What does the government’s Energy Price Relief Plan REALLY mean for your bills?

The government’s new Energy Price Relief Plan, announced last Friday, is set to reduce the financial strain of soaring energy bills for Aussie households and businesses.

It’s causing waves in the media – but with all the industry jargon, the announcement may be confusing for some everyday Aussies to get their head around. 

If you feel this way, then no need to panic. We’ve broken down below exactly what the plan means for consumers, and when you can expect to see some relief to your energy bills. 

What is the Energy Price Relief Plan?

Essentially, it’s a four-step plan, which will use a ‘targeted and temporary’ approach, to reduce the impact of rising electricity and gas prices for households and businesses. 

But, how will it do this exactly?

Well, the primary mechanism behind the plan is a temporary price cap for wholesale natural gas prices, as well as a price cap for coal used for generation in New South Wales and Queensland – the biggest coal-producing states.

Upon legislation passing, wholesale natural gas prices – the price that retailers and generators pay for their supply – would be temporarily capped at $12 per gigajoule, while coal prices would be limited to $125 per tonne.

The price cap would mean that electricity prices should only rise to a predicted 23 per cent next year, as opposed to the initially forecasted 36 per cent. According to the Albanese Government, these changes will prevent an estimated $230 increase on the average household power bill in 2023. 

As for natural gas prices, it’ll mean an increase of only 18 per cent this year instead of the forecasted 20 per cent as well as a smaller four per cent jump in the following year. 

Alongside the price cap, the government will also establish a $1.5 billion Energy Bill Relief Fund that will help provide additional rebates and financial support for vulnerable energy customers. This will be co-funded by each state and territory government to provide a tailored support option for residents in the local area. This will be in addition to existing rebate and concession schemes.

Further investments in renewable energy have also been tagged as part of the scheme.

What does this mean for Aussie energy bills?

While the government’s plan does mean that energy prices will see a slightly lower increase than initially predicted, it won’t necessarily eradicate the current wholesale market volatility being experienced. 

Tara Donnelly, Canstar Blue’s Utilities Editor, explained that Aussies should still prepare for energy bill shock in the coming year. 

“Unfortunately, we aren’t out of the storm just yet. It’s important to understand that while wholesale price caps will help to ease the extent of rising electricity prices, there will still be a significant price increase in the coming year to most household power bills,” she said. 

This is because, as outlined by the Australian Energy Council (AEC) – an industry body responsible for assisting retailers competing in the wholesale market – the Australian energy market has been weathering more than just internal pressures over the last six months. 

Sarah McNamara, AEC Chief Executive, said the international turmoil for the energy industry also played a significant role. 

“The recent exceptionally high energy prices we have seen have not been caused by the activities of electricity generation or energy retailing but are due to international factors outside their control,” she said.

“Market participants are not making large profits in these conditions. The war in Ukraine and other global factors have produced a complex set of circumstances which have placed extraordinary pressure on energy markets, and on customer bills throughout 2022.”

Ms McNamara added that while a positive step, price caps may not deliver the desired lower prices. 

“We understand and appreciate the intent of the government in seeking to put downward pressure on prices by reducing generator costs. Price caps should only be used as a temporary tool and interventions of this nature are extremely difficult to get right. We would caution against presumptive rhetoric about the short-term impact of any price caps.

“How price caps impact retail bills is also difficult to predict. Regulated electricity prices have already been set through to 30 June 2023 and the next Default Market Offer (DMO) won’t be finalised until May next year.”

As for rebates and payment assistance, these avenues will be accessible to customers already receiving some kind of welfare assistance, such as pensioners or those on income support or family tax benefits. 

The extent of support for these customers is still to be determined among each state and territory. However, these kinds of households will have this rebate directly applied to their power bills, as opposed to receiving a cash handout. 

Small businesses are also expected to be eligible for an energy bill rebate. 

The direct impact of both these changes, however, are not likely to flow through to consumers’ energy bills until the June quarter of 2023. 

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What if I am struggling to pay my energy bills now? What can I do?

If you find yourself unable to pay your current energy bills, then the best thing to do is get in contact with your provider and discuss your situation, Ms Donnelly said. 

“Energy retailers are required by law to offer hardship programs to customers who are struggling financially and cannot pay their bills as a result. If you do find yourself in a position where you cannot afford your energy bills, it is best to just give your provider a call and discuss your options. 

“Whether it be switching you to a cheaper plan, placing you on a payment plan or helping you to sign up to an eligible rebate or concession, your provider is there to help you.”

According to the Australian Energy Regulator’s (AER) latest report, customers on energy hardship typically consumed about 81 per cent more electricity than the average household during 2021-2022. 

Low-income households were also found to have spent almost double the percentage of their income on energy bills than the average household, according to the same report. 

Ms Donnelly explained that this could be due to the low energy efficiency in these households.

“Low-income households are typically not just disadvantaged by their disposable income but also by how inefficient their property may be when it comes to heating and cooling. These households may not be able to afford high-rated appliances or rooftop solar installations, which can leave them at a disadvantage when it comes to reducing their energy bills, particularly in the current climate.”

To these kinds of households, the message of staying vigilant in the market remains ever important, Ms Donnelly added. 

“If you are of a low-income household, then be sure to check out all your financial assistance options when it comes to your energy bills. Your state or territory government may have a selection of energy related rebates or concessions you could be eligible for to help manage costs. 

“Alternatively, keeping an eye on the cheapest offers in the market can also ensure you remain on the best possible price for power or gas in your area.”

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