‘Little left to squeeze’: Power price warning

Power Lines
Cash strapped households are set to enjoy reductions in their power bills from July 1. Picture: NCA NewsWire / Kelly Barnes

Consumers across Australia’s eastern states are set to benefit from a fall in household power bills from July 1 as a cut to electricity price caps and government energy rebates deliver hundreds of dollars worth of relief to cash strapped families.

The Australian Energy Regulator’s final default market offer (DMO) – a price ceiling to ensure customers receive the lowest price possible – was released on Thursday, lowering the maximum amount electricity retailers can charge households in NSW by up to $28 to $2499, and in South Australia by $63 to $2216.

However, these figures do not include the household electricity rebate announced in the federal budget in mid-May, meaning bills will be a further $300 lower than the default price.

Electricity prices will be lower for many Australian households from July 1. Picture: NCA NewsWire / Aaron Francis

While the default offer in southeastern Queensland will increase by up to $83 next financial year to $2052, this increase will be more than offset by the federal government’s rebate and an additional $1000 subsidy announced by the Labor state government.

In Victoria, where the default market offer is separately set by the state’s Essential Services Commission, prices for households will fall by up to 5.7 per cent, or $100, to $1655, before the $300 reduction is applied.

In each state, between 8 and 12 per cent of households are signed up to the default market offer, representing almost 500,000 customers.

However, the default offer will indirectly impact many more households as major retailers, like Origin Energy and AGL, will use the state specific caps as a benchmark to determine the final prices it sets for the rest of its customers.

The default market offer next financial year reflect an easing in wholesale prices, or the cost at which retailers purchase electricity before they sell it to consumers.

However, this decrease was offset by a rise in network costs, reflecting the higher expense of maintaining the poles and wires infrastructure.

Further, a jump in operating costs for the electricity retailers also didn’t translate to higher customer prices as the AER reduced the allowable margins for the power companies.

Ben Barnes, acting chief executive of the Australian Energy Council, the peak body for the major electricity retailers, said the moderation in default prices would ultimately reduce competition in the sector – and could limit the ability of retailers to offer discounts.

“Reductions in the DMO have focused on reductions in retailers’ costs and margins, but there is little left to squeeze,” he said.

“How the AER sets the DMO in future years will be critical to building confidence in industry and allow them to set cheaper market offers.”

With cost-of-living pressures are front of mind for many households, AER chair Clare Savage encouraged consumers to seek a better electricity deal if possible.

“Most retailers have cheaper deals than the standing offer, so shopping around remains the best way to get the best price,” Ms Savage said.

Welcoming the AER’s final offer, Energy Minister Chris Bowen said the government’s investments in energy were lowering household bills.

“Today’s figures show a welcome downward trend for prices but we know there’s more to do – which is why we’re delivering our reliable renewables plan and providing direct energy relief for every household energy bill.”