Why Are Electricity Prices Rising in Australia in 2026–27?

For 2026-27 many households and small businesses are asking why prices will increase. The main drivers are higher wholesale energy costs, changes to market rules and reform of the energy system, plus rising network tariffs and environmental and retail costs. These factors combine to push up the regulated price and what retailers charge per kWh.

Key factors

• Wholesale energy costs: higher generator prices and volatility in the wholesale market raise what retailers pay, which flows through to customers in NSW and other regions.
• Network tariffs and grid investment: upgrades to the grid and maintenance increase network charges recovered in bills, affecting residential and small business customers.
• Environmental and retail costs: policy-driven charges and retailer’s operating costs add to bills, including compliance and metering.
• Rooftop solar and solar energy: while rooftop solar reduces some demand and can create savings for participating households, its variable output requires backup from the broader energy system, influencing prices.
• Time of use & energy plan design: more time of use pricing means costs shift to peak periods, changing how residential customers and small customers pay per kWh.

Regulation, safety net and safeguards

Governments set prices in some cases through a regulated safety net to protect vulnerable customers — a regulated price or safety net can limit increases for residential customers and small business customers. However, reforms and changes to market settings can take effect in stages and individual circumstances will affect whether prices will decrease or continue to increase for any given household.

What retailers and customers should consider

Energy retailers are adjusting energy plans to reflect higher input costs; some will set prices differently between fixed and variable offers. Customers should compare offers, check if a regulated price applies, and consider rooftop solar, battery options or time of use plans to maximise savings. Small customers and residential customers should also watch for protections like a safeguard or a regulated safety net and seek advice if their retailer’s prices will change.

Outlook for 2026–27

Prices will change regionally: for example, Ergon’s area and other local networks may see different outcomes. In some cases prices will decrease as new capacity and competition enter the market, but in the near term many households will experience higher bills as wholesale energy costs and network investments are recovered. The objective of ongoing reform is to stabilise costs and lower electricity prices over time while maintaining a reliable electricity supply and safety net for vulnerable customers.

If you have opened an electricity bill recently and wondered, “Why are electricity prices rising in Australia?”, you are not alone. Even when official benchmark prices fall in some regions, many households and businesses can still feel like electricity is getting more expensive because rebates end, daily supply charges change, network costs remain high, and market offers move differently from regulated default prices.

In 2026–27, the story is not a simple “prices are rising everywhere” headline. The Australian Energy Regulator’s Default Market Offer, known as the DMO, has reduced standing offer prices in parts of New South Wales and South East Queensland, while South Australia is the main outlier for residential flat-rate standing offers. Victoria’s Victorian Default Offer, known as the VDO, is also lower on average from 1 July 2026. The bigger picture, however, is that electricity remains expensive because several cost drivers still sit inside every bill: wholesale electricity prices, network charges, environmental scheme costs, retail operating costs and retail margins. [aer.gov.au], [esc.vic.gov.au]

The Short Answer On Electricity Price Changes

Electricity prices in Australia are changing because the cost of supplying power changes each year, including wholesale electricity costs, poles-and-wires network charges, environmental scheme costs, retail operating costs and retail margins. In 2026–27, some regulated default prices have fallen, but many customers may still feel pressure because prices vary by state, distribution zone, tariff type and whether they are on a standing offer or a market offer. [aer.gov.au],[dcceew.gov.au]

Put simply: the electricity price rise Australia 2026 story depends on where you live, what type of plan you are on, how much power you use, and whether any rebates or discounts have changed.

What Sets the Price You Pay — The Default Market Offer and VDO

Before looking at the reasons behind rising electricity costs, it helps to understand the benchmark prices that are often mentioned in the media.

What is the Default Market Offer?

The Default Market Offer 2026, or DMO, is set by the Australian Energy Regulator. It applies to residential and small business standing offer customers in:

• New South Wales
• South Australia
• South East Queensland

The DMO is not designed to be the cheapest electricity deal available. It is a regulated safety-net price that caps what retailers can charge customers on default standing offers. It also acts as a “reference price”, which retailers must use when advertising market offers. That is why you often see electricity plans promoted as being a certain percentage below the reference price. [aer.gov.au], [dcceew.gov.au]

This matters because many Australians are not actually paying the DMO. Most customers are on market offers, where retailers set their own rates, discounts and conditions. A market offer can be cheaper than the default price, but it can also change depending on contract terms, usage patterns and retailer pricing decisions.

