As if paying $2 for a litre of petrol wasn’t enough, everyone’s power bills are set to leap up next month as electricity prices become the latest addition to our high cost of living. Time to live under my doona so I don’t have to turn my heater on.
The Australian Energy Regulator (AER) ordered an increase to the benchmark price at the end of May in response to cost pressures facing energy providers.
The amount by which prices will rise will vary state to state and provider to provider, but rest assured I will be keeping my lights off and living in darkness this winter.
There’s been a lot of talk from all sides of politics about why people are being forced to pay more when the cost of living is already bonkers. So why is this happening and how hard will it hit my cocktail budget?
How much are energy prices expected to rise?
The AER’s tariffs, known as default market offers, will come into effect in July and will see prices rise by at least 8 per cent.
Base prices will rise between 8.5 per cent and 18.3 per cent in New South Wales, up to 12.6 per cent in Queensland and 9.5 per cent in South Australia. This will cost most Aussies at least an extra couple of hundreds of dollars a year.
But wholesale energy prices have gone up much more in the last 12 months and providers are private businesses in this free market so they can charge whatever they like. Capitalism, baby.
Some providers are warning price hikes *much* higher than 18 per cent.
New Zealand-based ReAmped Energy told its more than 70,000 Australian customers to take their business elsewhere or face doubling energy prices.
“The markets are just rocketing every day,” ReAmped chief executive Luke Blincoe said.
“The best thing we can do is advise customers to look somewhere else because the price increases that we will need to put through are so significant that we just would rather they were elsewhere and getting better deals.”
This is the most New Zealand thing I’ve ever heard. Bless them for being honest I guess.
Why is this happening?
Wholesale power prices in Australia have been rising since early 2021 and have more than doubled in the last 12 months.
The increase has been attributed to two main factors: a shortage of fossil fuels and crumbling coal-fired power plants across the country becoming less reliable.
Firstly, production issues at mines in NSW and Queensland have meant power plants aren’t getting enough coal to burn. Many plants have also reported unexpected generator outages in recent months. This combination has seen electricity generation at black coal plants fall to almost their lowest levels in history, which was in 2002.
The lack of material supply resulted in wholesale electricity prices rising to around $87 per megawatt hour in the first quarter of 2022 — 141 higher than the first quarter of 2021. And those high prices will soon be passed onto you, the consumer. Yay!
Energy companies also pushed for the tariffs to the help them cover the cost of moving away from coal and shutting its old plants. Origin Energy, for example, said it would close its Eraring facility in the NSW Hunter region — Australia’s largest coal-fired power plant — by August 2025.
What has the Federal Government said?
Treasurer Jim Chalmers spoke to several media outlets on Thursday morning to address rising energy prices adding to the high cost of living.
“The energy market operator has already imposed a cap … that’s an important step,” he told the ABC.
“There is the so-called trigger which is about domestic supply, we need to recognise that even that potential policy trigger has its own challenges and is not necessarily immediate. Our most important responsibility is to try and inject the sense of certainty.”
He said there wouldn’t be a quick fix to a problem that had been building for 10 years while the Coalition was in power but that investment in renewable energy was the longterm solution.
“I want to be upfront, honest … we’ve got a serious set of economic conditions that we’ve inherited from our predecessors which we have to acknowledge,” Chalmers said.
Energy Minister Chris Bowen has also criticised his predecessor Liberal MP Angus Taylor for making a political decision to delay the release of the AER report until after the election to make it seem like higher prices were Labor’s fault. They’re not.
Chalmers blamed the previous government for the $1 trillion debt it racked up, as well as rising interest rates and stagnant wages for the high cost of living. He said the Albanese government would implement a cost of living package in October to lift wages and implement childcare reform.
But for now, we all just have to cop it. Or move to a log cabin in the wilderness and read books by candlelight.