BAD news: power bills are set to soar. Good news: they could have been set to soar twice as high.
The Australian Energy Regulator (AER) has just released their draft determination for Default Market Offers over the 2023-24 financial year.
The Default Market Offer is the price that you’ll be offered if you don’t negotiate a better deal with your energy supplier. In other words, it is the maximum amount you can be charged and is used as a benchmark for suppliers to base their other offers on.
The AER’s job is to balance the needs of the consumers against the needs of the supplier. Suppliers need to cover the cost of providing services and make a profit but not at the expense of customers’ financial wellbeing.
The Default Market Offer changes are based on a few different factors, but the AER’s proposed offer for residential customers ranges from just under $2,000 to $3,000 each year.
This means an increase as high as 19.8 per cent in Queensland, 21.8 per cent in South Australia and 23.7 per cent in New South Wales.
Victoria sets its own default offer, separate from the AER, but the price suggested by their Essential Services Commission will see the average residential customer paying 31.1 per cent more in the coming financial year.
These increases will definitely be a huge financial burden for many households, but they aren’t as bad as they were first predicted to be.
At the end of last year the Australian Government proposed their new Energy Price Relief Plan that included placing a temporary price cap on wholesale gas and coal. This plan brings down expenses for suppliers buying from the wholesale market and in turn means lower bills for customers.
Without this intervention the AER has said the increases could have been up to 41 per cent in Queensland, 44 per cent in New South Wales and a whopping 51 per cent in South Australia.
Of course, you can bring down this increase further if you shop around and negotiate yourself a better deal. If you’re looking to do this, a good place to start is the Government’s Energy Made Easy website.
But even with the best deal on offer, price increases will impact all customers, and it especially hits households on low incomes hard. A 2022 survey of households earning $50,000 or less found that despite customers budgeting and prioritising paying their utility bills, 38 per cent still struggled to pay their bills on time.
