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‘Ten years of pain’: Why your household electricity costs could remain high despite plummeting wholesale prices

Reviewed by expert, David Koch
4 min read
29 Jan 2024
couple with high energy bill in embedded network

Compare the Market is warning Australians that electricity prices could remain high for the next decade, with consumers bearing the brunt of network transformations.

Latest figures show wholesale electricity prices in the National Electricity Market were down around 50% on the previous year in many jurisdictions, leaving many to question why household energy prices remain high.

But Compare the Market Economic Director David Koch said there was more to pricing than just wholesale costs, with a mix of environmental and business costs weighing heavily on bills.

“People are desperate to see some price relief this year. A drop in wholesale prices may have been a glimmer of hope, but that’s just one piece of a complex puzzle,” Mr Koch said.

“Outdated electricity grids and networks have been expensive to maintain and will cost even more to transform over the next ten years. It’s regular Aussie families who will bear the brunt as some of these costs are passed on.

“None of these changes will happen overnight, so we could face a long, protracted period of price pressure.”

Wholesale prices only account for a third of what makes up an energy bill. A range of other factors will continue to influence energy prices in 2024.

Just as you’ve noticed prices increasing across the board in your daily life, network costs are going up for our energy distributors and retailers.

“Due to inflation, the cost of materials to maintain the network has increased, rising fuel costs mean it’s costing more for distributors to read meters, maintain poles, wires and pipes and transform the grid,” Mr Koch said.

“On top of that, Australia has renewable energy commitments to meet. While Federal and State Governments, retailers and distributors are working to make that happen, it costs a lot of money. Unfortunately, consumers foot part of that bill.

“The fact of the matter is that there wasn’t previously a lot of investment or forward-thinking into the renewable transition.”

But Mr Koch said that some discounts were available for people willing to take the time to sniff them out.

At the time of writing (7 December), there were energy plans with up to 25% off the reference price on Compare the Market’s energy panel.

“We’re urging customers not to switch off, but switch over, to save,” Mr Koch said.

“We know many households are on so-called ‘standing offers’ which means they’re paying more than they need to.

“Retailers are legally obligated to display the percentage difference between their market electricity plan on offer and the default offer – which makes it easy to compare.”

What else is in your energy bill?

Distributor costs

In addition to the price retailers pay for wholesale electricity, they also need to factor in costs to transport and distribute electricity to households – which have gone up due to inflation.

Distributors are the energy companies that maintain the gas pipes, electrical poles and wires and read electricity and gas meters.

So as the cost of materials and transport has gone up, it’s been passed on to consumers through their energy bills.

Environmental costs

Renewable energy is really ramping up in Australia and while we should eventually see prices fall, it does come with an upfront investment and transitional period.

What many people don’t realise is that while national and state-based schemes require retailers to produce a set amount of renewable energy, retailers incur a cost to implement these strategies.

Bulk buying

Retailers purchase electricity ahead of time at a fixed price to help mitigate risks in a volatile market.

This can mean that if prices drop, it can take time for customers to see the benefits.

Retail costs

Regulators also factor in costs that retailers incur to sell electricity.

It’s best to think of these retailers as businesses. Like any business, there are day-to-day costs to operate and service customers, market to customers, install and maintain meters.

They also need to put funds aside for customers who don’t pay their bills, are in debt or need to be on hardship programs.

Retail allowance

Energy regulators want customers to have access to fair and affordable electricity plans. To do this, there’s a retail allowance factored into the default market offer (DMO) and (Victorian default offer (VDO), which encourages retailers to invest, innovate and compete in the market.

But remember, retailers are free to set retail market offers above the DMO or VDO, so the idea of the retail allowance is to encourage them to offer deals lower than the standing offer.

Metering costs

As Australia’s electricity grid continues to evolve, so do the types of meters that help determine how much electricity we’re using.

Advanced metering infrastructure is being rolled out to more homes across Australia, allowing electricity to be read remotely, data to be tracked regularly, and more.

But these new technologies cost money to roll out. It’s a balancing act between getting the most effective new devices into homes, while managing costs faced by consumers.

For more information, please contact:  

Phillip Portman | 0437 384 471 | [email protected]

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy home and contents, car, pet and travel insurance along with energy products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.


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Written by Phillip Portman

When he’s not busy writing, Phillip can usually be found at the movies, playing with his Italian Greyhound Wilma, hanging out with his cockatiel Tiki, or talking about everything pop culture. He has a Bachelor of Arts in Communication and Journalism and has previously written about health, entertainment, and lifestyle for various publications. Phillip loves to help others and hopes that people learn something new from his articles.

[email protected]

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