Relief for some as power prices drop, but not for all

Holly Hales |

The price electricity providers can charge customers this next year will be revealed on Tuesday.
The price electricity providers can charge customers this next year will be revealed on Tuesday.

Hundreds of thousands of Australian households and businesses are set to pocket major savings on their energy bills, with one state receiving the biggest drop.

The Australian Energy Regulator on Tuesday released its draft default market offer, known as DMO 6, for energy prices in the coming financial year.

The offer, which applies to consumers in NSW, South Australia and parts of Queensland, is a price cap on how much retailers can charge customers on their default plans.

Regulator chair Clare Savage said the decision followed a reduction in wholesale electricity prices, partially offset by a rise in network costs.

Documentys on the regulator's draft Default Market Offer.
The Australian Energy Regulator’s draft determination default market offer was published on Tuesday. (Joel Carrett/AAP PHOTOS)

“Australian households are experiencing difficult times, difficult economic circumstances and cost of living pressures and we have seen two years in increases in prices,” she said.

“We have ensured there’s sufficient cost there, record reflection of the costs and margin for retailers, which makes sure they can continue to operate and compete in the system.”

Australian Energy Council chief Sarah McNamara urged people to shop around to get the best deal, even before the offer comes into effect in July.

“Retailers also inform you every three months if you are on their best deal…it pays to check the competitive market,” she said.

Head of research at personal finance marketplace Compare Club Kate Browne said the offer marks little reprieve as energy prices have gone up by 40 per cent in the past two years.

“The proposed default market tariff, which falls between 1.9 per cent and 3 per cent…is still a long way off easing households’ cost-of-living crisis,” she said.

The draft Victorian default offer was also released on Tuesday and proposes falls of about $112 (6.4 per cent) in residential bills and $266 (or seven per cent) for small businesses from July 1, if finalised.

About 360,000 homes and 58,000 small businesses are on the Victorian offer.

Essential Services Commission chair Kate Symons said upcoming reductions to wholesale electricity have driven the price drops.

Ms Symons said there was a chance further savings could take place for Victorians by the time the final offer lands in May.

Essential Services Commission Chair and Commissioner Kate Symons.
Essential Services Commission chair Kate Symons believes Victorians could get even more savings. (Joel Carrett/AAP PHOTOS)

“If we continue to see a downward trend in wholesale electricity if the 12-month average of the wholesale electricity cost, that will flow through to the final update,” she said.

For NSW, SA and Queensland customers, it is estimated price increases will be less than the rate of inflation.

Nine per cent of households and up to 20 per cent of small businesses will be directly impacted by the offer price, which is a “reference price” for market competitors.

“It’s the price against which retailers have to advertise their plans and offers and discounts,” Ms Savage said.

“It tends to have a fairly significant impact on the market.”

A majority of residential customers could get price cuts of 0.4 per cent to 7.1 per cent.

image of a powered light bulb
Most homes will get a price reduction of 0.4 per cent to 7.1 per cent. (Dave Hunt/AAP PHOTOS)

Queenslanders in the state’s southeast will experience the biggest hike at 2.7 per cent.

Most small business customers could get cuts of up to 9.7 per cent while others could face modest increases of around 0.7 per cent, depending on their region.

Federal Energy Minister Chris Bowen said the draft benchmark price was proof that government policies to cap coal and gas and have more renewable energy going into the system was working.

Climate Change and Energy Minister Chris Bowen
Chris Bowen says the benchmark price is “encouraging”. (Dean Lewins/AAP PHOTOS)

“And it shows the impact of my request – along with state ministers – to the Australian Energy Regulator to prioritise the needs of consumers and put consumers first … rather than competition,” he told reporters in Canberra.

The regulator also said wholesale electricity prices had stabilised since the extreme peaks seen in 2022.

The energy regulator’s final offer determination will be delivered in May and will come into effect from July.