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Why Australia’s Energy Prices keep Rising.


Graph showing an arrow increasing, the title is energy costs

We all know that energy prices have been rising and are set to keep going, however it has been tipped that over the next few years the rise will be moderate in comparison to previous years. When it comes to price hikes the federal government is only able to influence a small part of the price increases, it’s your state and territory governments who can make the biggest impact.

Why are energy prices rising so quickly for energy and gas? Unfortunately, it’s not a simple answer, the reasons are different for gas and electricity and the contributing factors even vary per state. Who regulates the electricity and gas supply industries, this is a shared responsibility between the Australian, State and Territory governments.

How Much Has Energy Increased?

'How much' inside a speech bubble

Are you sitting down for this? According to the Parliament of Australia energy prices have increased a whopping 72% over the 10years to June 2013 and gas has increased 54%. While increases may slow down there is no doubt in anybody’s mind that they will still increase.

The electricity increase differs from state to state in Perth the increase is closer to 30%, while Adelaide is around 41%, Brisbane was 73% and 107% for Sydney not good news for Sydney. The below table shows the increase of gas and electricity prices from 2003 to 2013.

graph

Image from APH

What’s causing the price hike?

Before we can look at what is causing the rise in energy prices we need to look at what makes up the energy price in the first place.

There are 3 main contributors to your energy bill:

1. Wholesale Cost – this is the cost of generating the electricity or extracting the gas. One can’t help imagining how this ‘cost’ would drop if Australia made more of an effort to switch to renewables!
2. Network Charges – this is the cost of delivering the electricity to your home or business through power lines or gas pipes as well as maintenance of these.
3. Retail Margin – this covers the salary of the guy that reads you meter and other services such as the call centers that manage the services.

The government may also tack on some funds in there for renewable energy generation etc, however given the current climate I see this more as revenue raising for rather than the renewable energy sector. Typically, 1 and 2 above would account for about ¾ of your total bill.

If you need more help understanding your bill click here for more information.

In previous years the network has been somewhat neglected and the hikes over the last decade can be attributed to the investment into repairing or building new networks. Australia is an ever-growing population and as such we need a network that can supply the energy demands of the nation. This is one of the reasons that why Sydney has had a bigger hike than say Perth especially when you look at the ever-growing population of these states in comparison. As the networks are updated and can cope with the demand of the growing population you will see the increase in your energy bills become more manageable, it estimated to only increase around 5% per year over the coming years.

What can be done to reduce price increases?

Below are a number of ways to try and get the electricity increase under control and while these may not sit well with most people, I fear in the face of rising energy cost most would turn a blind eye.

Minimal Privatisation – you can’t help but think the more state government owned networks are sold the less control or influence the government will have to keep electricity prices in check.
Adjustment to environmental policies that effect the wholesale cost – again if we made the switch to renewable this would not be an issue, why should our beautiful country suffer to give us cheaper energy prices when there is a sustainable option available that can keep costs down without impacting the environment.
Deregulation of retail price
Standards on the reliability of the network – if only this one was thought of 10years ago, we may not be in this mess!

What can I do to influence energy prices?

Solar panels in the sunshine with a blue sky

The picture above says it all, for those who can install solar at home and for those who can’t op for an energy provider that provides its energy from renewable sources. This is the time to act Australia the choices we make today will determine the world we will live in tomorrow. By choosing renewable energy you’re creating demand which will increase supply, it’s that simple!

Those who want to take it a step further go off grid and get yourself a battery storage system for your solar and you won’t have to give the energy companies a cent. Keep in mind even if you get solar you’ll still need to use electricity at night and during those cloudy days, keep your energy green and clean.

Given that the majority of coal fire stations are coming to the end of their life we need to start making moves in the right direction now before its to late, don’t just take our word for it check out this short clip from the Climate Council.

Does anyone remember what their energy bill was 10 years ago compared to now? Drop us a line we would love to hear from you.

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Julie Moore is Co-founder & Director of Save Energy Save Money, Australia’s first energy and price comparison website. With over 10 years’ experience in the corporate world Julie ensures Save Energy Save Money provides you with the energy information you need to make informed decisions. Helping to contribute to a more sustainable Australia.

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