Wholesale electricity prices on the rise: Are more bill hikes to come?

Household power bills could soon fall further victim to rising wholesale electricity prices after the energy regulator reported wholesale costs to be on the rise again.

In its quarterly report, the Australian Energy Regulator (AER) found that wholesale electricity prices had increased on average in the three months from April to June, in comparison to costs reported for the previous January to March quarter.

Wholesale electricity costs are those in which generators and providers pay for their supply to customers. While these are not to be confused with the final cost for consumers, they can pay a role in dictating these prices.

Why have wholesale costs increased?

According to the AER, the driving force behind the rising average was a change in seasonal demand, as the eastern and southern states began to endure cooling temperatures and shorter days. Coinciding with this, a seasonal shortfall in rooftop solar generation, because of these changed conditions, also contributed to higher wholesale energy costs during this time.

Additionally, the exit of the Liddell coal-fired power station in April was believed to have contributed to higher prices this past quarter than the last. The AER however did state that this was partially offset by an influx of new solar, wind and battery renewable energy generation.

Despite the rising prices, the AER did note that energy demand overall had fallen in the last 12 months across New South Wales, Queensland, Victoria, South Australia and Tasmania.

The drop in demand was largely thanks to the increasingly lowered day time energy demand average, as a result of continued rooftop solar installation and generation uptake by households and businesses.

Solar and wind energy generation were also found to have had a greater combined output during this quarter than the same time last year, with wind energy entering its hay day with a record monthly output recorded for June. This was in relation to both the total generation for the grid, as well as wind energy generation in VIC and SA.

The AER also noted that the grid experienced far fewer coal generator outages throughout April to June than the same time last year.

So, what does this mean for power bills? Are prices going to skyrocket again?

Despite the rising costs reported for the last three months, the AER has assured consumers that prices remain well below the unprecedented highs experienced this time last year, even as households weather the seasonal demand of the winter months.

AER Board Member Justin Oliver said fewer outages and more generational capacity had aided in reducing the impact of wholesale market volatility this quarter in comparison to the same quarter in 2022.

“The second quarter of 2022 was an extremely challenging time for the sector,” he said. “We’re pleased the factors that drove the high prices at that time weren’t present to nearly the same extent this year.

“We have seen far fewer coal generator outages and more coal capacity offered into the market than the same period last year. There are strong gas flows between states and high gas storage levels at the Iona facility, which is critical for managing supply-demand shocks.”

But while the prices all look to be somewhat stable in comparison to the highs of 2022, the AER has still forecasted increasing prices for wholesale costs in the beginning of 2024, particularly for QLD and NSW.

This is primarily due to the El Niño weather conditions expected this summer, as well as the prolonged re-entry of some of the Callide power station’s units – a major power station located in central Queensland. These units were closed due to a structural failure and are now not expected to begin generating power again until early to mid-2024.

Canstar Blue Utilities Editor Tara Donnelly said if prices remained on an upwards trajectory, it was likely these costs would be passed onto consumers.

“Wholesale costs contribute to about one-third of the final cost of electricity to consumers,” she said. “As seen from the last tumultuous 12 months, if wholesale electricity costs continue to climb, then its likely households and businesses will see their costs rise.

“It may not be an immediate increase, but these costs will need to be absorbed at some stage.”

On July 1, the full effects of last year’s energy crisis came into play during the default power price change for NSW, VIC, south-east QLD and SA. Households on standing tariffs witnessed increases of up to 25% depending on their location and distribution network, which the AER and Victoria’s Essential Services Commission (ESC), at the time of the price determinations, stated were due to the rising wholesale costs for providers.

Ms Donnelly said households should remain vigilant in the market over this time by any means, as increases looked far from over.

“While it may take some time before the wholesale increases reported by the AER this past quarter make any difference to household power bills, the price rises from the beginning of this month are still playing out in the market.

“There are price rises expected from a number of retailers later this week, as well as several Victorian energy retailers come August 1, so households are far from out of the woods yet.”

Some of the providers anticipating price changes for its Victorian plans this next week include the likes of EnergyAustralia, Origin Energy, AGL, Alinta Energy and Red Energy.

Worried your retailer might be changing prices? See which providers have stated rates changes after July 1 in Canstar Blue’s wrap-up.

Don’t let a price hike notice get you down! See if you could be getting cheaper power elsewhere by comparing from these cheap offers

I’m worried about my rising energy bill: What should I do?

If you are struggling to pay your rising energy bill then it may be worth reaching out to your provider for assistance. You may be eligible for an energy concession or rebate in your state or territory which your provider can assist you with signing up for.

Alternatively, you may be eligible for its energy hardship program or a payment plan. Each retailer is required by law to have a hardship program for struggling customers which outlines support in the form of a payment plan, plan changeover, financial counselling or energy efficiency tips. To find out this information, check your retailer’s website or give them a call.

It should be noted that energy is an essential service and customers should not be disconnected without sufficient warning and assistance first.

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