Regulator announces final determination on electricity prices

Graph on a printed utilities energy bill
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The Australian Energy Regulator (AER) has released its final determination on electricity prices for the 2024–25 Default Market Offer (DMO 6).

The DMO is an electricity price safety net that protects consumers from unjustifiably high prices. The DMO also acts as a reference price on bills so all customers can compare plans with other retailers.

Related article: AER report shows wholesale energy prices down in 2023

“Electricity affordability remains a top cost-of-living issue for households. Many customers are facing challenges to absorb higher electricity prices in the current economic climate. In recognition of this, the AER has placed increased weight on protecting consumers,” the regulator said in its final determination.

As proposed in its draft determination, the AER has adjusted the approach used to calculate the retail allowance, ensuring a reasonable profit margin for retailers but deciding not to apply an additional competition allowance in DMO 6.

From 1 July 2024, most residential customers could have price reductions of between 1% to 6% while some may have increases between 2% and 4% depending on their region and whether they have controlled load (such as underfloor heating or a pool pump running overnight).

Most small business customers could see reductions between 1% and 9% while some could face modest increases of around 1% depending on their region.

AER chair Clare Savage said that since the 2023-24 DMO 5 was released, there has been movement in wholesale and network costs—the two largest cost components of the DMO.

The wholesale energy costs in DMO 6 have decreased by approximately 21% in South Australia and between 7% and 11% across NSW. In South East Queensland, costs have only decreased slightly (0.2%).

“The easing in wholesale prices has been offset by the pressures currently observed in the poles and wires—network prices,” Savage said.

Key drivers of increases in network prices include adjustments for under-recovery of revenue in prior years, updated capital and operating costs, increases in inflation and interest rates, increases in incentive payments and jurisdictional schemes, and for the NSW networks, the NSW Roadmap contribution allocations.

Costs associated with managing bad and doubtful debts and an expansion in the roll out of smart meters have also resulted in increases in the retail cost component.

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“The combined effect of these various changes in costs have resulted in prices decreasing in New South Wales and South Australia, and increasing in South East Queensland,”  Savage said.

Both the Queensland Government and federal government have announced financial assistance with electricity bills to help offset these increases. Some households will also be eligible for additional targeted support under schemes provided by the Queensland, New South Wales and South Australian governments.

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