Australian households face steep power bill increases as generation costs soar | Energy

Households in Queensland, New South Wales and elsewhere will face double-digit increases in their power bills from July after the regulator lifted its standard electricity price after generation costs soared by close to half.

The Australian Energy Regulator, which was ordered to delay the release of its default market offer (DMO) from 1 May until Thursday by the outgoing Morrison government, said residential customers in south-east Queensland will see increases of 11.3%-12.6%, or about double the expected inflation rate.

Similarly in NSW, residential customers will see increases 8.5%-18.3%, or much higher than the inflation rate. South Australia, the other state covered by the DMO, will see prices rise as much as almost 20%, while Victoria released its own reset for 2022-23 on Tuesday, lifting the price by 5%.

The DMO was set up in 2019 to give consumers who don’t shop around a “price safety net”. The offer serves as a price cap for residential and small business customers for how much energy retailers can charge electricity to consumers on default plans, known in the market as standing offer contracts.

Rising gas and coal prices globally have contributed to a spike in wholesale power prices to record levels. Repairs or issues to as much as a third of the coal-fired power fleet have also contributed to the recent jump.

And here's today's crazy electricity price graph:

Quarter three prices up *$30-$40/MWh* in one day, across all mainland NEM regions.

— Dylan McConnell (@dylanjmcconnell) May 25, 2022


And here’s today’s crazy electricity price graph:

Quarter three prices up *$30-$40/MWh* in one day, across all mainland regions.

— Dylan McConnell (@dylanjmcconnell) May 25, 2022

Incoming energy minister Chris Bowen said the sharp increase in the standard market price was the result of “nine years of delay and denial” by the coalition government that would now be left with households and businesses to pay.

“The Liberal legacy is higher power prices” for the residents of Queensland, NSW and South Australia covered by the so-called default market offer, he said. “Nine years of policy chaos means we don’t have enough renewables in the system” nor enough transmission to link them up “the cheapest form of energy” to the grid.

Bowen also took aim at his predecessor, energy minister Angus Taylor, for acting to delay the release of the higher DMO. As reported by Guardian Australia earlier this week, Taylor ordered the regulator to delay the new offer from 1 May until today, after the election.

“Angus Taylor knew this report was coming out,” Bowen said. “They sat on this report. They approved its delay until after the election … they put power prices up and were dishonest about it.”

A spokesperson for Taylor earlier this week denied the delay was for political reasons. During the campaign, coalition ministers and the prime minister Scott Morrison claimed power prices had fallen by as much as 10%, a figure also included in the March budget.

The AER said that since the last DMO, wholesale costs for retailers have risen by 49.5% in Queensland, 41.4% in NSW and by 11.8% in South Australia. These were increases “due to reduction in generation resulting from unplanned outages and higher gas prices and gas prices, slow of investment in new capacity, and increasing ‘peaky’ demand (sharp highs and lows) driving up the cost of wholesale electricity contracts for retailers “.

The rise in generation costs had preceded Russia’s invasion of Ukraine in February, and the resulting increase in global prices for gas, coal and other energy supplies had compounded Australia’s increases. Extreme weather in NSW and Queensland had also affected coal supplies and electricity demand, as had further unplanned outputs at multiple generators, the regulator said.

“In setting these new DMO prices, we understand the significant impact they will have on some consumers who may already be struggling with cost of living pressures,” Clare Savage, AER’s chair, said in a statement.

“We have given scrutiny to all factors affecting the DMO calculation and have set safety-net prices that reflect the current conditions and underlying costs to retailers.”

“If a large number of retailers are unable to recover their costs and are forced to exit the market – as we have recently seen in the United Kingdom – that will add more cost to consumers,” Savage said.

The rises come as the Queensland government announced residents will get a $175 rebate on their household power bills with the state’s wholesale electricity prices the highest in the nation.

Premier Annastacia Palaszczuk says households will get the rebate on their next power bill to offset that increase, with electricity providers to automatically apply the credit.

“People are having to make difficult choices including going without,” Palaszczuk told on Thursday.

Weston Energy early this week told the market it could no longer supply gas to customers as agreed. Regulators triggered a retailer of last provision for the first time in six years to transfer the affected customers to alternative suppliers.

Gavin Dufty, a spokesperson and energy expert at St Vincent de Paul, said the rise in the market offer was about the levels expected and would affect some 580,000 households.

“It’s a tough gig for the AER in uncertain times. If you put it up too high people on the DMO end up paying above the odds,” Dufty said. “If you put it too low all people out on the market offers might see greater increases in prices than those on the DMO.

“It also indicates to me that households with solar are likely to see an increase in feed-in tariffs to match the increase in wholesale prices – so may be somewhat insulated from the price changes,” he said.

It was now a “great time” for people with healthcare cards and pension cards to be reminded that there are energy concessions available, Dufty said.

with Australian Associated Press

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