Winter bill shock warning: Is it time to fix electricity prices?  - Canstar Blue

Winter bill shock warning: Is it time to fix electricity prices? – Canstar Blue

An expert on Australian consumers has warned to be prepared for an energy bill shock this winter due to higher wholesale electricity prices as demand for coal soars.

The first quarter of 2022 saw wholesale costs rise more than 100 percent compared to the same period last year, according to Dylan McConnell, a research fellow at the University of Melbourne’s School of Climate and Energy.

“The impact on family bills will not be immediate, likely within months,” he told Australian Financial Audit.

It will depend on how retailers hedge as well. Those that are also not hedged will move more quickly to pass the increases to the consumer.”

McConnell’s analysis reveals a price hike of more than $100 per megawatt-hour (MWh) this quarter, an annual rise of between 64.6 and 284 percent depending on the site. His research has shown that Queensland bill payers are likely to be hit hardest.

Wholesale electricity price chart

“Next quarter futures prices are looking pretty bad too. The whole forward curve is not looking good, Q2 2022 Queensland and NSW prices are up 30MWh and $20MWh respectively,” said Mr. McConnell. Friday alone.

The rise in coal prices can largely be blamed because fossil fuels remain the main source of electricity generation via the National Electricity Market (NEM). NEM is Australia’s largest wholesale market where power generators and retailers exchange electricity for supply in the six eastern and southern states and territories.

The recent unfavorable weather has also increased the demand for networks, while the effects of the global pandemic have exacerbated conditions. This comes on top of rising gas prices and shortages in the wake of the Russian invasion of Ukraine, as well as a blackout at the Callide Power plant in Queensland last year.

With the cost of living still rising, Australia’s energy future will remain a fiery talking point among lobbyists and politicians.

It comes after tech billionaire Mike Cannon-Brooks made a bold bid to acquire energy giant AGL, promising a rapid phase-out of coal-fired power and more investment in renewables.

How does the wholesale market affect electricity bills?

Jared Mullane, energy editor at Canstar Blue’s Energy, explained that wholesale energy prices are the market price retailers pay for electricity before they put it on their profit margins and pass it on to paying customers.

“Energy retailers are now feeling the shock of increased wholesale prices and the medium to long-term outlook is that we are entering a period of ever-rising wholesale costs,” he said.

Wholesale prices will likely continue to rise in the next few months, and will have a noticeable impact on price competition because competition in these types of conditions will not be sustainable for some retailers. There is also uncertainty about whether these wholesale prices are the new normal, as the pricing market in the past two years has been very low.”

Mullane points to favorable wholesale conditions that have benefited from the uptake of renewable generation entering the grid, particularly rooftop solar. In recent years, this enhanced power supply has helped reduce costs to consumers.

Retail energy bills consist of four main costs of supplying energy – grid service charges, retail margins, wholesale prices, and environmental obligations. According to the Australian Energy Regulatory Authority (AER), wholesale costs make up about a third of electricity bills.

Is it time now to set electricity prices?

With home energy use and electricity prices expected to rise with the onset of winter, there are ways for customers to reduce the potential for billing shock. One easy way to ensure there are no hidden price hikes during the life of the contract, Mullane said, is to switch to a fixed rate plan.

“Winter is just around the corner and many Australians will be using more energy to heat their homes, especially in southern states. With wholesale prices continuing to rise, retailers will likely be placed in a position where it is only viable from a business perspective to increase prices for their customers.

To help mitigate rising retail energy prices, residents can choose to fix their electricity prices on certain plans offered by a few providers. Keep in mind that these plans usually only fix prices for 12 or 24 months, however this means that there will be no price hikes during this period, which can provide a degree of comfort to bill payers.”

Some of the retailers that currently offer fixed prices include EnergyAustralia, Nectr, Origin and Tango Energy.

Compare Energy Plans

Below are some of the cheapest deals posted from retailers in our database which includes a link to the retailer’s website for more details. These are products from referral partners†. These costs depend on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes an overall energy use of 3900 kWh/year for a residential customer on a single rate. Please use our comparison tool to make a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase.

Below are some of the cheapest deals posted from retailers in our database which includes a link to the retailer’s website for more details. These are products from referral partners†. These costs depend on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes an overall energy use of 4,000 kWh/year for a residential customer on one rate. Please use our comparison tool to make a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase.

Below are some of the cheapest deals posted from retailers in our database which includes a link to the retailer’s website for more details. These are products from referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes an overall energy use of 4,600 kWh/year for a residential customer on a single rate tariff. Please use our comparison tool to make a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase.

Below are some of the cheapest deals posted from retailers in our database which includes a link to the retailer’s website for more details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but rates may vary depending on your circumstances. This comparison assumes an overall energy use of 4,000 kWh/year for a residential customer on one rate. Please use our comparison tool to make a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase.

Image credit: ice_blue/Shutterstock.com, University of Melbourne


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