Small retailers suffer through electricity price increase
It was a tough start to 2022 for a lot of Australians, with bushfires and floods coupled with soaring costs of living and record petrol prices. And the electricity market hasn’t escaped unharmed.
In the first quarter of 2022, wholesale electricity doubled in price, leading the Australian Energy Regulator to announce in May that the regulatory electricity price for QLD and NSW would rise by up to 18%.
For several smaller retailers, this increase has given them no choice but to pass the costs on to customers, or in some cases, to take the extraordinary step of encouraging customers to switch to another provider.
But it’s not too late to protect your bill from the volatile market. The regulated price increase takes effect on 1st July, so there is still time to switch your plan. Call Move-In Connect on 1300 786 045 and we can help you lock in a fixed-rate contract that could save you hundreds of dollars.
- Why has the cost of electricity gone up?
- How has the increase affected retailers?
- How can I find cheaper rates for my electricity?
Why has the cost of electricity gone up?
The start of 2022 has been a perfect storm for rising electricity prices. Some of the main factors causing prices to rise are:
- Transport disruption caused by COVID-19.
- Sanctions placed on Russian exports following the war in Ukraine.
- Disruptions to coal lines following flooding in NSW and QLD.
- A limited supply of wholesale electricity supply caused by power station outages and closures.
- Increased demand for power following warm temperatures and heatwaves during summer.
All of these factors combined saw the price of wholesale electricity double in the first quarter of 2022, forcing retailers to pass on the costs to customers.
Each year the Australian Energy Regulator (AER) sets a Default Market Offer (DMO), which is the government-regulated price cap for retail electricity prices in NSW, QLD and SA. When the AER announced the 2022/2023 DMO price on 25th May, the increased cost of wholesale prices meant there was a significant increase in the price cap.
Following the announcement, prices in the states regulated by the DMO are set to rise by up to 18% on 1st July, to ensure retailers can remain profitable in the current market.
How has the increase affected retailers?
For Australian electricity retailers, the impact of the price increase depends on how they purchase their electricity. The larger retailers buy wholesale electricity using hedging strategies, where they buy 12 to 24 months of electricity at a set price. This protects them, and their customers’ power bills, from short term fluctuations in the wholesale market.
In addition, the ‘Big Three’ Australian retailers, Origin, AGL and EnergyAustralia, are also large scale electricity generators, owning some of the largest power plants in the country. This means they can remain profitable by controlling the price of wholesale power.
Unfortunately, most of the smaller retailers don’t have the scale for effective hedging strategies, so they buy their wholesale electricity from the spot market. This means they pay the current market price for electricity, and an increase in the wholesale price is immediately felt on their bottom line.
Because retailers have a legal obligation to supply power to the customers, a sharp price increase can leave small retailers operating at a loss. To remain profitable, they have no choice but to pass on the costs to customers.
The recent price increase has been so significant that several small retailers have taken the unprecedented step of advising their customers to switch providers to avoid the price hike. Luke Blincoe, CEO of ReAmped Energy said to 9 News “In the current climate we can’t offer the best prices. We thought we would be upfront and tell our customers to get the best deal they would have to leave us. It is gutting for us but it is the right thing to do.”
More than 70,000 ReAmped customers have received the notice to switch, with more smaller retailers looking set to follow. With the winter months upon us, demand for electricity will rise, adding to the price of wholesale electricity and prolonging the unsustainable prices.
If you are a customer of a small electricity retailer, or if you have already received notification from your retailer of a price increase, you should take action now to protect yourself from extremely high prices in the future.
How can I find cheaper rates for my electricity?
If you are concerned that your bills are set to rise, or your retailer might close down, we’re here to help! Our experts will find a cheaper, risk-free energy plan for your home or business, so you can stop worrying and start saving.
With rates set to go up on 1st July, you need to act quickly to secure yourself a cheaper plan, or risk being stuck with the higher rates.
The best way to stay safe in a volatile market is to find a fixed-rate plan. With global and national issues set to continue, there has never been a more important time to lock in your rate. A fixed-rate plan guarantees you electricity at a certain price for the duration of your contract, so even if the price of electricity skyrockets, your bill will stay the same.
But don’t forget, you need to switch to a fixed-rate contract before 1st July to lock in the lower rates.
If you’re moving home or looking for a better deal, contact Move-In Connect online or by calling 1300 786 045 and we can help you find a fixed-rate plan that will secure you great rates for your home or business.
We can recommend a plan from our panel of preferred providers that will not only guarantee you low rates but also give you additional benefits to match your needs. Our plans include high solar feed-in tariffs, sign up bonuses and renewables options, so you can find the perfect one for your home or business.
You could also be eligible for an energy concession under your State government’s affordable energy scheme. Visit one of the links below to find out your entitlements:
- Victoria (Power Saving Bonus)
- New South Wales (Energy Rebates and Assistance)
- Queensland (Electricity Reticulated Natural Gas Rebate)
- South Australia (Energy Bill Concessions)
With the 1st July deadline looming, don’t wait to hear from your retailer, act now! If you’re moving home or business premises, finding a cheaper deal in time could save you hundreds of dollars. With moving costs, plus the ever-increasing cost of living pressures, that saving could make all the difference.
Our team is waiting to help. Call us on 1300 786 045, or enter your details online to compare and save.