Adding to pressure on households amid intensifying cost-of-living pressures,the changes will increase “default market offers” – caps on what retailers can charge customers that do not take up special deals – by between $300 and $564 a year.
“Energy prices are not immune from the significant challenges in the global economy right now,” Australian Energy Regulator chair Clare Savage said. “That’s why it’s more important than ever that we strike a balance in setting the default market offer to protect consumers as well as allowing retailers to continue to recover their costs and innovate.”
The looming retail power bill hikes are being driven by last year’s sharp rises in the cost of wholesale electricity across the east-coast grid. The spike was caused by a spate of ageing coal-fired power plants breaking down during peak demand periods,as well as sharply higher costs for coal and gas needed to generate power due to the war in Ukraine driving up global demand and prices.
The hikes,although significant,were not as severe as the rises of up to 50 per cent the AER forecast in December,before the Albanese government intervened in the energy market. In December,the government introduced emergency laws capping the price of domestic gas at $12 a gigajoule for 12 months and domestic coal at $125 a tonne,reducing the cost of running power stations and cutting wholesale prices.
Concerns about east-coast energy prices are set to be brought into even sharper focus this week as the Australian Energy Market Operator (AEMO) releases new forecasts projecting Victorian gas demand could outstrip supplies by as early as this winter in the event of extreme weather conditions.
As gas output from the 50-year-old Bass Strait fields is rapidly drying up,AEMO has become increasingly worried that Victoria could have insufficient available gas during winters from 2023 to 2026 if cold weather drives up electricity and gas demand for heating at the same time as a slump in power generation from wind farms or broken-down coal-fired power stations.
Without new projects,east-coast gas demand is expected to outstrip supply by 2027.