Consumer Watchdog Says Australians Paying Too Much for Electricity

An Origin Energy power bill is pictured in Brisbane, Australia on June 8, 2018. (AAP Image/Dan Peled)

As millions of Australians have been hit with electricity price surges since July, the Australian Competition and Consumer Commission (ACCC) has raised concerns that electricity bills are too high.

In May, the Australian Energy Regulator released the new default market offer, which caps the maximum rate energy retailers can charge residential and small business customers in three regions that are part of the National Electricity Market (NEM): New South Wales, South Australia and Southeast Queensland.

The new prices coming into effect from July 1 would see a significant number of Australian households experience an increase of up to $600 (US$409) in electricity bills for the 2023-2024 financial year.

The energy regulator said the main driver of the rise in retail electricity prices was high wholesale energy costs caused by expensive electricity futures contracts signed between energy companies before October 2022.

Other contributing factors included higher costs of coal and gas used for electricity generation and reliability issues with aging coal-fired generation assets.

Around nine percent of NEM customers are charged the default market rate, while the remaining are on cheaper unregulated market offers provided by energy retailers.

However, the ACCC has found that market offers have caught up with the default rates set by the government and, in many cases, surpassed the latter.

“There are millions of customers who are paying at or above the government-set safety net price,” ACCC commissioner Anna Brakey said, reported the Australian Broadcasting Corporation.

“[Of those], there are more than a million customers paying more than the safety net price. That means they’re paying more than they need to.”

The commissioner then advised consumers to contact their retailers and shop around to ensure what they paid was not above the default rates.

“It’s important that they ring their retailer because they have a right to that government-set safety net price. They need to pay that at a maximum.”

Retailers Defend High Electricity Prices

The Australian Energy Council, a peak body representing energy retailers in the country, believed that the price hikes were necessary due to the impacts of local coal-fired power station outages and the war in Ukraine, which inflated global energy prices.

“Retailers need to be able to recover the costs of doing business or running their businesses from their customers. That’s just a fact of life,” Australian Energy Council CEO Sarah McNamara said.

The CEO also noted that there was no evidence of price gouging in the consumer watchdog’s analysis of electricity bills.

“I think it’s evidence that retailers are struggling to maintain really cheap market deals everywhere all the time at the moment,” she said.

“There’s a very tough economic environment for retailers to operate in.”

A power point in Brisbane, Australia, on Sept. 23, 2022. (AAP Image/Russell Freeman)

While a number of small retailers had to exit the market due to unfavourable business conditions in the 2022-2023 financial year, several energy companies have reported improved financial performance.

In June, AGL, one of Australia’ top energy companies, announced an update to its 2022-2023 earning forecasts, which revised the company’s underlying profit after tax to $255-$285 million, up from $200-280 million in the previous forecast.

The company attributed the improved earnings to the sustained high wholesale energy prices as well as the commencement of operation of several projects.

The energy giant has also been sued for allegedly using bids to manipulate power prices and inflict financial damage on customers.

Government Continues to Pursue Renewables Despite Energy Crisis

While Australians continue to suffer from high electricity prices, the federal Labor government still insist on accelerating the renewable transition to achieve net zero emission.

In April, the government announced that it had doubled the number of approved renewable energy projects since coming into power in May 2022.

While acknowledging that coal and gas still have a role in the country’s energy mix, the government is trying to bring more renewables online faster.

Energy Minister Chris Bowen still firmly believed that renewables were the cheapest form of energy and that the energy crisis would be resolved with more renewables flowing onto the grid.

During a recent TV show, the minister suggested Australians struggling with energy prices to install solar panels on their house roofs to deal with the price hikes, which sparked widespread criticisms from viewers.

The government also rejected the Opposition’s calls to include nuclear energy in the energy mix, saying it was an expensive technology.

However, energy bosses have warned that Australia’s energy security could be at risk as the current development of new renewable energy sources failed to catch up with the shutdown of traditional power plants nationwide.