2023 is here and energy prices are changing. What do you need to know?

Choosing the right energy provider is an effective cost-cutting exercise for households looking to save on their utilities. After the New Year, energy retailers are expected to make changes to energy tariffs, which may affect the rate that you are paying. Once you receive a notification that your energy rates have changed, then comparing gas and electricity providers is the best way to avoid bill shock, and ensure that you are not paying excessive energy bills.

To get the best deals on gas and electricity prices, it is advisable to change energy providers. Many Australians habitually switch every one or two years, which is a good measure towards avoiding the retailer’s increased tariff and will save you a decent sum of money. When your fixed tariff ends, which is unavoidable, you can be moved to your retailer’s standard tariff, which is generally more expensive, or have your rates increased, unless you sign up for a new deal.

Select and Switch are ready to help you compare gas and prices from an extensive range of leading energy providers in your area.

Select & Switch has been actively helping Australians find the right gas and electricity provider for many years and is focused on helping customers ensure they save and get a better electricity deal for their home or business. Select and Switch regularly updates their system to reflect the latest rates from their energy partners.

Changes depend upon the state.

Some of the estimated forecast changes for each state are outlined below (the actual changes may be different)

ACT: Independent Competition and Regulatory Commission estimate:

• The average tariff will reduce by 1.25 percent.
• For the average household, there is also a decrease of $23 per year.

New South Wales:

• Depending on distribution zones, the default market will increase by 9.6 percent, 11 percent, or 18.3 percent.
• A maximum annual increase would be $210 to $369.

Northern Territory: Tariffs are set by the Northern Territory’s Treasurer under the Electricity Pricing Order. A draft of the July 1 order was signed on June 9, but it has yet to be made public.

Queensland:

• Southeast Queensland: According to the AER, power bills could rise by up to $220 yearly or 12.6%.
• Regional Queensland: Queensland Competition Authority reports a 9.2 percent increase or $119 per year.

South Australia: An annual increase of $198, or 9.5%.

Tasmania: Determination for the 2022-23 financial year is yet to be released.

Victoria: Essential Services Commission announces a 5 percent increase in Victorian Default Offer and a $61 annual increase.

Western Australia:

• State budgets determine household prices every year.
• There will be a 2.5 percent price increase.

Do retail prices impact wholesale electricity prices?

Retailers buy electricity at wholesale spot prices to sell to their customers. Neither residential homeowners nor businesses pay wholesale spot prices. A contract or retail electricity plan normally stipulates what you will be charged for that energy over a specific period.

NEM is the platform where wholesale electricity prices are traded. And these prices tend to fluctuate based on supply and demand.

In the majority of energy bills, the wholesale cost of producing power is only covered by 30-40%. In contrast, 60%-70% portion of your charge is attributed to transportation. These charges are renewable energy target, residual cost, and retailer services.

Put differently, even when wholesale electricity rates stay the same, other factors can increase your power bill. Wholesale price increases may cause your average electricity price to increase and vice-versa.

Why do electricity prices increase?

Certain factors are out of your control, but you do have control over some of them.

Out-of-control factors

Retail/administration costs: Account management, meter readings, and more fall into this category.

Purchase costs: As providers purchase electricity and sell it to consumers, these prices fluctuate depending on the demand.

Network costs: Electricity poles, wires, and pipes cost money to build, maintain, and operate.

Green costs: For electricity providers, renewable electricity generation can be more expensive, so energy customers may pay higher bills.

International influences: Prices are more than just determined by national factors. They can be affected by global demand, geopolitical tensions, and global supply issues.

Weather conditions: Despite the predictability of seasonal patterns, unpredictable weather events or natural disasters can create unexpected demand and potential costs for fixed infrastructure.

Raw material costs: Russia’s invasion of Ukraine is causing higher international coal and gas prices. Local prices are volatile as Australia currently exports nearly 80% of its gas.

