Blog Post Saturday 01 July 2017
Electricity and gas prices have been steadily increasing in recent years and all indications are that prices will continue to rise in the foreseeable future. While many people believe this is because of energy retailers trying to increase profits, these increases actually happen across the board, due in a large part to changes in wholesale costs.
Your energy bill is made up of a number of different cost components, each of which contributes to the total amount you pay.
On your energy bill, you will see what is known as a fixed charge (often called a ‘daily supply charge’ or ‘average daily cost’). This amount goes largely towards wholesale (generation) and network (supply) costs.
There is also a variable or consumption charge, which is shown in cents per kilowatt hour (c/kWh) for electricity and cents per megajoule (c/MJ) for gas. This is the amount you pay for each unit of electricity and gas you consume. This can vary depending on factors such as whether you have solar panels or appliances that operate off-peak.
Other charges which you may be required to pay for your energy can include:
Energy price rises are an annual industry event and are driven by recurring factors such as:
Energy prices are on the rise this year as in previous years, due not only to the recurring factors mentioned above, but also to more recent developments such as:
Australia has committed to reducing carbon emissions by 26-28% by the year 2030 in line with the worldwide initiative to keep global warming at 2 degrees.
We are currently attempting to achieve this through a Direct Action plan, which pays polluters to reduce emissions. However, many experts are predicting we will not achieve the 2030 goal and must find new ways to reach our target, while maintaining a reliable energy supply and keeping energy costs under control.
One idea finding favour with a number of organisations is a proposed Emissions Intensity Scheme, which is seen as the best way of reducing emissions while keeping energy prices down. The scheme works by penalising electricity generators who pollute above a baseline limit, while rewarding those who stay below the limit with credits they can trade to polluters.
Other proposals to keep future price increases in check include increasing the privatisation of state government-owned electricity networks, adjusting government environmental policies which impact on wholesale costs and increasing retail price deregulation.
Even if such measures are successful in the longer term, energy price rises seem inevitable for the foreseeable future. So what can the average consumer do to reduce their energy bills?
Here are some useful suggestions:
The bottom line is, everyone needs energy, whether it’s electricity, gas or both, but that doesn’t mean we have to pay more for it than we absolutely have to. So while general market forces may be out of our control, choosing the right retailer is not. For more information on choosing the right retailer, check out this post. And here are a few more places you can find tips for reducing your energy bill: