Those of us who aren’t lucky enough to have self-generating energy systems in our homes through solar power or otherwise are somewhat at the whims of the Australian energy market and whichever energy retailer we have chosen to supply our energy needs.
Sure, we can switch energy provider and bring our bills down here and there, but we’re endlessly reminded in news articles, podcasts, TV, just how expensive our energy bills are.
Yet wholesale electricity prices have decreased since 2022 (source). Why are those savings to the retailers not showing in our energy bills? Is no one regulating the industry? We get asked these questions a lot, and we wanted to delve into how Australia’s government regulates energy prices and how and why that affects your energy bills.
So, let’s dive straight in…
Are Electricity Prices Regulated in Australia?
Yes and No. TAS, WA and Ergon Energy in QLD are, yes. But the other states aren’t. Not in the restrictive way this question would pose.
Here’s how it works…
How are the prices monitored and effectively policed by the Australian Government?
Energy supply is an essential service, and like most essential services, both state and federal have policies and initiatives that regulate many aspects of the energy industry.
Prices, specifically, are governed at a state level. And three factors are considered when setting the price:
- Retail costs
- Wholesale pricing
- Network and Environmental
Across Australia, our energy prices are regulated by a combination of government agencies and legislative frameworks to ensure fair pricing and the protection of consumers. They include:
Australian Energy Regulator (AER)
The AER regulates electricity and gas networks, ensuring that pricing is fair and reflects the cost of supply.
“The AER works to ensure energy consumers have access to a reliable and secure market and that they pay no more than necessary for energy to their homes and businesses.” (source)
They set maximum prices for using energy networks, monitor wholesale electricity and gas markets to detect market manipulation or anti-competitive behaviour, and enforce compliance with the National Electricity Law and National Gas Law.
Australian Competition and Consumer Commission (ACCC)
The ACCC monitors retail energy prices and competition in the market. It conducts inquiries and produces reports on the state of energy markets, analysing the factors influencing energy prices, assessing the level of competition, and investigating complaints to enforce consumer protection laws.
“We monitor energy companies’ compliance with the Electricity Retail Code.”
The ACCC ensures that energy retailers do not engage in misleading or deceptive conduct.
State and Territory Regulators
Each state and territory has its own energy regulator that oversees energy pricing and compliance within its jurisdiction.
In Victoria, we have various regulators for different purposes. You can find a list of them here.
State regulators work with the AER and ACCC but may have additional responsibilities, such as setting retail electricity and gas prices for certain customer segments, implementing energy efficiency schemes, and handling consumer complaints and disputes.
National Energy Customer Framework (NECF)
The NECF is a set of laws and rules designed to protect consumers in the national energy market. It covers customer billing and payment arrangements, consumer rights and obligations, and retailer and distributor responsibilities in energy services.
You can read about it here.
Energy Security Board (ESB)
The ESB provides whole-of-system oversight for energy security and reliability. It works on long-term reforms to the National Electricity Market (NEM) to ensure it remains fit for purpose, including developing strategies for managing the transition to renewable energy sources and ensuring the market design supports reliable and affordable energy supply.
Legislative and Policy Frameworks
Several key pieces of legislation underpin the regulation of energy prices, including the National Electricity Law (NEL) and National Gas Law (NGL), which provide the legal framework for the regulation of electricity and gas markets, and the Competition and Consumer Act 2010, which empowers the ACCC to regulate competition and protect consumers.
Market Transparency and Reporting
The Australian Government and its agencies provide regular reports and data releases, offering insight into energy prices, market performance, and regulatory actions. Transparency ensures accountability, which in turn influences policy decisions.
How expensive is Australia’s energy compared to other comparable countries?
At the moment, we’re certainly in the upper quadrant of pricing. Australia’s electricity prices are relatively high, especially for residential consumers. Australian households face some of the highest electricity prices among developed nations.
Which state has the most expensive electricity and why?
SA has the most expensive energy costs, followed by NSW. VIC and TAS have the lowest.
We believe this is due to SA and NSW having the highest cost of production and less reliability. Whereas TAS and VIC have high generation, reliability, and stability in the grid.
If energy prices are regulated in Australia, why is energy so expensive?
The price of energy in Australia is high due to these main reasons:
1. Costs of Infrastructure
Australia has invested heavily in upgrading and expanding its energy infrastructure, particularly renewable energy integration. This includes:
- building new power plants,
- enhancing grid reliability
- accommodating distributed energy resources like solar panels and batteries.
These investments, while essential for future energy security and sustainability, have driven up costs.
2. Market Structure and Competition
Our energy market is a complex mix of public and private entities, with significant competition in generation and retail. While competition can drive efficiency, it can lead to price volatility and higher consumer costs.
3. Export Market Influence
Australia is a major exporter of liquefied natural gas (LNG), which is particularly impactful because gas-fired power plants are a significant part of Australia’s energy mix. High global LNG prices translate to higher domestic prices for gas used in electricity generation.
4. Policy and Regulatory Environment
While regulation aims to protect consumers and ensure fair pricing, it also imposes compliance costs on energy companies. Policies designed to encourage renewable energy adoption, improve energy efficiency, and reduce carbon emissions can add to the overall cost structure of energy providers, which may be passed on to consumers.
5. Global Energy Price Trends
Oil prices, international coal prices, and global economic conditions can affect the cost of energy production and, consequently, the prices consumers pay.
If energy companies are regulated by a larger body, why are some more expensive than others?
Despite regulation, energy prices in Australia vary among companies due to differences in infrastructure investments, efficiency, and market strategies.
Consider energy retailers that are investing heavily in renewable integration or upgrading aging infrastructure. These costs are passed on to consumers.
Market dynamics also play a role. Energy retailers with larger market power can set higher prices, while those with efficient operations and competitive strategies may offer lower rates.
What are the best money-saving solutions regarding energy consumption?
The biggest recommendations to save money every year are:
- Compare your energy once a year
- Take advantage of the market offers multiple times a year
- Install solar energy
- Install a Smart meter
- Electrification (upgrade your heating from gas to electric, etc)
What you can do right now is compare your energy costs against other providers. Contact one of our connection experts who can do that for you and could potentially save you thousands of dollars a year. Get in touch via 1300 640 879 or contact us here.