The cost of supplying electricity to households is at its lowest in eight years, according to new data from the consumer watchdog.
The Australian Competition and Consumer Commission (ACCC) revealed that the cost for retailers to supply electricity to homes on the National Electricity Market was down on average by eight per cent or $128 in 2020-21, in comparison to the 2018-19 financial year.
The average annual cost for residential electricity in 2020-21 was $1,434, with the average supply charge cost noted as 27c per kilowatt hour (kWh) – the lowest it has been since 2013-14.
After analysing billing data from Australia’s major electricity retailers, we found that it costs them on average 8% less to supply electricity to an apartment or house than it did two years ago. https://t.co/mttcajS4Gx pic.twitter.com/np0xQhfwEU
— ACCC (@acccgovau) December 12, 2021
Cheaper wholesale electricity prices have aided in reducing supply costs for energy retailers, ACCC Chair Rod Sims shared.
“More renewable generation and lower fuel costs have brought down the wholesale price of electricity, and the Prohibiting Energy Market Misconduct laws are working because we can see the savings being passed down from generators, to retailers, to consumers,” he said.
The Prohibiting Energy Market Misconduct law came into effect in 2020 and enforces energy retailers to pass on ‘significant and sustained cost reductions to customers’.
The ACCC reported that more than half of the average savings ($66) over the past two years are attributed to falling wholesale electricity costs.
A typical energy bill for a residential energy customer is broken into the following; network costs (45%), wholesale costs (32%), environmental costs (10%), retail costs (10%) and retail margins (3%).
Source: The Australian Competition and Consumer Commission’s Inquiry into the National Electricity Market – November 2021 report.
Lower network costs reportedly accounted for $22 in savings, with lower retail costs and margins making up a further $52 in savings per household compared to 2018-2019.
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Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3911kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for 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 decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for 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 decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further 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 general energy usage of 4613kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for 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 decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4011kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for 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 decision.
Does this mean energy bills are getting cheaper?
With this data it becomes much easier to determine whether cost cuts have been passed on to bill-payers, Mr Sims added.
“Our analysis of retailers’ cost data is valuable because it not only shows us what makes up the total figure on an electricity bill, it reveals whether they pass on cost reductions to consumers.”
Despite the recent drop in supply costs, household power bills still remain 32 per cent higher than they were in 2007-2008 – the earliest point the ACCC began collating data.
It is believed that as old hedging contracts expire, however, these savings could be passed onto consumers. A hedging contract is an agreement used to determine a set price for a retailer to purchase electricity from a distributor to then supply to homes and businesses. These contracts are usually determined several years in advance.
Mr Sims said: “There is a time delay between wholesale prices falling and electricity bills declining due to the hedging contracts between generators and retailers. But we know there are more savings still to be passed on to consumers and businesses because we haven’t yet seen the lower prices in the wholesale market for electricity fully reflected in retailers’ costs.
“We anticipate that retailers’ wholesale electricity costs will continue to fall as older and more expensive hedging contracts expire. This should mean continued reductions in electricity prices for customers next year.”
Business customers score cheaper costs too
The cost of supplying electricity to small businesses has also dropped to the lowest it has been in five years, falling by 10 per cent in the last two years. For large business energy customers, there was a decline of 12 per cent during this time period – its lowest in four years.
The fall in costs for small business energy customers have been attributed to a 41 per cent fall in retailer’s margins between 2018-2019 and 2020-2021.
These changes should soon bring some energy bill relief, Mr Sims noted.
“We expect to see electricity prices for small business customers come down further, which will provide relief to many in their pandemic recovery,” he said.
As for large business customers, this decline in supply costs has been largely due to the drop in wholesale electricity prices.
Wholesale electricity costs made up 49 per cent of a power bill for a large business energy customer in 2020-21.
Image credit: Ihor Berkyta/Shutterstock.com
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