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What you should do as electricity prices rise in Australia tomorrow

Posted: 29 June 2022 5:35 pm
News

Don't let 1 July pass you by without finding out how this might impact your energy bills.

What should I be doing?

You're probably in one of several scenarios right now:

  1. Your energy retailer has told you it's increasing its prices from 1 July or 1 August and you have yet to shop around for a better energy deal.
  2. solar energy icon

    Action: Wait until after 1 July to compare plans as that's when retailers are expected to refresh their energy plans.

  3. Maybe you've already shopped around and locked in a fixed rate energy plan that won't see your rates change for the next 12 months.
  4. solar energy icon

    Action: Wait until after 1 July to compare plans as that's when retailers are expected to refresh their energy plans.

  5. You haven't been informed of a price hike yet by your current provider.
  6. solar energy icon

    Action: Compare plans regardless.

  7. Your energy retailer has had to call it quits. You've either been told to switch to another provider yourself, or you've been assigned a new retailer.
  8. solar energy icon

    Action: Either way, shop around yourself before signing up to a new provider as you'll know what's best for you.

What's happening?

Australia is in the middle of the perfect energy storm.

Wholesale electricity prices are 6 times higher than they were in April 2021. These make up 30-40% of a household's power bill.

From 1 July, hundreds of thousands of Australians will begin to feel the pinch of these rising electricity prices.

This is because the Australian Energy Regulator will officially pass on rising costs to households when it lifts the reference price by as much as 18.3%.

The reference price (also known as the Default Market Offer or standing offer) is the benchmark price set by the government to help you compare energy plans.

In Victoria it's called the Victorian Default Offer and is set by the Essential Services Commission.

How will my state be impacted?

Those living in New South Wales and Queensland will be hit the hardest. Here's a breakdown of the price increase for each state that falls under the National Electricity Market (NEM).

  • New South Wales. Price to go up by 8.5% to 18.3%.
  • Queensland. Price to go up by 12.6%.
  • South Australia. Price to go up by 9.5%.
  • Victoria. Price to go up by 5%.

Tasmania is also part of the NEM but its prices are set by the Tasmanian Economic Regulator. The watchdog recently approved an 11.88% increase in standing offer prices from 1 July.

Good to know. Other states in Australia that are not included under the NEM will not be impacted by the electricity price hike.

Why is Australia in the middle of an energy crisis? Read all about it here.

What should I consider when comparing electricity plans?

Your main action point is to make sure you're on the best energy plan available to you.

1. Standing offer vs market offer

It's good to remember that there are 2 types of energy plans you can sign up to if you live in one of the states that fall under the NEM.

These are known as market offer and standing offer.

The key difference is that all energy retailers are obliged to sign customers up to standing offers that are equal to the reference price or VDO. These are usually more expensive than market offers.

But, we are in a very different scenario this year. If your energy provider is giving you a market offer that is, for example, 30% above the reference price, then it is no good. Anything above the reference price means you're paying more than you should.

2. Fixed rate electricity plan vs fixed rate benefit period

Fixed rate energy plans are fast disappearing and only a handful of providers remain that still offer these.

If you come across a fixed rate plan, make sure it is fixing your rates for the next 12 months (the most common timeframe).

You might see fixed rate benefit period and get confused. The difference in this instance is your usage rate won't be fixed but some benefits such as discounts might be.

3. 10-day cooling off period

If you're confused about anything, always give the energy provider a call before signing up to find out if there are any hidden costs you need to be aware of.

It's also good to remember that you have a 10-day cooling off period to switch providers without incurring any costs.

Want to learn more about how to compare and switch energy providers? Read our guide to get ready for 1 July.

Bottom line

It's likely you might not feel a bill shock until you get your first monthly or quarterly bill following the 1 July price hike.

But don't wait around for that. Compare, compare, compare. It's never been a more important year to get on top of your energy bills.

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