What is the Victorian Default Offer?

Victoria uses a separate benchmark called the Victorian Default Offer 2026, or VDO. It is set by the Essential Services Commission and applies to Victorian standing offer customers. Like the DMO, it is intended to provide a simple, trusted and reasonably priced option for people who are unable or unwilling to engage in the retail electricity market. [esc.vic.gov.au], [esc.vic.gov.au]

The Victorian Default Offer also acts as a reference price for market offers. This means Victorian retailers must use it when showing how their advertised market offers compare.

Why the DMO and VDO do not tell the full story

The DMO and VDO are useful benchmarks, but they do not automatically tell you whether you personally have the best electricity rates. Your actual electricity bill can be affected by:

• Your state and distribution zone
• Whether you are on a standing offer or market offer
• Your tariff type, such as flat rate, time-of-use or controlled load
• Your daily supply charge
• Your usage rate per kilowatt hour
• Solar feed-in tariffs
• Concessions or rebates
• Whether a temporary government bill credit has ended
• How your household or business uses electricity across the day

That is why an electricity bill comparison needs to look at your actual usage and location, not just a headline percentage.

What Changed From 1 July 2026 in Price Changes?

From 1 July 2026, new default electricity prices came into effect across DMO and VDO regions. The AER released its final DMO 8 determination on 26 May 2026 for New South Wales, South East Queensland and South Australia, while Victoria’s Essential Services Commission released its final VDO decision on 20 May 2026 for prices applying from 1 July 2026 to 30 June 2027. [aer.gov.au], [esc.vic.gov.au]

The key point is that the 2026–27 changes are mixed. Some benchmark prices are down, while South Australia is the main exception for residential flat-rate standing offers.

For anyone searching electricity price increase by state, the important takeaway is that not every state moved the same way. In 2026–27, New South Wales, South East Queensland and Victoria generally saw regulated benchmark reductions, while South Australia had a small increase for residential flat-rate DMO standing offers. [energyplans.com.au], [esc.vic.gov.au]

The Real Drivers Behind the Numbers

So, why is electricity so expensive in Australia even when some default benchmark prices are falling?

The answer is that your bill is made up of several layers. Some can move quickly, such as wholesale market costs. Others, such as network charges, are slower to change because they relate to long-term infrastructure investment.

1. Wholesale electricity prices Australia-wide remain volatile

Wholesale electricity is the cost energy retailers pay to buy electricity from the market before selling it to homes and businesses. These prices can move sharply depending on demand, generator availability, fuel costs, weather, outages and renewable generation.

AER wholesale market data for Q1 2026 showed average quarterly prices ranged from $50 per megawatt hour in Victoria to $144 per megawatt hour in South Australia. Prices were lower than the same quarter a year earlier in most regions, but South Australia increased from $98 per megawatt hour to $144 per megawatt hour, driven by high-price events in January linked to hot temperatures, high demand, low wind output and network limitations. [aer.gov.au]

This explains why the national headline can be misleading. Wholesale electricity prices Australia-wide do not move evenly. A state with more high-price events, network constraints or weather-driven demand can experience different outcomes from another state.

2. Network charges are a major part of the bill

Network charges cover the cost of transporting electricity through transmission lines, poles, wires, substations and local distribution networks. These are often called “poles and wires” costs.

They are one of the largest and most stable components of a bill because electricity networks require long-term investment, maintenance, reliability upgrades and connection of new generation. Even when wholesale prices fall, network costs may not fall quickly.

The AER’s final DMO process uses a cost build-up approach that includes wholesale electricity, network costs, environmental costs, retail costs and a retail margin. The AER also released a cost assessment model to show how DMO tariff caps and prices were calculated for 2026–27. [aer.gov.au]

For customers, this means a bill can remain high even if the wholesale component improves. The fixed daily supply charge can also matter more for low-usage households because they pay that charge regardless of how much electricity they use.

