Wholesale electricity price drop: Are power bills finally on the decline?

Some reprieve from soaring power costs may soon be on the cards for households and businesses as wholesale electricity costs show signs of decline in eastern states.

As part of a new Treasury analysis, a decline between 29% and 44% was forecast for wholesale electricity costs across New South Wales, Victoria, Queensland and South Australia in 2023, based on data from November 2022 to December 2022.

Wholesale costs are the price that retailers pay for their electricity supply from generators to then distribute to their customer base. These are not to be confused with the costs that households and small businesses pay for power.

The analysis found forecast wholesale prices had dropped the most in the Sunshine State with a 44% change over the final two months of last year. This was then followed by NSW (38%), SA (32%) and Victoria (29%).

The decline in costs coincides with the launch of the government’s Energy Price Relief Plan in December, which saw the implementation of a $12 per gigajoule price cap for wholesale natural gas prices and a $125 per tonne cap for coal prices for 12 months.

Treasurer Jim Chalmers said the data proved the relief package – which has been a point of pain for some retailers – would help to shelter consumers from the full brunt of skyrocketing wholesale prices.

“The price rises that were forecast were untenable and that’s why we acted. Our intervention will help take some of the sting out of power prices for families and businesses,” he said. “This isn’t an overnight fix, it’s going to take some time, but it’s heartening to see the plan is already starting to work.”

Prior to the release of the Energy Price Relief Plan, households were anticipating a 36% increase to their power bills in 2023-2024 due to wholesale cost volatility. This market intervention however, has seen this amount re-forecast to 23%, equating to about $230 in savings for household power bills.

It comes as several gas retailers in Victoria look to significantly hike prices for customers next month off the bat of rising wholesale costs.

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What does this mean for household electricity bills?

This decline in wholesale prices, though a positive move for energy affordability, is still unlikely to provide any real savings relief to customers in the immediate future.

This is because many retailers have already entered wholesale supply contracts for the year, which were likely signed when prices were still sitting at unprecedented levels in 2022.

Unfortunately, the current price cap intervention from the government only applies for new contracts signed by retailers after the fact.

Tara Donnelly, Canstar Blue’s Utilities Editor, said some retailers had already been in a position to make significant changes to pricing, according to Canstar Blue’s historic price changes report.

“We’ve already seen a few retailers make their way back up the chain with competitive pricing, particularly in the New South Wales and Victorian markets,” she said. “With these changes generally only applying to new customers, it serves as a good incentive for Aussies to keep an eye on the market and compare deals regularly to ensure they are still on the best possible price for their household.”

Ms Donnelly said less than half of Aussie electricity customers are happy with their current power plan.

“In a Canstar Blue survey conducted in December, only 40 per cent of Australians said that they think they can get a good deal for electricity. Despite this, only 13 per cent of households made a conscious effort to switch providers in the last two years.

“Of those that had switched however, 57 per cent of them said it had proven to be a good financial decision to do so. So, there is some merit in taking the time to compare plans in your area and potentially switch providers if there is a better deal out there.”

How to spot a good energy deal

So how do you know when you’ve come across a good energy deal? Depending on your household size and personal circumstances, there are a couple of things to keep an eye out for when looking for a good energy deal.

If you come from a larger, high-usage household, then it’s probably worth your while to find a plan with cheaper usage rates as this is where the majority of your energy costs are likely to come from.

If you are part of a smaller household with lower usage requirements however, you may find that a cheaper daily supply charge is the way to go as this may be making up a significant portion of the costs.

Looking into whether a retailer offers any value-add incentives, such as a rewards program or discounts off at the bowser or checkout, may also help when deciding which energy deal could be better to go with – just so long as you actually utilise the discounts on offer to you!

To see which providers are currently offering the best value in your state, check out our expert’s picks below. These selections are based on Canstar Blue’s unique Value Rank methodology.

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