Electricity prices are supposed to drop on 1 July – so why is your provider raising rates?
Key takeaways
- Some households in NSW, South East Queensland and South Australia are receiving notices that their daily supply charges are increasing, even though benchmark electricity prices are falling from 1 July. Some are also seeing changes to usage rates, depending on their plan.
- The Australian Energy Regulator is now investigating how retailers have restructured their plans and communicated changes to customers, after Energy Minister Chris Bowen flagged concerns about the price hikes.
- Whether your overall bill goes up or down will depend on the plan you're on and how much electricity you use.
- The best thing you can do is compare energy plans after 1 July to see if you can get a better deal.
If you've received a letter from your energy provider telling you your daily supply charge is going up, sometimes by more than 60%, you're not alone.
We've seen price change notices from several retailers, including AGL, Origin Energy, EnergyAustralia and GloBird Energy.
The common thread? Daily supply charges are increasing, while usage rates are either falling slightly or, in some cases, rising too, depending on the retailer and plan.
The changes have prompted Energy Minister Chris Bowen to ask the Australian Energy Regulator (AER) to investigate whether the price hikes and the way they've been communicated to customers may have breached consumer rules.
Bowen separately told the Australian Financial Review, "If your costs are coming down, your customers' bills should be too."
I thought electricity prices were supposed to go down on 1 July. What's happening?
Each year, the energy regulator sets the Default Market Offer (DMO), a type of benchmark that helps shape electricity prices.
This year, the benchmark prices are coming down on 1 July, which suggests prices should ease overall.
But not everyone sees that reflected in their bill.
That's because only a small share of customers - around 10% - are on standing offer plans that directly follow the benchmark prices. The rest are on market contracts, where prices are set by individual retailers and can vary widely.
Retailers use the DMO as a reference when setting prices, but they don't have to match it.
So even when it falls, some plans get cheaper, while others stay the same or go up depending on how they're structured.
Haven't compared energy plans in over 12 months?
There's a good chance you're missing out on a cheaper deal.
So, why exactly is my energy bill going up then?
An electricity bill is made up of two main parts:
- A daily supply charge, which is what you pay to stay connected to the grid
- A usage charge, which is what you pay for the electricity you actually use
The key change this year is how those two parts are balanced.
Rather than just setting an overall benchmark price, the regulator also changed the way the total cost is split between fixed daily charges and usage rates.
As Louisa Kinnear from the Australian Energy Council told ABC News, some customers may assume their bill is going up as a result, when in reality it's often a "rebalancing of the fixed and unit charges".
Whether you end up better or worse off depends on your plan and how much electricity you use.
An Origin Energy spokesperson explained:
Many customers will see increased supply charges and lower usage rates. The majority of these customers, based on an average Origin customer usage profile, will see lower electricity bills. [However] the impact on a customer's bill will ultimately depend on how much electricity they use.
Electricity price changes from AGL, Origin Energy and EnergyAustralia
The figures in the following table are just averages. Your own price changes, if any, will depend on the plan you're on and how much electricity you use.
| Origin Energy | AGL | EnergyAustralia | |
|---|---|---|---|
| NSW | -0.8% | -2.4% | +1.8% |
| VIC | -2% | -4.1% | +0.4% |
| QLD | -5.4% | -8.7% | -5.8% |
| SA | +0.8% | -1% | +1.3% |
"There will be a range of outcomes for customers across different AGL products, regions and customer types, including increases and decreases," an AGL spokesperson said.
"Our pricing decisions are shaped by a number of factors, including rising network costs, wholesale, environmental and retail costs, broader market conditions and our focus on customer affordability."
This is similar to what EnergyAustralia told us as well.
"Individual customers will see varying outcomes, based on their underlying tariff, energy plan type and their usage," an EnergyAustralia spokesperson said.
"Your bill should outline whether you are on the best plan for you. If you are unsure, we encourage any customer with questions to contact us."
What should you do?
July is a good time to shop around for a better energy deal or even negotiate better rates with your existing provider.
If you've recently received a price change notice, it's especially worth checking whether you're still on a competitive plan.
When you're comparing plans, have a look at both your daily supply charge and usage rate, and compare these to other plans in the market.
It's important to look at both rates as the balance between the two can make a big difference depending on how much electricity you use.
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