3. Environmental scheme costs and retail costs also matter

Electricity bills can include costs linked to environmental schemes, renewable energy certificates, energy efficiency programs and other regulated obligations. These costs can rise or fall depending on policy settings and certificate prices.

Retail costs also sit inside the bill. These include billing systems, customer service, compliance, hardship programs, metering arrangements, bad debt risk and retailer operations. The DMO and VDO processes both assess efficient costs in setting benchmark prices. [aer.gov.au], [esc.vic.gov.au]

Retail margins are also included. This is the amount allowed for retailers to operate sustainably and manage risk. While it is easy to assume retailers alone are responsible for higher bills, the regulated benchmark price is actually a bundle of several cost categories.

4. Coal plant retirements and the renewable transition are changing the market

Australia’s electricity system is changing quickly. Older coal-fired generators are retiring or becoming less reliable, while more solar, wind, batteries and transmission projects are being added.

This transition can reduce prices during periods of abundant renewable generation, especially during the middle of the day when solar output is high. However, it can also create volatility when demand is high, wind or solar output is low, storage is constrained, or transmission capacity is limited.

The new Solar Sharer Offer in DMO regions is one sign of this changing market. From 1 July 2026, eligible households with smart meters in DMO regions can access three hours of free power in the middle of the day, with a daily cap of up to 24 kilowatt hours. The policy is designed to help customers shift usage into periods of strong solar generation. [dcceew.gov.au]

The transition is not just about building renewables. It also requires firming, storage, transmission, demand management and smarter tariffs. That is why electricity prices can be lower in some periods but still feel high overall.

Does This Affect Everyone Equally?

No. Electricity price changes do not affect everyone equally.

Standing offer customers versus market offer customers

If you are on a standing offer, the DMO or VDO may directly affect what you pay. These are the customers most closely linked to the official benchmark price changes.

If you are on a market offer, your price depends on the plan your retailer has offered you. Market offers are usually more competitive than standing offers, but not always. They may include discounts, variable rates, benefit periods or conditions that change over time.

The DMO applies as a cap for standing offers and a reference price for advertised market offers in New South Wales, South Australia and South East Queensland. The VDO performs a similar standing offer and reference price role in Victoria. [dcceew.gov.au], [esc.vic.gov.au]

That is why it is worth checking your bill and comparing the reference price against your actual plan.

Distribution zones inside the same state

Even within the same state, prices can differ by distribution zone.

For example, New South Wales includes different electricity distribution areas such as Ausgrid, Endeavour Energy and Essential Energy. Victoria includes AusNet Services, CitiPower, Jemena, Powercor and United Energy zones under the VDO. The Essential Services Commission publishes different VDO supply and usage charges by Victorian distribution zone. [energyplans.com.au], [esc.vic.gov.au]

This matters because two customers in the same state can have different usage rates and daily supply charges simply because they are connected to different networks.

Households and businesses are affected differently

Small businesses often use more electricity and may have different usage patterns from households. A cafe, office, warehouse, retail store or manufacturing site may use power at different times of day and may be more exposed to demand, time-of-use or business tariff structures.

That is why business owners should not rely only on residential price headlines. If you need to compare business electricity, look at your actual meter data, usage profile, tariff type and contract terms.

For businesses, the cheapest-looking rate is not always the cheapest total bill. A plan with a low usage rate but a high daily supply charge may not suit a low-usage business. A time-of-use tariff may work well for some businesses but be expensive for others that operate mainly during peak periods.

Why Your Electricity Bill May Still Go Up Even If Benchmark Prices Fall

Some customers may be confused if they read that default prices have fallen but still receive a higher bill.

There are several possible reasons:

• Your rebate may have ended: The Australian Government’s Energy Bill Relief Fund ended on 31 December 2025, after providing up to $150 in rebates from 1 July 2025 to the end of 2025 for households and eligible small businesses. [energy.gov.au]
• Your usage may have increased: More heating, cooling, working from home, appliances or electric vehicle charging can lift total costs.
• Your market offer may have changed: Retailers can change market offer rates in line with notice requirements.
• Your discount may have expired: Some discounts apply only for a benefit period.
• Your daily supply charge may be higher: This can increase bills even if usage rates fall.
• Your tariff structure may have changed: Time-of-use tariffs can reward off-peak usage but penalise peak usage.
• Your solar feed-in tariff may be lower: A lower feed-in credit can increase the net bill for solar households.

