Households and businesses will feel the squeeze of rising electricity prices this year despite federal government intervention in the energy market.
In a speech to the Sydney Institute, Energy Minister Chris Bowen outlined how the government’s decision to take action in the market meant price rises would be significantly less than what they could have been.
But Mr Bowen acknowledged this was “cold comfort” to Australians battling cost-of-living pressures across their household bills.
In the October budget, the Treasury forecast a 56 per cent rise in energy costs and a 44 per cent gas price hike over the next two years without government intervention.
The government intervened in the market late last year, introducing a temporary 12-month price cap on coal and gas.
Parliament was recalled before Christmas to pass the legislation for the temporary cap following an agreement by the prime minister and state and territory leaders at national cabinet.
Mr Bowen said the caps were set to account for a “reasonable profit margin” for energy companies, but not an unjustified one.
He detailed how markets have responded, including a forecast showing wholesale prices for 2023 have dropped by up to 48 per cent.
His speech preceded the Australian Energy Regulator releasing its draft default market offer, which provides a reference price for residential and small business electricity prices in NSW, South Australia and southeast Queensland.
Without intervention, the regulator advised the government the residential offer would increase between between 35 and 44 per cent in NSW, 51 per cent in SA and 41 per cent in southeast Queensland.
Based on this advice, the government estimated small business customers in SA would have seen a 53 per cent price rise, 50 per cent for those in southeast Queensland and 37 per cent in NSW.
Without pre-empting the regulator, Mr Bowen said he was encouraged by early signs the intervention was having an effect in reducing prices.
“I expect the draft DMO released this week to be significantly lower than the AER’s predictions pre-intervention,” he says.
“But I know that will be cold comfort for people who will still have to deal with the resulting energy bill increases.”
(Australian Associated Press)