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There’s a lot going on in Australia’s National Electricity Market that’s having an impact on prices. Visit the ‘Why have electricity prices increased?’ page for more information, and read on for some frequently asked questions (FAQs) on pricing.
1. Why have electricity prices increased?
Any decision to change prices is based on a detailed consideration of a range of factors including costs, market conditions and the value we offer customers.

In this instance, retail electricity prices have risen because of significant increases in the forecasted (future) wholesale market prices. The wholesale price of electricity has increased because of the closure of ageing, low cost, coal fired generators, high gas prices and limited gas availability for gas-fired generation, and an uncertain policy environment.

Visit the ‘Why have electricity prices increased?’ page for more information.

2. How much are prices increasing?
NSW
Electricity prices will be changing for AGL’s NSW residential and small business customers from 1 July 2017. The average increase across AGL’s residential electricity customers in NSW is estimated at $5.70 per week (including GST)1. The increase experienced by each individual customer may be substantially different and will be dependent on tariff type, their usage, the area they live in and their existing energy plan. We encourage customers to visit our website from 13 June to see the new prices that will apply to their account.

Gas prices will be changing for AGL’s NSW residential and small business customers from 1 July 2017. The average increase across AGL’s residential gas customers in NSW is estimated at $1.60 per week (including GST)2. The increase experienced by each individual customer may be substantially different and will be dependent on usage and their existing energy plan.

Retail electricity prices have risen because of significant increases in wholesale market prices. Wholesale prices have increased for a number of reasons, including high gas prices and limited gas availability on the East Coast, the closure of aging coal-fired generators, and an uncertain policy environment.

Any decision by AGL to change prices is based on a detailed consideration of a range of factors including costs, market conditions and the value we offer customers. NSW is a very competitive market and AGL has a range of offers in the market. We are committed to keeping energy prices competitive and we encourage customers to shop around.

For more information on some of the factors that may influence energy rates, visit agl.com.au/EnergyRates.

We encourage customers to take advantage of our monthly billing option to break bills down into more manageable, regular amounts. If customers are experiencing financial difficulty, there is a range of support available including payment plans, energy concessions, referral to financial counselling services and where appropriate debt relief on a case by case basis. Call 131 245 for assistance.


1 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers. Customers on different tariffs will experience different changes to their prices.
2 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers.

SA
Electricity prices will be changing for AGL’s South Australian residential and small business customers from 1 July 2017. The average increase across AGL’s residential electricity customers in SA is estimated at $6.70 per week (including GST)3. The increase experienced by each individual customer may be substantially different and will be dependent on tariff type, their usage, and their existing energy plan. We encourage customers to visit our website from 13 June to see the new prices that will apply to their account.

Gas prices will be changing for AGL’s South Australian residential and small business customers from 1 July 2017. The average increase across AGL’s residential gas customers in SA is estimated at $2.90 per week (including GST)4. The increase experienced by each individual customer may be substantially different and will be dependent on usage and their existing energy plan.

Retail electricity prices have risen because of significant increases in wholesale market prices. Wholesale prices have increased for a number of reasons, including high gas prices and limited gas availability on the East Coast, the closure of aging coal-fired generators, and an uncertain policy environment.

Any decision by AGL to change prices is based on a detailed consideration of a range of factors including costs, market conditions and the value we offer customers. SA is a very competitive market and AGL has a range of offers in the market. We are committed to keeping energy prices competitive and we encourage customers to shop around.

For more information on some of the factors that may influence energy rates, visit agl.com.au/EnergyRates.

We encourage customers to take advantage of our monthly billing option to break bills down into more manageable, regular amounts. If customers are experiencing financial difficulty, there is a range of support available including payment plans, energy concessions, referral to financial counselling services and where appropriate debt relief on a case by case basis. Call 131 245 for assistance.

3 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers. Customers on different tariffs will experience different changes to their prices.
4 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers.