This is why “compare electricity rates” should mean comparing the full bill, not just one headline rate.

What Should Customers Do Next?

This article is not intended to push a quick switch for every customer. The first step is simply understanding what is driving your bill.

A practical approach is:

1. Check whether you are on a standing offer or market offer.Your bill should show this, or your retailer can confirm it.

2. Compare your plan against the reference price.Look at how your retailer says your plan compares to the DMO or VDO.

3. Look at both the usage rate and daily supply charge.A good comparison should include both.

4. Check your distribution zone.Pricing differs by network area, even within the same state.

5. Review your last 12 months of usage if possible.One bill may not reflect your normal pattern.

6. For businesses, compare based on your operating hours.

A business that uses power mostly during the day may need a different plan from one that operates at night or across weekends.

If you want to check whether your current plan still stacks up, you can use the Select and Switch electricity comparison service to compare available options in your area. The aim is not just to find cheap electricity rates, but to understand which plan may better suit your usage, location and customer type.

FAQs

Will electricity prices go down in Australia?

In some areas, benchmark electricity prices have gone down for 2026–27. The AER’s DMO reduced residential flat-rate standing offer prices in New South Wales and South East Queensland, while Victoria’s VDO average annual bill is also lower for domestic and small business customers. However, South Australia is the outlier for residential flat-rate DMO standing offers, and individual bills can still rise because of usage, tariff changes, retailer pricing, supply charges or the end of rebates. [energyplans.com.au], [esc.vic.gov.au]

What is the Default Market Offer?

The Default Market Offer is a regulated electricity price set by the Australian Energy Regulator for standing offer customers in New South Wales, South Australia and South East Queensland. It caps what retailers can charge standing offer customers and acts as a reference price so customers can compare market offers. [aer.gov.au], [dcceew.gov.au]

What is the Victorian Default Offer?

The Victorian Default Offer is Victoria’s regulated standing offer price, set by the Essential Services Commission. It is designed to provide a simple and reasonably priced electricity option for customers who are unable or unwilling to engage in the market. It also acts as a reference price for Victorian market offers. [esc.vic.gov.au], [esc.vic.gov.au]

Why did South Australia’s prices go up when others fell?

South Australia’s residential flat-rate DMO standing offer price rose slightly in 2026–27 while several other regions fell. One reason is that wholesale market conditions differ by state. AER wholesale market data for Q1 2026 showed South Australia had higher average quarterly wholesale prices than other National Electricity Market regions, with high-price events linked to hot weather, high demand, low wind output and network limitations. [aer.gov.au], [energyplans.com.au]

Is the DMO the cheapest electricity price?

No. The DMO is a safety-net standing offer and reference price. It is not necessarily the cheapest plan available. Many customers may be able to find cheaper market offers, depending on their location, usage and plan conditions. [dcceew.gov.au], [esc.vic.gov.au]

How do I compare electricity rates properly?

To compare electricity rates properly, check the full plan, not just the usage rate. Compare daily supply charges, usage charges, time-of-use periods, solar feed-in tariffs, discounts, benefit periods and how the plan compares with the DMO or VDO reference price. Business customers should also compare electricity based on their operating hours and annual usage.

Final Takeaway On Electricity Bills

Electricity prices in Australia are not moving in one simple direction in 2026–27. Some regulated benchmark prices have fallen, South Australia remains an outlier for residential flat-rate DMO standing offers, and many customers may still feel cost pressure because rebates, usage patterns, supply charges and market offers can change.

The best next step is to understand your current bill first. Then, if your plan looks expensive against the reference price or your recent usage, it may be worth running an electricity company comparison to see whether there are better electricity rates available for your home or business.

Publisher note: Default electricity prices reset each year from 1 July. Before publishing or updating this article, confirm the latest DMO and VDO percentage changes from the AER and Essential Services Commission.