Aussies Warned Electricity Prices Could Increase: NSW Residents Face 9 Percent Spike

The Australian Energy Regulator released its latest Default Market Offer (DMO) for energy prices in NSW, Queensland, and South Australia.

A general view of Australia's largest solar farm, the Western Downs Green Power Hub, in Chinchilla in Queensland, Australia on Jan. 17, 2025. Brook Mitchell/Getty Images

Residents and business owners are being warned to expect electricity prices across three states amid the Labor government’s push for more renewable energy.

On May 26, the Australian Energy Regulator (AER) released the 2025-26 Default Market Offer (DMO) for energy prices for New South Wales (NSW), South East Queensland, and South Australia.

The DMO is the maximum price that retailers can charge electricity customers on contracts, and serves as a benchmark for comparing market offers.

Under the new DMO prices (pdf), residential customers in Australia’s most populous state, NSW, face increases of between 8.5 percent and 9.1 percent, while businesses will see rises of between 7.9 percent and 8.5 percent, depending on their distribution zone.

For example, a resident customer who uses around 3,900 kilowatt-hours of electricity a year in Ausgrid’s distribution network will need to pay $1,965 (US$1282) from July 1, 2025, up from $1,810 previously–an 8.5 percent rise.

Meanwhile, the price hikes in the two other regions are smaller, with residents and businesses being warned of increases between 3.7 percent and 0.8 percent in SE Queensland, and 3.2 percent and 3.5 percent in South Australia, respectively.

AER Chair Clare Savage said it was a difficult decision for the agency to raise the DMO prices amid the current cost of living crisis.

“We know this is not welcome news for consumers in the current cost-of-living environment,” she said.

“As noted in our draft determination, sustained pressures across almost all components of the DMO have driven these price rises.”

The new DMO price increases come as the Labor has introduced some measures to reduce the cost of living burden for Australians, including a $150 electricity bill relief in March.

What is Causing Price Increases?

According to the AER, the latest price increases have been driven by the sharp rise in retail and network costs.

While retail costs make up a relatively small portion of the DMO, they recorded the largest increase among all cost components—rising 35.4 percent, compared to 8.3 percent in the previous period.

The AER report said this increase was due to growing costs reported by retailers, including bad and doubtful debts, the implementation of smart meters, and the cost of acquiring and retaining customers.

Regarding network costs, the AER cited market factors such as higher inflation and interest rates that are compelling operators to charge higher fees.

Other contributing factors include spending to improve network resilience to address climate change-related risks, integration of consumer energy resources (including rooftop solar, batteries and electric vehicles), and cyber security.

High voltage electricity transmission towers in Newcastle, Australia, on April 14, 2023. Roni Bintang/Getty Images

Amid the significant increase in DMO prices, Savage told consumers that they were unlikely to pay that much.

“While the DMO protects consumers on standing offers that can’t or don’t engage in the market, as of this month, 90 percent to 95 percent of competitive market offers are below the current DMO price,” she said.

“On average, the lowest offers across DMO regions are between 18 percent and 27 percent cheaper.”

The AER chair also advised consumers to actively look for better deals and contact their suppliers if they have difficulties.

“I strongly encourage all consumers to avoid staying on an old or uncompetitive plan. Contact your retailer to see if you can get a better offer or shop around. At least every 100 days, your retailer must tell you on the front page of your bill if they can offer you a better deal,” she said.

“You can also compare available plans in the market by visiting our free and independent website–Energy Made Easy–www.energymadeeasy.gov.au.”

Energy Minister Calls for More Renewables

While Energy Minister Chris Bowen acknowledged the increases, he noted that it was “encouraging news” as the price hike was not as high as previously anticipated in March.

The minister also said it was the reason why the Labor government decided to extend the recent energy bill relief for a further six months.

“It’s clear energy bills for Australians remain too high, and we’re providing help for people doing it tough as we deliver longer-term reform,” he said.

In a statement on May 13, Bowen said that more renewable energy projects were needed to ensure “cheaper energy” could flow into the grid and help lower electricity bills.

“The Albanese government’s plan is the only one which is providing bill relief now and  supported by experts to deliver a clean, cheap, reliable and resilient energy system into the future,” he said.

Minister for Climate Change Chris Bowen speaks to the media during a press conference at Parliament House in Canberra, Australia, on March 19, 2024. AAP Image/Mick Tsikas

Labor’s Energy Policies Have Failed: Opposition

Meanwhile, opposition Liberal energy spokesperson, Ted O’Brien, said the latest DMO figures confirmed what Australians already knew–Labor’s energy policies were struggling.

He also stated that Australian families and businesses were being “crushed” by the policy.

“Three years ago, [Prime Minister] Anthony Albanese and Chris Bowen promised cheaper power bills,” he said.

“Instead, they’ve delivered among some of the highest electricity prices in the world.

“Everywhere you look, Labor’s policies are failing. Labor is struggling to keep the lights, can’t get offshore wind projects off the ground, gas supply is on a knife edge, and they can’t even deliver own their reckless emissions targets.”