Electricity price hikes in Victoria – Here’s what you should know

Recently Victorians have been facing a rise in electricity prices as the government introduced a new scheme designed to ease cost-of-living pressures. This is attributed to supply constraints and high coal and gas prices.

According to Victoria’s Essential Services Commission, the default rate for Victorian consumers would soar by 1% to 5%, depending on the type of tariff and area.

So, why is this happening?

These rises in prices indicate significant challenges in Australia’s power sector. We may be in the nascent phases of a shock to energy prices like the oil price crisis in 1973. Here are some reasons for electricity price hikes in Victoria.

1. The conflict in Ukraine:

Russia is a significant contributor to the energy supply worldwide. However, curtailing the import of Russian oil and gas has virtually shut off that tap in Australia. This leads to a tremendously increased demand for gas, coal, and oil from other countries on a global scale. In the wake of constrained supply, the prices for those commodities have also been raised. Hikes in prices have a great strong impact on people because coal contributes to almost two-thirds of Australia’s electrical supply.

2. Unscheduled outages at coal and gas-fired facilities:

There might be several reasons why these plants aren’t operating at peak capacity. But Resources Minister Madeleine King said some of them must be shut down for maintenance on aging stations.

3. Varying weather conditions:

Floods in the nearby parts of Victoria impact the supply of coal and the interruptions, which are having flow-on effects.

4. Wholesale rates impact Energy hikes:

It is important to note that default offers are not ‘fair prices’ offers. Instead, they have offers that rank among the most expensive on the market. In reality, a new analysis from the Victoria Energy Policy Centre indicates that in the past few years, any Victorian customer who chose an offer at random was going to pay less than the default rate. More informed customers could have spent up to 30% less.

How this affects your bills:

Retailers of electricity revise their pricing at least once every 12 months as energy costs fluctuate. The 2021 market report from the Australian Competition and Consumer Commission (ACCC) lists the components of the typical Australian household power bill as follows:

• The wholesale price of electricity (32% )
• Maintenance costs for the network’s wires, poles, and other infrastructure (45%)
• Expenses related to meeting renewable energy target obligations (10%)
• Retail charges such as handling bills and customer service (10%)
• Sales margin(3%)

What can you do to save electricity?

Like most other Victorians, you may be looking to compare electricity plans and save some money on your monthly bill. Select and Switch lets you conveniently compare energy plans and try to find a provider better suited to your needs. But for now, here are some tips for you to optimise your energy consumption:

1. Opt for fixed plans:

While some energy plans have fixed prices for an entire year, most of them are variable. This means the retailer is free to alter them as they wish. If you act now, you may be able to lock in a fixed-rate plan for a year and safeguard against any future price rises.

2. Switch your current plan:

If you receive a rise in your electricity rates, then switching your electricity plan to a cheaper offer is the best thing you can do.

Switching is also useful in that it doesn’t cost you any money. Soaring wholesale electricity prices that raise the rates affect each retailer differently. Due to the tripling in prices of black coal and gas in a year, some retailers get more of their power from these sources than others, meaning that their prices will be affected more.

Therefore, once all the price rises have been factored in, you may still be able to save money on your electricity bill by switching from the expensive plans to the cheaper ones.

3. Cut out extra supplies:

The average Victorian home only receives two ratings for efficiency. By making your homes more energy efficient, you can save hundreds of dollars each year on your electricity costs. Implementing a few improvements to the major energy consumers like pools, heating/cooling systems, and hot water services is a smart place to start.

4. Learn about the pricing structure:

Each offer has a different set of prices or tariffs. Knowing them in advance enables you to remain cautious while making your payment whilst also choosing the suitable one for you. The tariff arrangements that retailers frequently provide are:

Flat rate: Electricity consumption is billed at the same rate irrespective of day or night.

Time-of-use: Electricity used during “off-peak” or low demand periods is billed at a lower rate than electricity used during high demand or “peak” times. Different pricing is applied, depending on the electricity consumption.

Flexible pricing: Along with peak, shoulder, and off-peak rates, this is an extended “time-of-use” tariff.

Block pricing: Some retailers split usage into units to determine charges. Each block is priced differently based on how much energy is utilised.

To Sum Up:

Since electricity prices are increasing, there has never been a better time for you to compare the electricity plans in Victoria and switch your current offer to a more affordable and cheaper rate. You can find the best electricity deals offered by our panel of energy retailers for Victoria in only 5 minutes with the help of our online energy comparison tool.

Check your options now and switch to a better electricity plan today.