Australian Energy Market Commission 2016 Residential electricity price trends report
Energy prices are one of the top sources of cost of living pressure, and it seems that the stress is set to rise with the Australian Energy Market Commission (AEMC) 2016 Residential electricity price trends report finding that residential electricity prices are still rising.
The AEMC’s annual report on household price trends looks at what is driving changes in the underlying cost components of household electricity bills. It analyses the competitive market sectors of wholesale generation and retail; the regulated networks sector; and price implications from government environmental policies.
AEMC Chairman John Pierce said the report shows the retirement of coal-fired generators will increase residential electricity prices in most places.
“Prices are likely to rise in most parts of Australia over the next two years, but expected to fall slightly in south east Queensland and Tasmania,” Mr Pierce said.
Against an official cash rate of 1.50% and general inflation of just 1.30%, wholesale electricity costs are estimated to increase by significantly more: between 5% and 15% each year over 2015/16 to 2018/19 in most states and territories. Perhaps not surprisingly, demand is expected to remain flat.
In dollar terms, the report estimates the national average residential bill will be $78 higher in 2018/19.
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Reforms are underway in most jurisdictions to give consumers greater control over how they manage and use energy:
- From 1 July 2017 network businesses will be required to structure their prices to better reflect the consumption choices of individual consumers. This aims to give consumers price signals about the cost of using electricity in different ways and at different times, so they can make more informed energy choices.
- New rules to open up competition in metering come into force from 1 December 2017 and will give consumers more opportunities to access a wider range of new energy products and services with real time information about their energy use.
State by state electricity price increases
The AEMC advises that it expects the following increases in state by state electricity prices over the next two years:
| Jurisdiction | Average annual price movement July 2017 to June 2019 | Current average annual bill |
|---|---|---|
| Queensland | 1.5% decrease | $1,390 |
| NSW | 3.9% increase | $1,320 |
| ACT | 9.3% increase | $1,450 |
| Victoria | 3.5% increase | $1,100 |
| South Australia | 2.4% increase | $1,600 |
| Tasmania | 0.6% decrease | $1,920 |
| WA | 7.0% increase | $1,400 |
| NT | 2.5% increase | $1,790 |
“The changing generation mix, with more solar and wind entering the market and coal-fired generators retiring, means that electricity flows and wholesale prices are also changing. This is leading to greater variation in residential bills depending on where you live, and how much electricity you use,” said AEMC’s Mr Pierce.
“Wholesale electricity costs are a key driver in customer bills. These costs are increasingly connected with the mechanisms used to achieve emissions policy objectives – that is, how the energy sector will contribute to the emissions reduction target set by the government as part of the Paris commitment.”
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