Why do electricity prices increase?

There are several parts that make up the overall price of your electricity bill, aside from costs related to what you consume. These moving parts fluctuate and cause price rises or falls on your gas or electricity bill each year. They include:

• Retail or administration costs. These include aspects of business management such as managing customer accounts, meter reads and more.
• Purchase costs. Energy providers (also known as energy retailers) purchase electricity and gas from the National Energy Market to on-sell to customers. These prices fluctuate depending on the demand for electricity and gas supplies.
• Network costs. The costs involved to build, maintain and operate energy infrastructure like electricity poles, wires and gas pipes.
• Green costs. Government programs support the development of renewable energy and the reduction of emissions. Electricity customers who choose greener energy may have higher power bills than those who don’t, as renewable electricity generation can be more expensive for the provider.
• International influences. Energy costs aren’t influenced solely at a national level. Global demand, geopolitical tensions and overseas supply issues can all affect electricity and gas prices here in Australia.
• Weather conditions. In times of extreme weather, the demand for heating or cooling increases, which drives up energy costs. Often, extreme temperatures follow predictable seasonal patterns (e.g. hot summers and cold winters), but unexpected weather events or natural disasters can bring about increased demand and potential costs to fix infrastructure damaged by extreme weather. Severe weather can also impact the ability to transfer raw materials, creating possible delays in being able to utilise them.

You won’t see these costs in your electricity bill as an itemised breakdown, however, but they are reflected in the daily supply and usage charges.

Here’s some factors within your control that can help mitigate or reduce an electricity price increase:

• Your consumption. It’s an obvious one, but how much electricity you consume will directly affect your bill. Read more about how to save electricity, especially in the summer and winter months.
• Your tariff. A tariff is essentially how your provider will calculate what to charge you for electricity. If you have a smart meter, for example, you may be charged less if you use power at a time of day when the network isn’t under strain. If you have a basic meter, you may be charged the same flat rate regardless of the time of day.
• The efficiency of your appliances. Improving energy efficiency in your home can help you save both energy and money on your energy bill. Learn more about energy-efficient appliances and their energy consumption.
• Your plan type and provider. When your energy plan or contract benefit(s) expires, you may lose your discounts and could move from a cheaper market plan to a more expensive standing or default offer. Switching plans can help you take advantage of discounts that providers may offer such as discounts from paying by direct debit or a one-off sign-up credit.

Are you worried that you’re overpaying for electricity? It’s easy to check whether there’s a great value plan you’re missing out on. Comparing a range of providers is a quick way to find out if you can save money; and you can use our free online comparison service to start the process.

Electricity prices generally change in most states on 1 July each year, but may differ depending on your state or territory. They don’t necessarily increase either; both electricity and gas costs can rise or fall each year depending on the factors that influence them.

Depending on your plan, if the price is not locked in, it can be changed by your provider at any time, or your rates could go up at the end of your contract. Keep in mind that electricity prices don’t generally change from a seasonal perspective; However, your bill may go up in summer because of increased usage (such as using air-conditioning) or in winter because of heating.

The electricity market is made up of generators and transmission, distribution and retail entities watched over by the Australian Government. Via the Australian Energy Regulator (AER) and state bodies like Victoria’s (VIC) Essential Services Commission (ESC), the government regulates prices set by distributors and energy providers.

These regulations help ensure the network runs efficiently and consumers are protected from unfair and excessive prices. The Default Market Offer (DMO) and the Victorian Default Offer (VDO) act as a benchmark on what providers can charge residential and small business customers on standing offer contracts.¹

Each year the government or state bodies will decide on the new maximum prices to match inflation and changes in wholesale prices. The 2025-2026 prices have shown increases across Australia, so if you’re on a standing offer, it could be worth switching to a better deal.

For residential customers, price changes will also depend on whether you have a controlled load (CL):²

The average annual bill for the Victorian Default Offer customers increased by a single percent compared to the 2025-2026 financial year.³

The DMO operates in NSW, SA, ACT and South East QLD. VIC has the VDO , which acts similarly. In other states, prices are fully regulated, and customers buy energy from companies set up by the government. People in Western Australia (WA), Northern Territory (NT) and north and regional QLD typically don’t have a choice when purchasing electricity. While Tasmania does have unregulated energy, options are limited compared to other unregulated states.

Solar can help reduce your electricity bills, especially if you’re smart about how you use it or you have a solar battery. In the short term, they can be expensive (with installation costs). However, you can significantly offset set-up costs with government solar rebates and feed-in tariffs. In the long-term, they can reduce your dependence on the energy grid and help save money on electricity bills.

One in three households in Australia have solar panels,⁴ but only one in forty houses have a solar battery.⁵ Since most people aren’t home during the day, they can’t take full advantage of their solar energy. A solar battery allows you to store your solar power and use it after the sun has gone down – so you get to use your own energy at a time where people without a battery must rely on the electricity grid.