Energy companies are raising fixed supply charges for some households from July, potentially offsetting expected price cuts and causing confusion among consumers. The Australian Energy Regulator (AER) had announced that default market offer prices would fall by up to 10% for most households and small businesses from July, but retailers are not obligated to pass these savings on to customers on market offers.
Fixed Supply Charges on the Rise
According to reports in the ABC and Australian Financial Review, some energy companies are increasing daily supply charges while reducing per-kilowatt hour costs. Energy Minister Chris Bowen confirmed this on Wednesday, stating, "We've seen some companies – not all, far from it – choose to increase their fixed supply costs while reducing their per-kilowatt hour costs." He has asked the AER and the Australian Competition and Consumer Commission (ACCC) to investigate the practice.
Default Market Offer vs. Market Offers
The AER's final determination for 2026-27 showed that households on standing electricity plans in New South Wales and south-east Queensland can expect price falls of 3.4% to 10.7% compared with last year. However, South Australian households on a flat rate face a 1.4% increase. While Bowen has heralded these outcomes, saying "Energy prices are coming down, and that's a good thing," the reality is more nuanced. About 90% of households and 85% of small businesses are on market offers, where retailers set their own rates and charges, and there is no obligation to pass on price cuts.
Consumer Challenges and Market Complexity
Erin Turner, chief executive of the Consumer Policy Research Centre, warned that customers not on standing offers "could very well see your prices go up." Increases in daily supply charges are particularly challenging because consumers cannot reduce their usage to avoid them. The ACCC reports that nationwide, retailers offer about 145,500 different electricity plans, and customers looking to switch may face over 120 options. Only a quarter of customers are on their retailer's best deal, and about 2.5 million people (36.5%) pay more than the safety net.
Factors Influencing Power Prices
Electricity prices are influenced by wholesale costs, network costs, environmental policies, retailer administration, and profit margins. The AER notes that wholesale and network costs are the main drivers, making up most of the bill. The entry of batteries, solar, and wind into the grid has contributed to expected price falls for standing offers, despite Middle East conflict uncertainty.
How Consumers Can Save
Consumers can save money by switching plans. The federal and Victorian governments provide comparison sites to help find the best deals. Turner advises, "If you haven't switched in a while, you're likely paying more than you should." The ACCC says customers who switch can save between $100 and $250 a year compared to the default price. The Australian Energy Council, representing energy companies, notes that retailers consider network costs, wholesale energy, hedging costs, commercial objectives, competitor pricing, and the regulated benchmark when setting market offers.
