Electricity Prices
Find out why electricity prices in Australia are rising dramatically and what you can do to lower your power bills
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With electricity prices rising dramatically in Australia, it’s now more important than ever to understand electricity tariffs and to compare energy plans to make sure you’re getting a good deal. Find out why electricity prices are rising so fast and what you can do about it right here with Savvy.
Why are electricity prices rising, and by how much?
Electricity prices in Australia are set either by state governments or by the Australian Energy Regulator (AER), depending on where you live. If you live in New South Wales, south-east Queensland or South Australia, prices for a default standard electricity plan are determined by the AER. In Victoria, the Essential Service Commission decides on electricity prices. In the NT and WA, the state governments determine the basic price of electricity.
In its determination for the 2023-2024 year, the Australian Energy Regulator has flagged electricity price increases of between 14.7% to a whopping 28.9%, depending on the exact electricity distribution area where you live. These increases will take place as from 1 July 2023. Victoria's Essential Service Commission will also lift prices by up to 25% for Victorians as from 1 July 2023.
What is causing electricity prices to rise?
The AER has said that wholesale energy prices continue to be the predominant driver of increased retail electricity prices. Wholesale prices (also known as the electricity ‘spot price’) refer to the price of electricity in the National Electricity Market (NEM). Electricity retailers compete against each other to buy power from the generators through the NEM. However, there are other reasons behind the increase in energy prices throughout 2022 and 2023.
Increasing wholesale energy costs:
Wholesale electricity prices have experienced a notable uptick due to various factors, including:
- rising fuel costs for transportation and electricity generation, in part due to the war in Ukraine, but also due to continuing COVID-19 supply chain difficulties
- reduced generation capacity, due to unplanned outages and reductions in output at Australian coal-fired power stations
- increased demand, due to unusual weather patterns causing hotter daytime temperatures, creating a higher demand for electricity to power air conditioning units
The tight supply-demand balance in the Australian energy market has driven up wholesale prices, which are passed on to consumers through retail price rises.
Investment in renewable energy infrastructure:
Australia's transition to a cleaner energy future involves substantial investments in renewable energy infrastructure. While these investments are crucial for long-term sustainability, they initially contribute to higher electricity prices, as the costs of building and maintaining renewable projects are passed onto consumers.
Environmental and policy costs:
Various environmental and policy initiatives, such as the Federal Government’s renewable energy target, plus emissions reduction schemes, and carbon pricing mechanisms, impose additional costs on electricity providers. These costs are passed on to consumers to support sustainable energy practices.
Network infrastructure upgrades:
The maintenance and upgrading of the electricity network infrastructure also impacts electricity prices. Investments in poles, wires, and substations to encompass new renewable energy inputs, and to ensure a stable electricity grid leads to an increase in costs for the electricity generators and distributors.
How can I reduce my electricity bills?
Electricity bills can take a toll on your household budget, but there are ways to cut down on electricity costs without sacrificing your family’s comfort. Let's explore some practical strategies to help you reduce your electricity bills and keep more money in your hip pocket:
Compare electricity plans, and switch if necessary
Make sure you are on the best electricity plan for your particular energy use pattern. You can do this by comparing energy retailers using Savvy’s free comparison service. Take the time to compare different plans, looking at competitive prices, sign-up bonuses and discounts, and flexible contract terms. Compare energy plans regularly, at least once a year, to make sure you’re up to date with the latest pricing, special offers and discounts that are available. The same applies to your gas plan. Compare new offers regularly to make sure you’re always getting the best deal possible.
Reduce your electricity consumption
There are a lot of ways to reduce your energy consumption, including:
- Turn off lights when you leave a room, unplug devices when not in use, and use power strips to control multiple electronic devices easily all at once
- Only run dishwashers and washing machines when they are full, and try to reduce the number of run cycles per week
- Use cold water to wash clothes, and use fresh air and sunlight to dry your clothes rather than using a tumble-dryer
- Switch your light bulbs to energy-efficient LED bulbs rather than incandescent ones to achieve up to 75% energy saving
- Turn down your hot water thermostat by just a few degrees, and turn up your air conditioning thermostat so less power is used to heat and cool
- Shut doors to unused rooms, and close curtains to either keep the sun out, or keep the warm air in
- Stop cool air leaking out by blocking off draughts and insulating your roof thoroughly
- In winter, make sure you remember to change your ceiling fan settings from summer to winter mode, so that warm air which has risen to the ceiling can be pushed down to the floor, and then recirculated in the room. Most ceiling fans have a switch on them, or on their remote control, which enables you to change the setting from summer to winter mode. This changes the direction of the fan, from summer (anti-clockwise) to winter mode (clockwise.)
Understand electricity time-of-use tariffs, and use them to your advantage
If you have a smart electricity meter and your electricity plan includes a time-of-use tariff, use these to your advantage and save money:
- Be mindful of peak demand times, and adjust your energy usage accordingly. Use as little power as possible during peak hours.
- Run your dishwasher and washing machine during off-peak hours to avoid higher electricity charges
- Try to reset your hot water heating, pool heating, underfloor heating and any other high-demand appliances to run during the cheapest part of the day or night when off-peak electricity tariffs apply
Upgrade to energy-efficient appliances:
Upgrade to energy-saving appliances with higher star ratings. They use less electricity and can save you a bundle in the long run. For example, a 4.5-star rated appliance can save you up to 30% or more in energy consumption compared to a lower-rated 2.5-star appliance. In addition, don’t forget to keep your appliances well maintained and serviced. A well serviced and maintained heater, air conditioner or water filter will run far more efficiently and will save you money in the long run.
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Disclaimer:
Savvy is partnered with Econnex Comparison (CIMET Sales Pty Ltd, ABN 72 620 395 726) to provide readers with a variety of energy plans to compare. We do not compare all retailers in the market, or all plans offered by all retailers. Savvy earns a commission from Econnex each time a customer buys an energy plan via our website. We don’t arrange for products to be purchased directly, as all purchases are conducted via Econnex.
Any advice presented above is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an energy plan. For further information on the variety of energy plans compared by Econnex, or how their business works, you can visit their website.