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Updated ,first published
Households could start to feel relief from rising electricity bills within months as authorities move to cut prices on the eastern seaboard by as much as 10 per cent, potentially wiping off hundreds of dollars a year for some customers.
In welcome news for households battling mounting cost-of-living stresses, the Australian Energy Regulator on Thursday said it intended to reduce the maximum price retailers can charge customers on standard electricity plans, known as default market offers, from July 1.
The proposed default price reductions – ranging from 1.3 per cent ($31 a year) in South Australia, to 8.2 per cent ($226) in parts of NSW, and 10.1 per cent ($216) in south-east Queensland – would mark the steepest cuts since 2022, when Russia’s invasion of Ukraine pushed up the cost of coal and natural gas and triggered double-digit power bill rises.
The biggest proposed cuts would be for small businesses, whose annual bills could fall between 8 per cent ($379) and 21 per cent ($1320), the regulator said.
In Victoria, where the state’s Essential Services Commission sets its own default offer, prices for households are on track to fall by 3 per cent ($46) a year, while small businesses would save 5 per cent ($172) a year.
If the draft decisions do not change, customers in all eastern states stand to benefit from lower retail power prices, Australian Energy Regulator chair Clare Savage said.
“This draft decision points to the potential for some welcome relief for households and small businesses after several years of rising energy costs,” she said.
However, much will depend on how the war in the Middle East continues unfolding over the coming weeks, the regulator has warned. Attacks on critical energy infrastructure in the region and Iran’s effective closure of the Strait of Hormuz – a vital shipping corridor for much of the world’s oil and natural gas – is already roiling global energy markets and could push up the cost of running coal- and gas-burning power stations if the conflict continues.
Savage said the fighting in Iran was causing a “highly uncertain outlook from our perspective”.
“We have seen some increases in the international price of coal and gas,” she said, but added that those rises had not flowed through to the domestic market “at this point”.
Domestic gas prices remained steady, she said. Higher export prices for Australian thermal coal, driven by Asian utilities racing to secure enough energy to cover a drop-off in liquefied gas deliveries from the Middle East, had contributed to a 6-10 per cent rise in the price of contracts to buy and sell power at future dates, she said. But even at elevated prices, they are still “well below what we had in the wholesale market” this time last year.
Savage attributed this year’s proposed power price cuts mostly to falls in wholesale electricity costs – what retailers pay generators for power before supplying customers – following a period of record-breaking contributions from renewable energy, which lowered the need to call on expensive gas-burning power stations to plug supply gaps.
Renewables and giant batteries powered more than 50 per cent of the grid in the December quarter for the first time in history, crunching coal to its lowest-ever seasonal share of the mix, and gas to its lowest since 2000. Strong output from renewables, combined with a lack of major coal-fired power plant outages, helped drive a 44 per cent decline in wholesale prices.
This year’s “default market offers” – which directly apply to consumers who do not take up special deals but also act as a reference point for retailers such as AGL and Origin Energy – have added significance for household budgets after the Albanese government announced in December it would end its $75-a-quarter energy bill rebates.
For the first time, the government has also instructed the regulator to introduce a so-called “Solar Sharer” offer alongside the default offer, which will compel retailers to offer three hours of free power in the middle of the day, when rooftop solar regularly floods the grid with more supply than it needs and causes prices to crater. On Thursday, the regulator said the free usage periods in the opt-in scheme would run from 11am to 2pm in NSW and Queensland, and 12pm to 3pm in South Australia.
Energy Minister Chris Bowen, who remains under pressure from the Coalition over a failed 2022 election promise to deliver a $275 power bill cut by 2025, said the draft default offer reductions showed Labor’s policies to turbocharge the rollout of renewable energy and battery systems were working. “It’s no coincidence that this comes at the same time as we’ve hit 51 per cent renewable energy,” he said.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.From our partners
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