Why have electricity prices increased?

Customer using AGL app
Across Australia, retail electricity prices have risen because of significant increases in wholesale market prices. This is due to 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.
The problem

The system that connects wholesale electricity generation to customers in southern Australia and across the East Coast is known as the National Electricity Market (NEM).

Many now argue that the NEM is at a crisis point that is leading to price volatility and higher electricity costs for customers across the board.

ABC investigation

On 8 May 2017, ABC’s flagship current affairs program, Four Corners, broadcast an investigation into these issues.

In the program titled ‘Power Failure’, Four Corners argued Australia was in the grip of an energy crisis contributing to higher retail electricity prices.

Grattan Institute report

Grattan Institute is an independent think-tank focused on Australian public policy. In May 2017, Grattan Institute released a report titled, ‘Powering Through: How to Restore Confidence in the National Electricity Market’.

The report’s authors argue that Australian policy makers are not managing the big transitions that are happening in the National Electricity Market well, leading to a less affordable and less reliable system for all.

Australian Energy Market Commission (AEMC) report

The AEMC was established by the Council of Australian Governments (COAG) to help govern Australia’s main energy markets. In December 2016, the AEMC published its seventh annual Residential Electricity Price Trends Report.

The report forecast rising residential electricity prices, primarily driven by significant increases in wholesale costs following the sudden retirement of the Hazelwood coal-fired power station in Victoria and Northern Power Station in South Australia.

Download the AEMC’s Residential Price Fact sheet here.

Editorials

Over the past few years, a number of journalists and commentators have written about issues facing the National Electricity Market. Here are just a few.

Tony Wood argues that Australia’s policy structures are struggling to maintain the delivery of affordable and reliable electricity.

Glenn Platt argues that Australia needs to make some challenging decisions about how the National Electricity Market should operate into the future.

Watch AGL’s Chief Economist explain why we are committed to making the transition from coal to renewable energy orderly, so that affordability and reliability for customers is prioritised here.

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.

What if I’m struggling to pay my bill?

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 hardship program here;
• Read about our Fairer Way Package here; and
• Get in contact with our 24/7 customer support center here.

How will my bill be affected?

The issues with Australia’s National Electricity Market will impact most people who consume energy in southern and eastern Australia.

At AGL, we want to be transparent with customers, so we’ve set up a My Energy Prices website so you can check rate changes.

Electricity Pricing FAQs

For more detailed information on electricity prices, visit our dedicated ‘Electricity Pricing FAQs’ page.