QLD
Electricity prices will be changing for AGL’s Queensland residential and small business customers from 1 July 2017. The average increase across AGL’s residential electricity customers in the Energex area is estimated at $2.00 per week (including GST)5. The increase experienced by each individual customer may be substantially different and will be dependent on tariff type, their usage and their existing energy plan. We encourage customers to visit our website from 13 June to see the new prices that will apply to their account.

Gas prices will be changing for AGL’s Queensland residential and small business customers from 1 July 2017. The average increase across AGL’s residential gas customers in Queensland is estimated at $1.70 per week (including GST)6. The increase experienced by each individual customer may be substantially different and will be dependent on usage and their existing energy plan.

Retail electricity prices have risen because of significant increases in wholesale market prices. Wholesale prices have increased for a number of reasons, including high gas prices and limited gas availability on the East Coast, the closure of aging coal-fired generators, and an uncertain policy environment. These impacts to electricity increases have been partially offset by network reductions.

Any decision by AGL to change prices is based on a detailed consideration of a range of factors including costs, market conditions and the value we offer customers.

AGL has a range of competitive offers in the market. We are committed to keeping energy prices competitive and we encourage customers to shop around.

For more information on some of the factors that may influence energy rates, visit agl.com.au/EnergyRates.

We encourage customers to take advantage of our monthly billing option to break bills down into more manageable, regular amounts. If customers are experiencing financial difficulty, there is a range of support available including payment plans, energy concessions, referral to financial counselling services and where appropriate debt relief on a case by case basis. Call 131 245 for assistance.

5 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers. Customers on different tariffs will experience different changes to their prices.
6 This calculation is based on last year’s total usage and assumes no change in consumption profiles, time of use or customer numbers.

3. What makes up the electricity price?
The electricity price takes into account a number of factors, including: a forecast of how much wholesale electricity market prices will be (which relates to the prices generators are paid in the National Electricity Market for their electricity); distribution and transmission, which is the cost of the ‘poles and wires’ that carry electricity from generators to customers; government policies such as ‘green’ schemes to encourage use of renewable energy (such as subsidies for solar); metering; and a retailer component.
4. What is your margin on electricity prices?
Our margins depend on many factors including the market conditions in that State, the energy plan and customer energy use. Margins are the returns afforded to retailers for managing the risk associated with volatile pricing in the wholesale market, which in turn means customers are protected from sharp price fluctuations in wholesale market prices.
5. You’re both an energy generator and an energy retailer, how does that help customers?
Creating stability
Being both an energy generator and a retailer spreads our risk across different parts of the electricity market, making our business more stable.

Moderating spot price volatility
Companies which are both retailers and generators (called “vertically integrated” companies) have a beneficial effect on moderating higher spot prices. These companies generally bid their generation capacity into the spot market to cover their related retail businesses, which has the effect of lowering spot prices. In contrast, generation-only businesses can pursue high spot prices without any real commercial disincentive.

Making large-scale investments
Building new energy generation requires significant long-term investment in a highly volatile market. Banks are unwilling to fund new large scale generation unless they are confident of getting their money back. To make such investments, companies must have an investment-grade credit rating. Vertically integrated companies (those which are both generators and retailers) have both the credit worthiness to raise the funding and the retail business to mitigate the long-term price volatility, making loans to them more attractive, meaning they can borrow the necessary amounts to finance investment in major energy infrastructure.

6. How can you justify price increases that are significantly higher than CPI?
Retail prices are determined by a range of factors including the forecast of what wholesale market prices will be over the coming year. Wholesale market prices have increased significantly because of periods of shortage in supply or because the available generation is high cost (for example because of rising gas prices). Retail prices are set in an open market with retailers competing to win business. AGL aims to provide competitive prices to attract and keep our customers while also covering costs.
7. What role has ‘gold plating’ of the networks played in the increase in electricity prices?
In most areas, network charges were big contributors to price rises in previous years, and that previous expenditure on the distribution and transmission network (also described as “poles and wires”) will keep network costs at relatively high levels compared to past network costs.
8. Are you pushing smaller retailers out of the market?
No. AGL’s focus is on attracting and retaining customers by providing value. Smaller retailers continue to acquire new customers and new players are entering the market. They sometimes lead the market in innovation, making them highly competitive. Their success demonstrates there is room for large and small players.
9. What are you doing for customers who can’t afford their bills?
Many in the community have been calling on the energy industry to step up and support customers who are struggling. At AGL, we’ve heard that call.

