Domestic consumers could face electricity price increases as high as 8.9 percent as regulator acknowledges ‘challenging time’ for customers.
Households and small businesses across New South Wales, South East Queensland, and South Australia will soon see electricity bills rise, with the Australian Energy Regulator (AER) approving price increases between 2.5 and 8.9 percent for domestic customers and up to 8.2 percent for small businesses.
The regulator sets the Default Market Offer (DMO) for electricity prices—a price “safety net” and benchmark for electricity prices in these regions.
AER Chairperson Clare Savage said the regulator had approved the higher prices because there have been “cost pressures across nearly every component” of electricity generation and distribution.
However, she added that it had “given careful scrutiny to every element of the cost stack to ensure prices are a reasonable reflection of the costs of a retailer to supply electricity.”
Wholesale market and network costs, the two largest price drivers, have risen between 2 and 12 percent due to high demand, outages at coal generators, and low solar and wind output. Inflation and interest rates were also contributory factors.
Those events have also influenced the price of wholesale electricity contracts for the coming year, the AER said.
Retailers Claim Costs Have Increased
Retail costs are a smaller component of prices than wholesale and network costs, but these have also increased “due to growing costs reported by retailers.”
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Savage said the AER has decided not to include a “competition allowance” in its latest determination, considering the current economic climate.
“While economic conditions have eased somewhat, underlying inflation remains elevated and the Reserve Bank of Australia has noted the economic outlook remains uncertain,” she said.
“Not including the competition allowance will also alleviate a small amount of cost-of-living pressure on consumers.”
Despite that concession, Savage admits that permitting price rises of this magnitude will put more pressure on households already struggling with the cost of living.
“The DMO is intended as a safety net for those who don’t—or can’t—shop around,” Savage pointed out, “but there are better offers available.
“By early February 2025 we had seen median market offers fall between two and five percent compared with July 2024, and the most competitive offers are now 19 to 25 percent below the current DMO price.
“It’s important that consumers regularly shop around to compare available deals and ensure they’re on the best plan for their individual circumstances.”
