Why your power bill may rise despite the lower default market offer

Customers may notice increasing fixed or supply charges, but some are arguing that most will be better off. (ABC News: Kylie Silvester) Electricity retailers have issued notices of rate increases to customers, despite the default offer falling in many markets. A comparison service says some retailers appear to be raising their cheapest prices to claw back profit. The Australian Energy Council, which represents power retailers, says far more customers are likely to see decreases, rather than rises, to their bills this year. Link copiedShareShare articleLike millions of Australians, Russell Smith took heart last month when he heard the news that benchmark electricity prices would be falling. The Australian Energy Regulator (AER) had just announced that after years of increases, so-called default market offers would be decreasing in many areas, including south-east Queensland. It was good news for the retired army intelligence officer, who had bought solar panels, a battery and an electric vehicle for his place in Maroochydore, 130 kilometres north of Brisbane. "We're now trying to live as much as we can off grid, but you obviously still have to be connected to the grid," Mr Smith said. Alinta Energy customer Russell Smith was surprised to see his power charges increase. (ABC News: Olivia Sanders) But last week Mr Smith received an email from his retailer saying that his charges would be going up from the beginning of next month. Usage charges would be higher across the day — albeit to a minor degree — but it was a different matter for the fixed component of his bill. The daily supply charge, Mr Smith was informed, would be jumping 13 per cent. At the same time, he would be getting even less for his solar exports, the prices for which would fall from 4 cents a unit to 2 cents. Russel Smith received conflicting messages about power prices within the space of 24 hours. (ABC News: Rhiannon Shine) In a statement to the ABC, Alinta Energy said the provider aims to provide "competitive, good value offers" across all markets". "We're also transparent about changes, writing to customers in advance with details of their new rates, how they compare to the reference price, and other options available," a spokesperson said. To Mr Smith's bemusement, a day after the notice of the increased rates he received a newsletter from his local state MP advertising the Queensland government's role in lowering prices. "[Energy companies] have got to run a business, I understand all that," Mr Smith said. "But then for the government to come out and say that they're going to be reducing the price by 10.7 per cent … that's clearly not the case." Across big parts of Australia — from Queensland to Victoria and South Australia — thousands of electricity customers have been getting similar notices. In some cases householders are being whacked with hikes to their daily supply charge of more than 60 per cent. The hikes have left many of those consumers angry at what they say is a contradictory and confusing market. Surging levels of renewable energy and better reliability from coal-fired generators are set to give consumers a break, with benchmark power prices to fall up to 10 per cent for consumers and more for small businesses. But Richard Foxworthy, who runs subscription-based power price comparison service Bill Hero, says there is a method to the apparent madness. He said the default offers set by the Australian Energy Regulator in Queensland, New South Wales and South Australia are supposed to act as a ceiling price. Mr Foxworthy said they were there to protect consumers who were unable or unwilling to engage with the market. But they are also the reference by which most other prices in the market are set, typically at a discount. "Default offer prices tend to get a lot of media attention because it's one of the few easily digestible price signals that happens every year," Mr Foxworthy told The Business. "There's an official announcement and that sets expectation across the industry about what should be happening with retail prices." Richard Foxworthy says it's entirely understandable that consumers are confused by the system. (ABC News: Darryl Torpy) Mr Foxworthy explained that a decrease in the benchmark price gives retailers less room to discount their competitive offers. As a result, he said they appeared to be raising their cheapest prices in a bid to claw back some of the lower profits likely to flow their way. What's more, far more customers are on market offers than default ones, which affect less than 10 per cent of households, according to the AER. "There is quite a wide spread between the highest price in the market, which is the default offer price, and the best available price in the market," Mr Foxworthy said. "The price spread right now is over $1,000 a year between best available price and the worst available price." Amid the noise, Mr Foxworthy can understand why many consumers might fi

Why your power bill may rise despite the lower default market offer

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