Australia Markets open in 2 hrs 27 mins

Electricity prices to jump 20%, Origin Energy boss warns

Electricity prices could increase by more than 20 per cent in July.

Origin Energy electricity. Australian money.
The head of a major energy retailer is expecting electricity prices to skyrocket. (Source: Getty/Reuters)

Aussies could be facing more expensive electricity bills this winter, according to Origin Energy boss Frank Calabria.

The energy boss has forecast prices to increase by more than 20 per cent from July 1, which is the date price changes from the energy regulator will kick in.

The Australian Energy Regulator (AER) is expected to release its draft changes to the default market offer (DMO) next week. This sets a price cap on what retailers can charge electricity customers on default or standing-offer contracts.

Calabria said he expected the AER to increase prices “in excess of 20 per cent”, on top of price hikes as high as 18 per cent last year.

“I would just reiterate that [the price increase] is in fact recovering costs that were incurred by the industry which, if we cast our mind back to May and June, certainly put the energy system under pressure,” Calabria told the Australia Financial Review Business Summit.

“Nevertheless, it’s going to be a contributor to cost of living, which we’re acutely aware of in terms of our customer base and supporting those that are less able to pay.”

The price rise will impact customers in New South Wales, South-East Queensland and South Australia on standing offers. Those in Victoria and the Northern Territory are part of separate markets.

Only about 10 per cent of customers are on default offers, with the remainder on market contracts. However, electricity retailers use the price as a benchmark to set other tariffs.

Calabria said the government’s coal and gas price caps had helped with a lower forward price for electricity, but said it would not help this year. That’s because providers were recouping their losses from last year, he said.

“So, it’s capturing the costs that were incurred through the winter we’ve just been through. But that forward price, if it stayed lower, would actually then flow through to consumer prices after that,” Calabria said.

Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.