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32% hike: How to avoid the worst of rising energy prices

·3-min read
Energy companies and cash
Many energy plans will now be above the government reference price set by regulators. (Source: Getty)

Most energy companies, including several of the big names, have revealed their price hikes for the year.

EnergyAustralia, Red Energy, Momentum and Powershop have now shown their hand, following updates from AGL, Origin and several smaller retailers during the past few months.

Yesterday, EnergyAustralia announced increases as high as 18.9 per cent for customers in South-East Queensland.

big retailers
Source: One Big Switch

This follows updates from AGL, which has hiked rates by as much as 18 per cent, and Origin, which has bumped rates by as much as 14.4 per cent.

Commenting on the price hikes, Momentum Energy, which has increased prices by as much as 32 per cent in NSW and South-East Queensland, said its prices had been affected by this current environment of wholesale price volatility and very high prices.

The retailer also pointed out that price increases and decreases in the energy industry weren't directly comparable because it depends on the starting price.

“For example, a customer of Retailer A who receives a price increase of 20 per cent is not necessarily on a worse offer than a customer of Retailer B who receives a price increase of only 10 per cent. The final price is what’s important,” a Momentum Energy spokesperson said.

Small retailers hiking faster than big ones

Joel Gibson from One Big Switch said the bulk of energy retailers had revealed energy prices for the year, with the latest round of announcements covering around 80 per cent of the market.

As expected, Gibson said the bigger retailers were hiking rates more modestly than smaller companies.

Gibson said the larger players owned their own power stations so were much less exposed to soaring wholesale energy prices.

“If you don’t flee the worst hikes, you could end up paying hundreds more than the government reference price,” he said.

Gibson said the advice had shifted from 12 months ago when he was urging energy customers to consider the smaller players offering better deals.

For the time being, he said people would be wise to stick with the bigger players, but that this advice would be updated as the situation evolved.

What you should do

While it’s getting harder to find a competitive rate, Gibson said customers should be aiming to secure a variable rate 10 per cent below the government reference price.

This is what’s known as the default market offer (DMO), which is a safety net rate set by energy regulators to stop energy companies charging unfairly high prices.

The next-cheapest option is to switch to a fixed-rate plan that’s anywhere below the reference price, although Gibson said these were becoming rare.

He also said customers could demand to pay the standing offer reference price.

“The exception to this rule is solar customers with a big feed-in tariff, who might opt to pay higher rates in exchange for a higher feed-in,” Gibson said.

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