Less capacity: Most of Australia’s electricity comes from coal-fired power stations, but around 25% have been offline this year because of repairs or maintenance.

Household electricity bills generated 32% of wholesale costs and 45% from network fees in 2020-21. In turn, distributors pass it on to providers, who then pass it on to you.

Under your control

Several factors can mitigate increases in electricity prices: The amount of consumption, the tariff, the efficiency of your appliances, and your plan type and provider. To understand these factors in more detail, please click here.

Coal and gas are abundant in Australia. So, you might wonder why the Russian-Ukraine War would affect our electricity bills.

Most of its fossil fuels are exported through supply agreements and form part of a global trading market.

In the near future, a significant reduction or revocation of Australia’s exports is unlikely. In light of the country’s complete dependence on imported energy, future global price shocks, and supply disruptions are likely to be part of the problem.

The Russian-Ukrainian war has impacted energy prices, but they witnessed an increase even prior to the war. The economy slowed during the pandemic. Consequently, a decline in energy demand was caused by many industries closing down or reducing operations.

Despite the economic recovery, the supply and demand gap resulted in increased energy prices. Rising energy prices were exacerbated by the Russia-Ukraine war. Although Europe rejected exports, no immediate alternatives were available, soaring energy prices even further.

Also, the environmental transition from fossil fuels to renewables has been significantly slowed down by the war. Due to the time-intensiveness of wind turbines, solar panels, batteries, and other approaches, it may be difficult to scale them rapidly.

What is the likelihood of Australia’s electricity prices falling soon?

Earlier in this article, we learned that retailers purchase electricity from wholesalers and sell it to businesses and households. Hence when energy prices spike, the spot market is typically more expensive. Despite getting charged a fixed price for electricity, the costs of such a volatile market eventually trickle down to consumers.

If retailers managed to hedge against such price spikes, the energy bill would reduce. As wholesale prices decline slowly and electricity bills reduce over time, low prices cannot be achieved immediately, but hopefully in the medium to long term. Increasing renewable energy generation is another way to lower energy prices.

What would having more renewable energy sources mean for Australia?

Coal plants are being impacted by renewable energy, with some retiring earlier than expected. Nevertheless, renewable energy can be a useful tool when it comes to replacing large coal-fired plants.

As we transition to increase the share of intermittent renewable energy generation by taking down major coal-fired power plants, the added burden of extreme weather is likely to add larger price fluctuations. Further, if hydropower development and battery storage do not meet government targets, the transition stage of increasing energy prices will continue.

Finding the best energy plan

You can help yourself to decide if you have the best deal in the market if:

You have a fixed-rate energy plan

If your energy bill is predictable enough, you have done a great job of comparing energy providers in your local area. In case your fixed-rate energy plan has finished, then it is easy to compare the best electricity rates from our energy providers in Victoria, New South Wales, Queensland, A.C.T. and South Australia with Select & Switch.

Your electricity and gas prices seem reasonable.

Everyone looks for a reasonable and affordable plan when looking for gas and electricity providers. Due to regular changes in energy prices, it is always a good idea to complete a regular comparison to see if your existing electricity and gas rates are still reasonable or competitive.

To ensure you are not paying too much, Select and Switch can help you quickly and easily compare your current electricity or gas bill. The comparison takes less than 5 minutes and is completely free for you to check if a better electricity or gas deal is available.

Your energy plan offers discounts on the rate.

Your energy tariff might differ from others as it may offer a discount on your usage or supply charges. It can be frustrating and time-consuming to try and compare a range of energy retailers when their rates are displayed differently. Some retailers now offer cheaper rates without discounts.

Select and Switch’s free energy bill comparison tool will do all the work. Just input your postcode, energy type, and usage information from your recent electricity or gas bill. The comparison results will tell you if you could save money by giving you the total amount your recent bill will cost against our panel of leading electricity and gas providers.

If you have any questions or need help comparing your bill, contact our friendly consultants by calling us on 1800 959 969 or simply drop us an email at [email protected].