by the 2022 energy crisis.
The latest increases were being fuelled by rising costs in the wholesale electricity market and the transmission and distribution network.
Josh Stabler from Energy Edge said wholesale generation costs had not surged as dramatically as they did after Russia’s invasion of Ukraine, but they remained elevated.
‘We are not seeing a material change down in terms of pricing,’ he said.
‘This is not an up and then back down again. This is, at the moment, looking like a new normal.’
Energy analysts pointed to fossil fuels as a major driver of rising electricity prices.
The Institute for Energy Economics and Financial Analysis (IEEFA) highlighted a Griffith University study showing that gas set electricity prices between 50 and 90 per cent of the time.
Since gas prices had soared in Australia, its impact on electricity prices had only intensified.
Coal plant outages had also contributed to higher wholesale prices, while renewable energy was associated with lower or even negative spot prices.
Beyond wholesale costs, the ageing network of poles and wires was also pushing prices up.
AER chair Claire Savage had previously warned of a ‘wall of capex’—capital expenditure—hitting consumers, with increased spending required for replacing infrastructure, improving cyber security, and adapting to climate change.
Dufty echoed concerns that price trends pointed in one direction—‘overall the average is going up.’
Households looking to cut their power bills were encouraged to invest in solar panels, upgrade to energy-efficient appliances, and improve home insulation.
IEEFA analyst Johanna Bowyer wrote: ‘Households and businesses could save money on their energy bills through reducing the volume of energy they purchase from the grid.’
Adjusting energy use to take advantage of midday solar output was another way to lower costs.
However, Dufty stressed that some consumers would struggle to offset rising prices and required targeted government assistance.
He noted that only 40 per cent of eligible customers were actually receiving energy concessions.
Government incentives aimed at boosting the uptake of green technology, he argued, should be funded through taxes rather than being added to electricity bills, which unfairly burdened those unable to take advantage of subsidies.
‘At the end of the day, we’re going through a transition,’ he said.
‘We’ve got to focus on policy.
‘And that’s where governments come in. How do they build up the complementary measures to make sure those shock absorbers support people along the way?
‘Because if you don’t do that, people get left behind and then the politics plays into it.’
In a previous story, we explored how many Australians could be paying more for electricity than they need to.
With power prices on the rise again, now is the perfect time to check if you’re getting the best deal.
Read on to find out what you might be missing and how to cut down your bill.
With electricity prices on the rise again, how are you planning to keep your power bills in check? Let us know your thoughts in the comments.
After a period of relative stability, energy prices are once again on the move, and the latest developments suggest many consumers could be in for an unwelcome surprise.
So, what’s driving the increases, and what can households do to stay ahead of the curve?
Australian households already struggling with the rising cost of living were bracing for another hit, with electricity prices set to climb again.
The Australian Energy Regulator (AER) released a draft decision recommending an increase to the default market offer (DMO), which would see benchmark electricity prices rise between 5.1 and 8.9 per cent in some states.
New South Wales faced the highest increase, with prices expected to jump by up to 8.9 per cent.
South-east Queensland was set to see a 5.8 per cent rise, while South Australians could expect an increase of 5.1 per cent.
These hikes, though lower than the massive 20 per cent surges of previous years, still outpaced inflation and added pressure to household budgets.
AER chair Claire Savage acknowledged the strain on consumers, stating: ‘We know that cost-of-living pressures are front of mind for many households and small businesses.’
She said the regulator had scrutinised every aspect of the DMO to ensure prices reflected the actual costs retailers faced in supplying electricity.
The DMO acted as a price cap for consumers in south-east Queensland, New South Wales, the ACT, and South Australia who were not on a competitive market offer.
While only about 10 per cent of customers were directly affected, the DMO also served as a benchmark for other retail tariffs.
For the current financial year, the DMO ranged from $1,800 in New South Wales to over $2,200 in South Australia for a typical household.
Victoria had a separate system, with the Essential Services Commission setting its own default offer.
A draft decision for Victoria, released on the same day as the AER’s, proposed a much smaller increase—less than 1 per cent for households and under 3 per cent for businesses.
Other states and territories operated under different arrangements, with Western Australia, the Northern Territory, and Tasmania following separate pricing models.
Gavin Dufty, national director of energy at St Vincent de Paul, urged consumers to seek better deals rather than relying on the DMO.
‘You’ve got to get off your seat and shop around,’ he said.
‘And I know that sounds really boring and passé, but that’s where you have to go.’
He warned that failing to compare offers could leave households paying significantly more than necessary.
The looming electricity price hikes came at a politically sensitive time, coinciding with an upcoming federal election where energy policy and cost-of-living concerns were key issues.
Energy Minister Chris Bowen defended the government’s approach, stating: ‘The Albanese government’s plan is the only one which is providing bill relief now and supported by experts to deliver a clean, cheap, reliable and resilient energy system into the future.’
There was speculation that the government might extend $300 energy rebates for another year as part of election promises.
Last year, electricity prices had remained relatively stable, with some even seeing slight reductions.
However, this followed two years of steep hikes—some as high as 40 per cent—driven by the 2022 energy crisis.
The latest increases were being fuelled by rising costs in the wholesale electricity market and the transmission and distribution network.
Josh Stabler from Energy Edge said wholesale generation costs had not surged as dramatically as they did after Russia’s invasion of Ukraine, but they remained elevated.
‘We are not seeing a material change down in terms of pricing,’ he said.
‘This is not an up and then back down again. This is, at the moment, looking like a new normal.’
Energy analysts pointed to fossil fuels as a major driver of rising electricity prices.
The Institute for Energy Economics and Financial Analysis (IEEFA) highlighted a Griffith University study showing that gas set electricity prices between 50 and 90 per cent of the time.
Since gas prices had soared in Australia, its impact on electricity prices had only intensified.
Coal plant outages had also contributed to higher wholesale prices, while renewable energy was associated with lower or even negative spot prices.
Beyond wholesale costs, the ageing network of poles and wires was also pushing prices up.
AER chair Claire Savage had previously warned of a ‘wall of capex’—capital expenditure—hitting consumers, with increased spending required for replacing infrastructure, improving cyber security, and adapting to climate change.
Dufty echoed concerns that price trends pointed in one direction—‘overall the average is going up.’
Households looking to cut their power bills were encouraged to invest in solar panels, upgrade to energy-efficient appliances, and improve home insulation.
IEEFA analyst Johanna Bowyer wrote: ‘Households and businesses could save money on their energy bills through reducing the volume of energy they purchase from the grid.’
Adjusting energy use to take advantage of midday solar output was another way to lower costs.
However, Dufty stressed that some consumers would struggle to offset rising prices and required targeted government assistance.
He noted that only 40 per cent of eligible customers were actually receiving energy concessions.
Government incentives aimed at boosting the uptake of green technology, he argued, should be funded through taxes rather than being added to electricity bills, which unfairly burdened those unable to take advantage of subsidies.
‘At the end of the day, we’re going through a transition,’ he said.
‘We’ve got to focus on policy.
‘And that’s where governments come in. How do they build up the complementary measures to make sure those shock absorbers support people along the way?
‘Because if you don’t do that, people get left behind and then the politics plays into it.’
In a previous story, we explored how many Australians could be paying more for electricity than they need to.
With power prices on the rise again, now is the perfect time to check if you’re getting the best deal.
Read on to find out what you might be missing and how to cut down your bill.
With electricity prices on the rise again, how are you planning to keep your power bills in check? Let us know your thoughts in the comments.
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