Regulator Approves Increases in Power Bills, Leading to Higher Costs for Consumers
Consumers at home could be looking at electricity price hikes of up to 8.9 percent in the near future, as the regulator recognizes a ‘challenging time’ for customers.
Households and small businesses in New South Wales, South East Queensland, and South Australia are set to experience increases in their electricity bills, with the Australian Energy Regulator (AER) giving the green light to price hikes ranging from 2.5 to 8.9 percent for residential customers and up to 8.2 percent for small businesses.
The regulator establishes the Default Market Offer (DMO) for electricity prices, a pricing “safety net” and standard for electricity costs in these areas.
AER Chairperson Clare Savage stated that the higher prices were approved due to “cost pressures across nearly every component” of electricity generation and distribution.
Although, she noted that they had scrutinized every aspect of the cost structure to ensure prices reflect the retailer’s actual costs of supplying electricity.
Wholesale market and network costs, the main drivers of prices, have increased by 2 to 12 percent due to increased demand, coal generator outages, and reduced solar and wind power production. Inflation and interest rates have also played a role in this rise.
These factors have also impacted the pricing of wholesale electricity contracts for the upcoming year, according to the AER.
Retailers Report Increased Costs
Retail costs make up a smaller portion of prices compared to wholesale and network costs, but they have also risen due to retailers reporting higher expenses.
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Savage mentioned that the AER opted to exclude a “competition allowance” in its latest decision, due to the current economic circumstances.
“While economic conditions have improved somewhat, underlying inflation remains high, and the Reserve Bank of Australia has highlighted ongoing economic uncertainty,” she explained.
“By not including the competition allowance, we can alleviate some of the financial burdens on consumers.”
Despite this, Savage acknowledged that allowing such substantial price increases will add more pressure on households already grappling with the cost of living.
“The DMO serves as a safety net for those who choose not to— or can’t— look for better options,” Savage emphasized, “but there are more competitive deals available.
“As of early February 2025, median market offers have dropped by between two and five percent compared to July 2024, and the most competitive offers are now 19 to 25 percent lower than the current DMO price.
“It’s essential for consumers to regularly explore available deals and ensure they are on the most suitable plan for their specific circumstances.”
