Power bill shock to hit households this month: Who’s most impacted?

Households that pay quarterly electricity bills have been warned to brace for a bill shock in October.

In its latest state of the market report, the Australian Energy Regulator (AER) said customers on quarterly billing cycles – at least 69% of households according to Canstar Blue data – are likely to see increases to their power bills from October 2023, following the significant increases to the Default Market Offer (DMO) and Victorian Default Offer (VDO) seen on July 1.

Monthly billing customers however, have likely been experiencing smaller price increases since August 2023.

The DMO – the price cap for power in New South Wales, south-east Queensland and South Australia – jumped by as much as 23% in some locations on July 1 this year, with Victoria’s equivalent, the VDO, rising by up to 25%. These prices will be in effect for the 2023-2024 financial year and have also played a role in increasing the average cost of market offers from retailers, according to the AER.

The increase in DMO prices this year was attributed to sustained wholesale electricity cost impacts. Compared to previous years where wholesale costs accounted for only 30% to 40% of the calculation of the DMO, the AER said these costs made up between 50% to 69% of the regulated price increases for 2023-2024.

The AER said the increases in wholesale costs were due to longer outages from aging coal-fired power plants, increases to network costs, extreme weather events in NSW and QLD, slowed investments in new generation assets and extended global pressures on gas prices.

In a statement about the report, AER Chair Clare Savage said despite the ongoing external pressures the market had seen some improvements when compared to last year’s volatile market conditions.

“Generally, we have seen better market outcomes this year, aided by milder winter temperatures, improved generation availability and the impact of government interventions in coal and gas markets along with energy bill subsidies,” she said.

“Work still remains to address energy affordability for consumers, coordinate the entry and exit of generation sources and ensure the timely and least-cost delivery of major transmission projects. These projects face challenges including escalating costs, slower than planned progress and the need to address the concerns of the communities that host them.”

The outlook for wholesale costs has also predicted further price drops throughout 2024 and 2025 as a result of the government’s price cap, implemented in late 2022. Despite the estimated drop in wholesale costs however, these prices are still expected to be higher than previous years.

Reliability issues with coal-fired power plants, higher network costs, increased customer energy debt and a proposed smart meter rollout from the electricity rule maker are also expected to drive prices up in the coming years.

Who will be most impacted by higher electricity bills?

According to the AER, the customers likely to be most impacted by higher electricity costs are low-income earners and those living in regional or remote areas.

The AER said low-income earners bear the higher burden of rising costs due to the limited income these customers have to put towards their electricity costs in comparison to others.

At the end of 2022, average income earners were spending 1.2% to 2.1% of their total income on electricity costs, whereas low-income earners were paying 2.8% to 5.4%, according to the AER. This means low-income earners were paying at least double the portion of their income on electricity costs as those on an average income.

The AER also said the hurdles to household energy efficiency upgrades, either from renting or the high upfront costs, were likely causing low-income households to pay more for their electricity.

As for households in remote or regional areas, higher network costs are often a burden. This is because these areas have a limited customer capacity in comparison to dense urban areas, which means these customers are required to pay more in order to cover the maintenance and transmission costs of the distribution network.

Energy debt on the rise: How you can stay ahead of power price pain

In the same report, the AER also found that the number of energy customers in debt had been consistently rising since mid-2022.

The number of customers in energy debt rose 11% between June 30, 2022 and March 2023. The Australian Capital Territory experienced the biggest increase in households in energy debt during this time (25%), followed by Tasmania (21%). QLD was the only state to see a decrease in the number of customers in debt during this time, which was largely attributed to the state government’s energy bill support.

In addition to the number of customers in energy debt, the amount of debt these customers were in also increased. For the ACT and TAS, energy debt rose by 12% and 13% respectively over the same period.

The number of customers on payment plans increased nationally as well from June 2022 to March 2023 by 7.7%.

Canstar Blue Utilities Editor Tara Donnelly said customers concerned about paying their energy bills should contact their retailer sooner rather than later for support.

“Most households are likely to be hit with a big bill shock in the coming weeks as the first meter reads post-July 1 begin to be sent out,” she said. “If you’re concerned that you may not be able to afford your next bill you should contact your retailer and ask about any payment plan or financial support schemes that may be available to you.

“All retailers are required by law to have an energy hardship policy to help their customers during times of need.”

To find your retailer’s energy hardship policy, head to its website or give the retailer a call for further information.

Alternatively, customers struggling due to low-income or medical conditions may be eligible for energy rebate or concession from their state or territory government.

Ms Donnelly added that customers should also keep abreast of changing prices and take advantage of the newly-enforced ‘best offer’ messaging on power bills to make sure they aren’t missing out on a better deal.

“From September 30, retailers have been required to upgrade their power bills in NSW, QLD, SA, TAS and the ACT to reflect a ‘best offer’ message for customers to compare,” she said. “This essentially helps customers to understand whether they could be paying less for power with a different plan from their energy retailer.

“This messaging provides an opportunity for customers to take ownership of their energy costs and switch plans if their current offer isn’t giving them the best value for money. It may even pay to take your new offer and compare it to others in the market, just to make sure you aren’t missing out on an even better deal elsewhere.”

Stay on top of power price pain! Compare from these cheap electricity plans now and make sure you aren’t missing out on a better price

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