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ABC News
ABC News
business reporters Kate Ainsworth, Rhiana Whitson and Michael Janda

Electricity prices set to surge up to 30 per cent as regulators reveal draft pricing plans

Power prices are set to increase for customers in some states from July 1. (ABC News: Curtis Rodda)

The Australian Energy Regulator (AER) has revealed draft electricity price increases of between 20 and 22 per cent over the coming financial year, while Victorian consumers can expect a 30 per cent price surge.

However, the AER's chair, Clare Savage, said the default market offer for electricity would likely have risen between 40 to 50 per cent without government intervention to cap prices in the domestic gas and coal markets late last year. 

"Since [the government] started talking about interventions in October last year, the prices seem to have stabilised in the last couple of months," she told RN Breakfast.

"So that's not to say they couldn't fall further. But I don't have a crystal ball. If we saw major plant outages or reliability concerns, they could also rise.

"So we just need to keep collecting that information until we make the decision in May."

Electricity prices set to increase 20 per cent or more from July

The regulator will announce a final pricing determination in May that will take effect on July 1.

More than a million customers directly affected

The AER's decision will directly affect around 600,000 customers in South Australia, New South Wales and South-East Queensland who are on the default offer, which is effectively a price cap for household and small business customers.

Specifically, customers in South-East Queensland can expect to see price rises of up to 20 per cent, South Australians up to 22 per cent, and New South Wales residents should brace for increases between 21-22 per cent, and up to 23.7 per cent for some on controlled load tariffs.

Small business customers can expect price rises of between 14.7 and 25.4 per cent, depending on their region.

Victoria's Essential Services Commission (ESC) has released its default offer, with an even larger 30 per cent increase in household electricity prices and 31 per cent for small businesses.

The ESC said a typical household bill would rise from $1,403 to $1,829 per year, while small businesses could expect an increase from $5,620 to about $7,358.

Around 400,000 Victorian households and 55,000 small business customers are on that state's default offer, according to the ESC.

Ms Savage said cheaper electricity prices could be found by shopping around.

"We do tend to see that, when the default market offer rises, other offers in the market also rise, because they are responding to the same sort of cost pressures that we've been analysing," she explained.

"But they should still be offering prices in the market that are lower than the default market offer. So it still makes sense to shop around."

It may be difficult for customers to know whether they are on the default offer, as there is currently no obligation for retailers to put this information on a customer's bill.

The AER said this would change in September when the "better bills guideline" took effect, although some retailers are rolling this out earlier.

For now, it said the easiest way for customers to find out was to go to to compare their current offer to the reference price and shop around.

Price rises could have been worse: government

Climate Change and Energy Minister Chris Bowen said that consumers would be paying even more if not for the caps on gas and coal prices imposed by the Albanese government.

"Today's draft increases are up to 29 percentage points lower than the AER projected in late 2022, more than halving the increase that was expected before the government acted on skyrocketing coal and gas prices," he noted in a press release.

"This means hundreds of dollars — between $268 and $530 — of additional increase avoided for households, and up to $1,243 additional increase avoided for small business customers."

Chris Bowen defends Government's energy market intervention ahead of price increases

Deputy Liberal leader Sussan Ley said the increase in energy prices from the regulator was proof the government's intervention into the coal and gas market had failed Australians.

"We actually didn't need to wait for [the Default Market Offer] today, because we're seeing that all around us, we know power prices are going up," she said.

"The rushed legislation that the government pushed through towards the end of last year has actually not worked, which just goes to show if you do these things in a rushed chaotic way they don't produce the outcomes you need."

Customer Immanuel Selvaraj said his electricity bill was already high, despite his family's efforts to reduce their energy consumption.

Immanuel Selvaraj and his family are using less energy but paying more for it. (ABC News: Dan Irvine )

"We actually used less this year than last year, so the overall bill amount is the same, but the consumption is significantly down compared to last year," Mr Selvaraj observed.

The federal government announced in December that it would spend $1.5 billion on payments to cut energy bills for low- and middle-income households and small businesses from April, but not all of the details have been worked out and will be announced in the budget.

States and territories committed to provide another $1.5 billion in "targeted and temporary" relief.

Mr Selvaraj ran as a Labor candidate in last year's federal election in the seat of Mitchell, in north-western Sydney, and wants to see more energy price relief in the Albanese government's May budget for households and small businesses.

"There'll be additional pressure on cost of living, and it will mean we will have to look at tightening our budget more," he said.

In the meantime, Mr Selvaraj's family is doing whatever they can to lessen the bill shock.

"The key is, of course, not using air conditioning or heater," Mr Selvaraj said.

"And other things like turning lights off and trying to all sit in the same room and watching TV, and not doing that in separate rooms."

'Probably a one-off'

The Grattan Institute's energy program director Tony Wood said that, even though the decision only directly affects around 600,000 people, other customers across most states can expect similar price rises.

"It works a little bit like the Reserve Bank interest rate," he told The Business.

"When it moves, it tends to be adopted by all the retailers.

"And, of course, if you aren't on a market offer, your retailer will almost certainly move your price as well, and how much they raise it by will be up to them, but they'll probably move it by a similar amount."

The latest price hikes come after retailers were hit with higher wholesale energy costs last year after a series of outages at coal-fired power stations and soaring gas prices fuelled by Russia's invasion of Ukraine.

"And, so, now we're going to see the retailers seeking to recoup those costs," Mr Wood said.

"And I think the regulator would largely be expected to pass those costs through in full [to customers].

"Now the only good news is that [it] is probably a one-off, and we would say you wouldn't expect to see those sort of conditions happening in the future."

Mr Wood agreed with Ms Savage that the federal government's cap on coal and gas wholesale prices appeared to be working to limit increases, but has not yet resulted in lower prices.

He said, even with the effect of those caps flowing through to retail energy bills, consumers should expect to pay even more again next year.

Surging energy costs to push up other prices

Adelaide cafe owner Ben Arbon said rising power bills were hurting businesses like his.

Ben Arbon has increased prices at his cafe, but says the extra revenue has already been absorbed by rising costs. (ABC News: Marco Catalano )

"I'm having to work seven days a week to try to keep wage costs down and to cover up the difference paying more for power and everything," Mr Arbon said.

Mr Arbon would like to install solar, but he said it was not viable for him at the moment. Instead, he is trying to save electricity by running appliances less, which is not easy at a busy cafe.

"If it's not being used, [I'm] turning it off rather than keeping it running for too long," he explained.

He said he has had little choice but to pass on increased power costs to customers.

"It was only just recently that I put the prices up on everything on the menu," he said.

"But, of course, with the cost of all the products and everything that we use also going up, the difference has been wiped out."

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