Our hardship program is called ‘Staying Connected’ and is designed to assist our residential customers who are experiencing financial difficulties and having a hard time paying their gas and/or electricity bills.

Staying Connected is all about extra support when the going gets tough—with personalised assistance that goes beyond traditional payment plans, so you can get back on track with your energy bills.

We’re also establishing the Fairer Way Package, which makes sure concession card holders and customers in greatest need are both on competitive plans and won’t incur late fees.

For more information to help pay your bill:

  • Read about our Staying Connected program here; and
  • Get in contact with our 24/7 customer support center here.
10. What are you doing to simplify electricity for customers?
Many customers find pricing complex, that’s why AGL has been simplifying our pricing structures to make it easier for customers to understand.
Customers are encouraged to call our contact centre at any time for help to understand their energy plan.

We also recommend that customers refer to the Federal Government website, Energy Made Easy, which helps them compare prices and services provided by energy retailers.

11. Are rising prices a sign that retail competition is failing?
Not at all. The National Energy Market (NEM) is one of the most competitive energy markets in the world. Retail costs are a small part of the total price paid by customers. Price increases are being driven by rising wholesale market prices. That has been driven by a number of factors, including high gas prices and limited gas availability on the East Coast, the closure of ageing coal-fired generators, and an uncertain policy environment.

Previous price increases were driven by rising network costs which are passed through to customers. Networks are monopolies which are regulated and not subject to competition. Bills also include the cost of ‘green schemes’ (e.g. solar subsidies) which have been set by government policy.

12. Are renewables driving up prices?
No, in the long-term renewable energy is cheaper because the sun and wind are free, even though converting that energy into electricity is not, and in the shorter term it is expensive to build either new conventional or new renewable generation and pay it off. Retail electricity prices have risen because of significant increases in wholesale market prices. That has been driven by a number of factors, including high gas prices and limited gas availability on the East Coast, the closure of aging coal-fired generators and an uncertain policy environment.

Gas was previously seen as a sensible transition fuel to move to a lower carbon energy generation market. However, the cost of gas in Australia has been climbing because domestic supply is limited: state governments have placed moratoria on domestic gas exploration and supply, and there is a high volume of liquefied natural gas (LNG) export trade to meet growing international demand. When demand is higher than supply, prices will increase and this is making gas-fired generation expensive. Gas is still an effective way to create “firm” supply when combined with renewable energy; that is when the sun isn’t shining and the wind isn’t blowing, gas supply can be quickly switched on to supplement renewable generation when it is isn’t available.

13. Why can’t I just buy my electricity from generators and skip the retailer?
Retailers are important in managing the risk of buying electricity in the wholesale market. Wholesale electricity markets are complex. Wholesale prices are set in a competitive market based on demand and generation availability at the time. The spot price, which can vary considerably between the thresholds of -$1000 up to $14,000/MWh, is determined by short term demand and supply conditions. The longer term hedge contract market reflects risks associated with uncertainty in gas prices, coal plant closures and government policy.

Because the price of electricity on the wholesale market varies so much between intervals, retailers manage that risk by “smoothing out” those prices so customers don’t see that volatility reflected in their bills.

Without retailers, customers would be exposed to sharp price fluctuations in wholesale market prices. By signing contracts with retailers, customers agree the price they will pay for electricity to the retailer, and can budget accordingly.

Retailers have to manage the risk that variable spot prices (which it pays to AEMO, the market operator, for the cost of energy actually consumed by its customers) may be greater than the prices paid to the retailer from its customers. If retailers don’t manage this risk effectively they can lose very large sums of money very quickly.