Yahoo Finance Electricity price relief coming for Australians struggling with cost of living
The energy regulator has delivered its draft determination for the maximum price retailers can charge customers.
The cost of electricity is set to go down for hundreds of thousands of Australians after the country’s energy regulator (AER) handed down its draft decision for the 2024-25 financial year.
The AER’s Default Market Order (DMO) sets the maximum price energy retailers can charge customers on default contracts - known as standing offer contracts. The DMO applies to small business and residential customers living in New South Wales, South Australia and South-East Queensland.
A draft determination for the next financial year has been released and it’s good news for people struggling with the cost of living.
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The AER has revealed prices "will be less than the rate of inflation" and the majority of residential customers could see reductions of between 0.4 to 7.1 per cent. The remaining residential customers could have slight increases in prices of 0.9 to 2.7 per cent. This will depend on their region and whether they have a controlled or uncontrolled load.
Most small businesses are also expected to get a win, with expected price reductions of between 0.3 and 9.7 per cent. Others could see an increase of around 0.7 per cent, depending on their region.
The changes could save customers hundreds of dollars a year.
AER chair Clare Savage said the 2024-25 determination was based on several factors, including wholesale and network costs, and environmental and retail costs.
“We know that economic conditions have put pressure on many Australians and the increases in electricity prices over the last two years has made energy less affordable for many households," she said.
"In light of this, the AER has, in this decision, placed increased weight on protecting consumers. While wholesale markets have stabilised since their extreme peaks of 2022, this easing has been offset by the pressures we are observing in network prices. Poles and wires costs are a large component of retail prices, comprising around 40 per cent of the price."
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Savage added that there were some very good deals out there for customers.
“The median market offer has dropped by between 1 per cent and 5 per cent across most electricity distribution zones since December 31, 2023, and the most competitive market offers are now 18 per cent – 23 per cent below the DMO price," she said.
"Your retailer is required to tell you on the front page of your bill at least every 100 days if they can offer you a better deal."
While only a small portion of customers are on default offers - with the remainder on market contracts -electricity retailers use the DMO as a benchmark to set other tariffs.
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DMO prices were introduced several years ago to protect consumers from "unjustifiably high prices" and were meant to act as a "safety net for customers who have not or cannot engage in the retail electricity market".
"Retailers must compare their market offers to their standing offers so consumers know if their plan is more expensive than the standing offer and can compare discounts on a like-for-like basis," the AER said.
The final determination for the upcoming DMO will be handed down in May and submissions will be open until April 9. The price change will kick in on July 1.
Victorians also expected to have cheaper power bills
Victorian authorities have also revealed a draft decision for the 2024-25 DMO, which will affect roughly 360,000 residential and 58,000 small business customers.
The state's Essential Services Commission has suggested bringing prices down by around $112 (or 6.4 per cent) for residential customers and around $266 (or 7 per cent) for small business customers.
Chairperson Kate Symons said the recommendation comes after a large increase in prices for the 2023-24 DMO.
“We understand affordability remains front of mind for consumers. Electricity retailers are obliged to communicate their best electricity offer to customers on their bills at least once every 3 months. They must also assist customers experiencing bill stress,” Commissioner Symons said.
“Victorian energy customers are entitled to a range of assistance from their retailers. If you’re having trouble paying your energy bill, you can ask your retailer for help. Retailers are obliged to provide assistance such as payment plans and help applying for Victorian Government energy concessions and utility relief grants.”
Wholesale energy prices are down
This comes after a report revealed wholesale energy prices plummeted in 2023. Prices dropped by between 44 and 64 per cent last year thanks to milder weather, an increase in renewable power and lower fuel prices.
In the wake of the report, consumer money-saving expert Joel Gibson told Yahoo Finance customers should shop around to find the best deal.
“The reality is retailers probably won't proactively contact you to reduce your rates,” he said.
“Most likely, they'll release some new plans with lower rates sometime this year and only those who switch will save.”
