Household Electricity Price Trends

22 March 2013

The Australian Energy Market Commission (AEMC) today released its Electricity Price Trends Report, which looks at trends in household electricity prices and examines the drivers of those trends.

Electricity prices are made up of a number of components.  In recent years the network component has consistently been the major driver of price increases.  It is expected that increases in this component will moderate significantly after July 2013.

AEMC Chairman Mr John Pierce said that on a national basis - after a projected average total price increase of 14% for households in the year to 30 June 2013, it is expected that the rate of price increases will moderate to an average annual rise of 3% for the two years to June 2015.

“Network prices will continue to drive the total prices paid by households, but as investment needs are progressively re-assessed this may lead to lower network costs.

“If current trends continue, overall wholesale prices are expected to remain flat, and we expect retail costs to flatten as well.

“The price impact of environmental initiatives is also moderating. The carbon price has already been factored into wholesale energy costs, and the impact of various state and commonwealth environmental schemes is likely to slow from this year. This reflects the end of the solar credits multiplier under the Small-scale Renewable Energy Scheme from
1 January 2013, and the closing of higher feed-in tariffs to new participants in many states,” Mr Pierce said.

The AEMC Pricing Trends Report identifies which factors are driving electricity prices and the impact they are likely to have in each state from 1 July 2012 to 30 June 2015.

It is not a forecast of actual prices but a guide to pricing trends and identifies the components that are driving those trends. The report does not take account of some decisions by governments and regulators announced in recent months.

Trends vary in each state according to the approaches taken by jurisdictional regulators to setting prices, and the different costs associated with population spread and density, weather, customer consumption levels, technology, economic strengths, consumer choices and environmental schemes.

“Network prices account for the bulk of anticipated total increases, but the impact of these can vary significantly across the states and territories,” Mr Pierce said.

“There are wide variations across the different states and territories but, on current trends, prices rise by an average 3.7 c/kWh this financial year, with that growth falling to less than 1 c/kWh on average for 2014 and 2015.”

Mr Pierce said although the report identifies clear trends in electricity pricing, final prices are likely to be impacted by further changes to the approach taken by jurisdictional regulators to price setting, particularly in relation to forecasting wholesale energy costs; the entry and exit of generators from the wholesale electricity market; and changes in network prices following the finalisation of new regulatory determinations for individual network businesses by the Australian Energy Regulator (AER).

For information contact:

AEMC Chairman, John Pierce (02) 8296 7800

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817

22 March 2013