Household electricity bills set to fall over next three years

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Households can expect to be paying about $120 (or nine per cent) less on their electricity bills in 2023 than they do today, the AEMC’s latest annual residential electricity price trends report shows.

The 2020 report examines the direction household electricity prices will take over the next three years and what’s driving that direction. It has found for the second year running that prices will continue to fall – and the main reason for the drop is lower gas prices and the introduction of new sources of energy generation like solar and wind.

“It’s great to see prices falling because at the AEMC what drives us is how to keep the lights on and costs down in a decarbonising power system,” AEMC chief executive Benn Barr said.

“The three key drivers of household electricity bills – wholesale costs, network costs and environmental costs – are all falling, which accounts for the overall drop that we are seeing.

“There are also regional differences across states and territories in the national electricity market that will affect price outcomes. And what energy offer you have and how much you use will also affect your bill.”

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Electricity bills overall:

Wholesale costs are expected to fall by about $150 between FY19/20 to FY22/23 as more generation capacity enters the system and gas prices stay low

Network costs should also fall by about $4 out to FY22/23. While transmission costs will increase by about $13, distribution and metering costs will likely offset this with a drop in the order of $17

Environmental costs are expected to drop by $5 out to FY22/23 due to a decrease in large-scale renewable energy costs as more renewable generation comes online. After seeing these costs mostly increase over the past decade, they have now been projected to drop for two years running.

Across the national electricity market jurisdictions from FY19/20 to FY22/23:

South East Queensland electricity prices estimated to fall overall by 14 per cent or $190 (an annual average drop of five per cent)

South Australian electricity prices estimated to fall overall by 11 per cent or just over $200 (an annual average drop of 3.7 per cent)

Victorian electricity prices estimated to fall overall by 15 per cent or about $170 (an annual average drop of 5.3 per cent)

NSW electricity prices estimated to fall overall by two per cent or about $30 (an annual average drop of 0.8 per cent)

ACT electricity prices estimated to rise overall by two per cent or $45 (an annual average increase of 0.7 per cent)

Tasmanian electricity prices estimated to fall overall by four per cent or $70 (an annual average drop of 1.2 per cent).

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“Our report shows that prices will fall over FY20/21 and FY21/22 and could increase slightly in FY22/23 if there is less capacity following the scheduled exit of some coal-fired power from the market,” Mr Barr said.

“But the outcome for 2023 prices may well be different following recent announcements on increasing renewable energy capacity in both NSW and Victoria.

“We conducted our analysis before those announcements were made and so our numbers do not reflect the impact those developments could have on prices. In any case, the overall figures show that prices in 2023 will still be lower than they are today.

“This report has been giving governments forward looking, policy relevant information on energy prices for more than a decade – but it is important to stress these are projections not predictions. Trends can change sharply in response to new policies and sudden market changes.”

Understanding what’s driving prices can help give state and territory governments the information they need to help determine if price changes announced each year by retailers are consistent with changes in the power system’s underlying costs.

This year’s report also demonstrates that there are still significant savings to be had from shopping around for the best energy deal via sites such as the Australian Energy Regulator’s comparison site Energy Made Easy.

Price trends affect individual households’ electricity bills differently, depending on how much electricity they use, and which energy offer they are on. Knowing how much power you use and when you use it is becoming more important as new technologies and information platforms become more accessible.

Integrating new technologies into the power system and expanding consumers’ ability to participate in the energy market and control their energy consumption is a key focus for the AEMC.