Wholesale energy prices fall by up to 48% – but are you saving?

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The energy regulator has announced that wholesale energy prices this quarter have fallen by up to 48 per cent compared to the same time last year, but Canstar Blue research shows that consumers haven’t seen anything like that reduction in power bills.

In a statement, the Australian Energy Regulator (AER) explained that the drop in wholesale rates is down to ‘softer international gas prices’ and ‘reduced costs for electricity generators’.

AER Chair Clare Savage said that residential and small business customers should be the winners as lower wholesale prices will indicate that energy retailers can pass on their savings to bill-payers.

“These figures are good news for consumers. Sustained low wholesale electricity prices translate over time into lower retail prices for businesses and households,” said Ms Savage.

“Looking forward, falling contract prices for the coming summer reflect market expectations that there will be enough supply to meet summer demand in the first quarter of 2021.”

Negative spot prices have set a number of records across various markets on the National Electricity Market since its commencement in 1998, according to the AER.

The AER reported that low daytime energy demand and falling international fuel prices are driving market costs down, as well as a surge in rooftop solar generation.

Alinta Energy General Manager of Sales and Marketing, Jane Mills, said customers should move now to benefit from current market conditions.

“We’re in an environment where wholesale electricity prices are falling, and we are going to compete hard for customers off the back of that,” she said.

“This is a great time for customers to shop around for a better deal. For anyone who hasn’t reviewed their energy deal this year, or even in the last couple of years, my advice is to get onto it because it’s much more likely that a quick phone call is going to net you some great savings.”

It comes after Alinta Energy slashed its prices recently in New South Wales and Victoria.

Have retailers passed on savings from falling wholesale prices?

How much has the average electricity bill changed from September 2019 to September 2020? We take a look to see if the retailers have actually passed on any savings to residential customers in light of lower wholesale costs.

State Distributor Average Annual Electricity Cost (Sep 2019) Average Annual Electricity Cost (Sep 2020)
NSW Ausgrid $1,370 $1,289
VIC Citipower $1,301 $1,340
QLD Energex $1,474 $1,360
SA SA Power $1,814 $1,640

Based on single rate electricity plans on Canstar Blue’s database. Cost calculations assume a distributor-specific annual usage of 3900kWh for NSW, 4000kWh for VIC and SA, and 4600kWh for QLD. Data taken from plans available on our database in September 2019 and in September 2020.

As you can see above, South Australia reported the biggest price drop in average annual electricity costs at 9.59%, with south east Queensland (7.73%) and New South Wales (5.91%) also recording cost decreases.

However, average costs in Victoria actually increased by about 3% (0r $39 a year). This follows an increase to the state’s regulated default tariffs in January 2020. Fortunately, the Victorian Default Offer (VDO) is set to become cheaper from January 2021, which should then lead to lower prices across the board.

While retailers have not dropped costs by as much as wholesale energy prices over this time period, this is to be expected given that retailer costs only make up part of standard residential energy bills, with other factors like electricity generation and distribution charges accounting for at least a third of total costs.

However, Canstar Blue Editor-in-Chief, Simon Downes, said it’s disappointing not to see bills come down by more than they have.

“You can definitely see the retailers that are passing on the savings and those that are not,” he said. “This is why it’s important for consumers to pay attention to movements in the energy market and take advantage whenever they can. If your retailer hasn’t dropped prices lately, it’s probably time to drop them.”

Compare Energy Prices

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 3900kWh/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 4600kWh/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 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.

What is the NEM and why should I care?

The National Electricity Market (NEM) is Australia’s wholesale market that aids the exchange of energy between retailers and power generators. Essentially, retailers purchase electricity from the NEM at wholesale prices and on-sell to households and businesses. Within the wholesale market, there is what’s known as a ‘spot price’, which refers to the cost that retailers pay for electricity.

Spot prices change every 30 minutes to reflect the market’s position, with prices increasing when power demand is generally at its highest, and vice versa, said Mr Downes.

“Understanding how the retailers charge a set price for electricity usage can help customers identify what is or isn’t a reasonable rate, which in turn should assist them in making a better decision when the time comes to switch providers,” he said.

“If you’re one of many Aussies who’ve been on the same gas or electricity plan for a while, then chances are you’re probably paying too much. With prices constantly being updated, it pays to compare your plan against a range of deals currently in market, otherwise you run the risk of missing out on finding a deal with cheaper rates.”


Image credit: patpitchaya/Shutterstock.com

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