Why Have Australia's Electricity Prices Gone Up?

It doesn’t make sense that Australia’s residential electricity prices are among the highest in the world despite having plenty of energy resources. So why have Australia’s electricity prices gone up, especially in recent years?

In the 10 years to June 2013, residential electricity prices in Australia have risen on average by 72%. Price increases have continued ever since, although the government introduced the Default Market Offer (DMO) in 2019, which has helped to lessen bill pain. Here a few of the factors driving the price hikes.

Industry Causes

Renewables?

Many have claimed that the price increases are the result of a transition from coal-fired power to greener alternatives. These claims are often politically motivated, however there is some truth behind them.

In our leading wind power state South Australia, for example, there have been high prices and power outages as a result of unreliable green resources and a lack of backup coal-fired plants. Similarly, some large and heavily polluting coal-fired plants were closed somewhat abruptly also leading to increases in wholesale prices.

However, a shaky transition from coal power to renewables does not paint the full picture.

Commodity Prices and Exports

Commodity costs for natural gas and black coal have contributed significantly to higher costs for consumers. Not to mention, a more lucrative export market has been prioritised over domestic demand. This causes domestic customers suffer from supply shortages and price increases.

Retailers Partly To Blame

In their investigation of Australia’s high energy costs, the ACCC attributed some of the blame to the confusing pricing structures and poor transparency of electricity retailers.

Consumers have struggled to determine what energy plan is right for them and which are priced reasonably. The result is that many Australians have wound up paying more for electricity than they need to.

The Good News

Default Market Offer

In 2019, the DMO was introduced. The DMO is a price cap imposed by the AER for energy retailers to adhere to. Its purpose is to facilitate the comparison of energy plans for consumers by acting as a reference point to other plans in the market.

The DMO replaced ‘standing offers’, which used to be the default offer customers received if they chose not to shop around for their energy plan. However, standing offers were often excessively high, which the DMO has sought to rectify.

The introduction of the DMO has helped reduce energy prices and promote greater market transparency.

The Market Is Not As Expensive As You Think

Despite the government’s efforts to improve transparency, massive gaps still exist between the average energy plan price and the cheapest. But that means there a big savings to be made if you take the time to find them.

In fact, switching from your current, averagely priced plan to the cheapest plan that still fits your needs could save you hundreds every year. This means shopping around for your energy plan and educating yourself on the market is crucial.

However, even with the DMO making it easier to compare prices between retailers, comparing plans can be a time-consuming and confusing activity. That’s why many households avoid the hassle and are stuck paying more than they need to.

At Compare & Connect, we are dedicated to helping Australians pay the right amount for their household electricity. Tell us what you need out of a plan and we can do the research for you free of charge. The Australian electricity market is expensive enough without paying for more than you need. Enlist our help today so you can start saving tomorrow.