Australian families are being urged to seek out a cheaper electricity deal, after regulators unveiled huge price rises that will force some households to pay hundreds more this year.
Default market offers for about 1.6 million households in New South Wales, Victoria, South Australia and south-east Queensland were unveiled on Thursday, with those who fail to negotiate their power deals set to pay between 19.6 per cent and 27 per cent more from July 1.
In dollar terms, families will pay between $315 and $439 more year on year in 2023-24.
The massive increases, which come after a year of energy market disruption, are sparking renewed calls for families to shop around, with data showing regulated prices are among the most expensive.
That’s because default offers serve as a de facto market cap, with each retailer required to offer a regulated price and advertise their other deals in reference to it – usually as a discount.
Canstar Blue figures compiled for The New Daily on Thursday show the new default offers could be hundreds of dollars more expensive than the cheapest deals, depending on your location.
It’s important to note, however, that market prices are likely to rise in coming months as retailers adjust to the fresh set of regulated deals, with the gap between market and default offers slated to shrink.
Soaring prices
Default market offers (DMO) are paid by Australians who take their energy plans off the shelf without shopping around and negotiating a market deal with one of Australia’s power retailers.
These prices also act as a reference point, with retailers required to advertise their plans as a percentage discount from the de facto price ceiling in dealings with families.
Both the federal DMO – covering NSW, South Australia and south-east Queensland – and the Victorian default offer (VDO) were lifted on Thursday, with changes effective from July 1.
Grattan Institute energy program director Tony Wood said the sheer size of the increases is unlike anything Australia has seen since regulated prices were introduced at a federal level.
He said federal government efforts to ease the squeeze with commodity price caps and bill subsidies will help struggling households cope, but that intervention is ultimately “cold comfort”.
“We had what was described as an unprecedented energy crisis last year,” Mr Wood told TND.
“We had problems getting coal from mines to power stations and high gas prices, at some point all the costs associated with that were going to pass through to consumers.”
Escaping the worst
The good news is that families prepared to do a bit of research and pick up the phone can avoid the worst of the price hikes this year.
That’s because default prices are typically among the most expensive, if not the most pricey, offers on the market, with a number of retailers offering much cheaper deals to those who negotiate.
Canstar figures show there are sizeable savings available to people who are willing to look, with Victorians able to apply for government subsidies merely for comparing their deal.
“Whether you’re on a standing-offer plan or are on a market-offer plan but haven’t looked recently for the cheapest possible plan available to you, there’s potential to make savings,” Canstar Blue’s utilities editor Tara Donnelly said.
“That’s likely to be the case even when standing-offer plan prices undergo their regulated increase on July 1.
“But both regulated and retail prices are specific to your local distribution network, so to work out exactly how much cost you can cut from your annual electricity bill, it’s really important that you compare prices based on your own current plan and your own energy use.”
It should also be noted that because market prices move in reference to default offers, the best deals on the market right now are likely to get more expensive over the coming months.
Mr Wood warned that the gap between default offer prices and market deals will likely shrink.
“The frustrating reality is the extent to which retailers, either large or small, are prepared to discount heavily from the DMO has largely evaporated,” he said.
“You can still shop around and see if you can get a better deal, but the likely benefit of that is smaller than it was previously.”
