Energy crisis explainer: What the fudge is going on with power prices?
Unfortunately, the energy crisis is here to stay as there is no "quick fix".
Australian households hoping for the government to whip out its magic wand and curtail rising electricity and gas bills will be very disappointed.
Energy Minister Chris Bowen met with his state and territory counterparts on 8 June to discuss the ongoing energy crisis.
The gist is there will be no "quick fix" for higher than usual power bills. However, there is a plan in place which we'll get into shortly.
But first, why are energy prices skyrocketing?
If you're still scratching your head about rising energy prices, then here's a quick run-through of what's triggered the "crisis".
- Russia’s invasion of Ukraine made global energy prices go up.
- The exit of a gas retailer, Weston Energy, in late May caused a supply issue, leaving many companies scrambling. This also led to an increase in local prices.
- There have also been unplanned breakdowns or planned repairs of aged equipment, with 25% of coal-fired power generation out of action.
- Australia's east coast is still 60% reliant on coal-fired power.
- Gas is needed to fill the gap as our renewable energy resources aren't as well-positioned to meet the demand. This is again driving up prices. Bowen said the current crisis was a “result of poor planning and a previous government which didn’t see the opportunity [in] renewable energy”.
- Since electricity prices are partly set by the cost of gas, whole electricity prices have risen across the board by as much as 141%.
- Wholesale electricity prices make up 30% to 40% of household energy bills.
- The cold weather snap that's hit Australia has also increased demand for energy.
- A gas cap was imposed on Sydney and Victoria markets on 31 May as wholesale prices soared to 80 times normal levels following the cold snap. It's the first time the Australian Energy Market Operator (AEMO) has had to impose a price cap in the last decade.
What's been the impact of the "energy crisis" so far?
A few things have had a trickle-down effect on household energy bills.
- The Australian Energy Regulator made the decision to increase the benchmark electricity tariffs from 1 July, meaning customers' bills will definitely get more expensive by at least $227. Read here for more details.
- Some energy providers made the decision to stop selling energy plans. A few have taken unprecedented steps to send their customers to other providers.
- Other energy providers have stopped taking on new customers as they re-evaluate their prices. They'll likely take on new customers after 1 July. These new plans will most likely be priced higher than their previous versions.
What did the energy minister and co discuss to help us out of this mess?
A few key things came out of the 8 June meeting:
- The AEMO has been given the power to procure and store gas supplies while regulators will be given more authority to ensure transparency in the energy sector.
- Plans are going ahead to build up spare electricity capacity.
- They will also be developing a National Transition Plan to reduce greenhouse gas emissions in a move towards net-zero. This will again be discussed in July.
What can households do right now?
There are some actions you can take right now.
- Call your current energy provider and find out if it will be increasing its rates (some people might have already received emails). You should also ask if you can be moved on to a cheaper plan.
- The next step is to start comparing energy plans and possibly signing up to a fixed-rate plan that will lock in rates for 12 months. This means when the 1 July electricity reset comes into effect you'll likely be spared. These plans are fast disappearing so you'll have to be quick.
- Hack your home to use less energy for heating. Put rugs over tiled areas, buy a door snake and/or weatherproof tape if your house isn't well insulated. You should also leave doors closed so it takes less time for the room to heat up and keep the heat within the 4 walls. See more tips for saving.
- Find out how much heating will cost you and choose an appliance that won't guzzle energy. Read our winter heating cost guide for more details.
Start comparing energy plans to find one that is best suited to your household.