Power bills in three Australian states to rise by almost a quarter - but it’s ‘not as bad as it could have been’

Power bills for households in three states will rise as much as 23.7% from 1 July if the Australian Energy Regulator's draft determination, announced on Wednesday, is confirmed.

The AER chair, Clare Savage, said the increases were "significant" but they could have been as much as 40% to 50% without the federal government's intervention in December to cap domestic gas and black coal prices.

The electricity price safety net, also known as the default market offer, is intended to set maximum increases for households and small business customers on standard retail plans in South Australia, New South Wales and south-east Queensland. Victoria is likely to release its own default offer later today.

The largest bill increases will be in NSW, where residential customers face price increases of as much as 23.7%, or 16.9 percentage points higher than the inflation rate. Those in south-east Queensland face increases of as much as 19.8% and residents in South Australia as much as 21.8%, the AER said.

For small business customers, prices will increase between 14.7% and 25.4% depending on their region, the regulator said.

The AER said customers should shop around to minimise the increases. "Based on offers available in February 2023, residential customers switching from a standing offer to the lowest market offer could save 7% to 17% and small business customers could save 9% to 26%, depending on their region," the regulator said.

Savage told ABC's Radio National: "It's not as bad as it could have been."

The federal government legislated to cap wholesale gas prices temporarily at $12 a gigajoule and cap coal prices at $125 a tonne, a move Treasury estimated would save the average households $230 on their electricity bills in the next financial year.

The AER said forward contract prices for the 2023-24 financial year had begun to fall in south-east Queensland and NSW "as soon as the intervention was publicly mooted".

"Contract prices have now fallen by approximately 50% since the end of October," it said. "However, despite this significant decline, the trade-weighted average prices for 2023-24 contracts are around $40 per megawatt-hour higher than they were at the start of 2022 in all regions."

On Monday the climate change and energy minister, Chris Bowen, said he expected the default offer to be "significantly lower than the AER's predictions" before the government's intervention in December.

In November the AER advised that, without action, the residential default offer would increase by between 35% and 44% in NSW, 51% in South Australia, and 41% in south-east Queensland.

Bowen revealed that the government estimated small business customers were on track to pay 37% more in NSW, 53% more in South Australia and 50% more in south-east Queensland.

"We simply had to act," he told the Sydney Institute. "But I know that will be cold comfort for people who will still have to deal with the resulting energy bill increases."

Bowen noted that the government would deliver $1.5bn of energy price relief rebates, expected after the May budget.

After consultation, the AER will issue its final default offer for the year in May.